Not everyone thinks that real estate equity is a good investment. A look at the 2015 American Community Survey revealed a new twist in the ever-changing U.S. demographics story: about 1.2 million wealthy households joined the widening ranks of renters in the U.S. in the last 10 years (from 551K to 1.75M). From 2005 to 2015, the number of renter households who earn more than $150,000/year increased by 217% as opposed to an 82% increase in the number of homeowner households within the same income bracket.
As a matter of fact, annual increases in the number of renter-occupied households with incomes over $150K have exceeded those of owner-occupied households consistently over the last 5 years:
We also noticed that every single year since 2009 the largest increase in U.S. renter households came from high-income earners.
Here’s the breakdown of changes in number of renter households that occurred from 2014 to 2015 by income:
- over $150K — ↑ 12%
- $100K – $150K — ↑ 9%
- $75K – $100K — ↑ 7%
- $50K-$75K — ↑ 4%
- less than $50K — ↓ 2%
According to the U.S. Census Bureau, the following 10 cities had the most significant increases in the number of high-income renting households from 2014-2015. The list includes urban areas like Charlotte, Chicago, Austin, Phoenix. We also compared those increases with changes in number of homeowners in the same income bracket, and here are the numbers side by side:
Fort Worth, TX — one of the fastest growing cities in the U.S., with a hot and diverse job market — saw a 77% increase in 2015 in the number of renter households that make over $150K per year. Similarly, in Portland, OR the number of high-earning renters was up 71% from 2014, thanks to an influx of millennials attracted to its booming tech sector and strong overall employment in various fields. The rental market is claiming a bigger and bigger slice of this young, successful demographic.
San Francisco is Officially a City for Rich Renters
Renters in top-earning households increased by 35% in San Francisco last year, while the number of renters of all other incomes (under $150,000) decreased. High-income renter households represent one quarter of total renter households here, the largest share of rich renters in the country. The San Francisco housing market has become so pricey that most people can’t even dream about buying anymore.[bctt tweet=”In San Francisco more households making over $150K/yr choose to rent than to own” prompt=”Tweet this”]
In 2015, the number of renter-occupied households surpassed the number of owner-occupied households making over $150,000/yr (56,591 renter-occupied vs 54,445 owner-occupied housing units), a situation that is atypical, considering that overall in the U.S. there are 7 times more owner households in the top-income category than renter households. What San Francisco has going for it is a solid job market, with high-paying IT and finance jobs occupied by young highly-skilled professionals — a recipe for the typical profile of an affluent renter.
Most High-Income Renter Households Are Clustered in Large Urban Areas
In the context where more than a third of U.S. households rent and the majority of them earn less than $50,000 per year, this growing number of high-income renter households shows the rental market from a different vantage point. It shifts the focus on those who choose the urban high-rise living over owning a suburban home. Thus, we are more likely to see the affluent renters clustered in America’s largest urban areas, as Census data confirms. Here’s where the most renter households earning $150,000 or more live:
Share of Renters by Income in The Top 10 Cities
The attitude toward renting has been changing. The increased interest in renting among a population segment that is typically made up of homeowners comes in the wake of the housing crisis. For many it’s a matter of caution, a hindsight “lesson learned” behavior that keeps even people with high-paying jobs in the renting pool longer. For some it’s a lifestyle choice, as renting is more popular thanks to the high-end apartment market phenomenon that’s been spreading all over the U.S. in the last couple of years. Or maybe it means that an increasing number of people believe that homeownership is not the only way to have a fulfilled and successful life.
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