Data released by the US Census Bureau shows a marked shift in trends for renters in the US. Wealthy Americans increasingly prefer to rent rather than buy a home. This change in attitude has far-reaching consequences for the US property market and highlights the potential behind buy-to-let investment in high-end homes.
A report by RentCafé on the latest data reveals that renters in the US consistently outpace homebuyers. The biggest increase has taken place at the highest end of the earnings brackets. Renters among Americans earning over US$150,000 a year increased by 175% between 2007 and 2017. While the number of homeowners in the same salary band also increased, its rise of 67% is well below half that of renters.
A decade of increases
The popularity of rentals among higher-income Americans is clearly illustrated in the graphic below. Every year since 2007 the number of wealthy renters in the US has outpaced that of homeowners.
Other less-wealthy Americans have also joined the rental trend. Statistics point to a 111% increase of rental households in the US$100,000 to US$150,000 salary bracket and a 66% rise among those who earn US$75,000 to US$100,000.
Reasons for more wealthy renters
The RentCafé analysis puts forward several reasons behind the marked shift towards renting among high-earning Americans:
New mentality – a possible motive for the big increase could be “a post-housing crisis mentality”.
Millennial mindset – this large demographic group doesn’t aspire to homeownership as much as older Americans.
Lifestyle choice – wealthy Americans may opt to rent rather than buy because of the flexibility that rentals offer.
Affordability – even renters in the US with generous salaries find themselves priced out of the market in many cities such as New York or San Francisco.
Cities with most wealthy renters
The report lists the 20 cities in the US with the highest increases in the number of wealthy renters. Seattle stands at the top – the city has 7.4 times more residents in rental accommodation than homeowners. Charlotte comes in second position with 5.2, closely followed by Baltimore with 5 times more. Wealthy renters in Jacksonville in Florida outnumber homeowners by a ratio of 3.7.
San Francisco has the highest number of affluent renters in the US. The group accounts for 31% of the total rental market, probably reflecting the high cost of homeownership in the city. Wealthy renters soared by 240% between 2007 and 2017 while wealthy homeowners went up by almost a fifth less (56%).
New American Dream
Although the trend to rent is most marked among higher earners, Rent Café points out that Americans generally are changing their attitude towards renting. Homeownership levels remain at their lowest ever as households adapt their accommodation preferences to changes in lifestyle and the housing market. The report concludes that “the spike of wealthy renter households could mean a change in attitude” towards the traditional American Dream of homeownership. If so, the potential behind the buy-to-let investment is higher than ever.