Recent data shows an increasing trend of renting over buying homes among American millionaires in nearly every U.S. city. An example of this is the 333 millionaire households in the Phoenix metro area that rented their homes in 2022. This is part of a larger trend of millionaire renters nationwide, which tripled between 2020 and 2022.
A recent LendingTree report about the costs of renting versus owning a home in the largest U.S. metro areas revealed that, in almost all cases, renting was “more affordable” than owning a home. The report compared factors such as down payment and short-term savings, as well as the potential hidden costs of homeownership. These costs included things like maintenance and repairs, property taxes, and depreciating equity, which factored into a judgment about unpredictable monthly expenses.
The LendingTree report led to the conclusion that renting is “more affordable” particularly in the case of short-term residence and decreased barriers of entry.
Renting does come with unique challenges and unexpected costs, however. This is particularly true in U.S. metro areas, many of which are in the middle of a period of historic growth that drives rental costs up. This is part of the same trend of rising housing costs that are turning millionaires away from homeownership, but cost increases have been slower in rented homes than in homes for sale. Movement from millionaire homeownership to rental is proportional to these trends.
According to a report by RentCafe, the most popular cities among millionaire residents are New York, San Francisco, Los Angeles, Miami, and San Jose, all of which have been part of a 29.4 percent increase in rental prices. While this represents an average of 7 percent per year, the increase was only 3.4 percent in 2023. This was slowed by sharp increases in apartment construction and slower overall economic growth.
In one of the most staggering examples, more than 50 percent of one of Houston’s famously affluent residential areas, the Woodlands-Sugarland region, are now officially cost-burdened. This means they spend more than 30 percent of their income on rent and utilities. To a lesser degree, this is reportedly part of a statewide trend.
This trend is even more significant when including high-income earners that fall short of the millions. The RentCafe study found that the number of renters earning more than $150 thousand annually increased by an incredible 82 percent over five years, and there was a 50 percent increase in the $100 thousand earnings bracket. The only rental population that decreased was low-income earners. This fluctuation was explained as a movement toward multi-family households in response to increasing rental costs, as well as families earning their way out of the lowest bracket thanks to post-pandemic economic growth.
The majority of millionaires making up this increase in home rentals are Millennials and Generation X, composing 28.4 percent and 22.6 percent of the millionaire rental market, respectively. The largest increases were seen in the cities of San Francisco, Los Angeles, and Washington D.C. Meanwhile, Seattle, Miami, and Portland saw the most significant increase in high-income earners below the million-dollar mark, though New York, LA, and San Francisco still boast the largest total number of renters in this bracket.
