Real Estate: 10 Cities Where Renting Is Smarter Than Buying (Even If You’re a Millionaire)
Written by
Dawn Allcot
Edited by
Cory Dudak
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The conventional wisdom has always been to buy a home since you’ll build equity and have “something to show” for your monthly payments. When you rent, you give that money to someone who can leverage the property and build their real estate empire.
But if you can invest that money elsewhere, there may be better choices than purchasing a home as your primary residence. Even millionaire millennials often opt to rent over buy in today’s market.
The Number of Middle- and High-Income Renters Grows, Data Shows
A survey from RentCafe.com shows that more families are renting apartments than ever in the past 50 years, and many are people with household incomes over $150,000. RentCafe.com data shows that the number of renters with incomes exceeding $150,000 grew by 82% between 2015 and 2020.
Based on a separate GOBankingRates study, $150,000 is well over the benchmark of what would be considered a “living wage” in all states. The number of renters making less than $50,000 shrunk by 11.2%, while those making between $50,000 and $75,000 grew by 14.5%. The number of middle-income renters, households making $100,000 to $150,000, grew by 50%.
Meanwhile, another surprising demographic also turned to renting. The number of millionaire renters tripled between 2015 and 2020. It could be an issue of “comfort and smart investing,” according to RentCafe.com.
First, there’s the added cost — either in time or money — of home repairs and maintenance that comes with owning a house. Also, there’s the benefit of mobility that comes with renting, enabling high earners to move quickly to embrace job opportunities without being saddled with the task of selling a house.
Finally, in today’s seller’s market, a home may not be the best investment and smart millennial millionaires are putting their money into other assets. This last point holds, especially in coastal cities with overinflated home prices. Rather than buying a house and risking a loss if they want to sell, millionaires can rent in ritzy neighborhoods and enjoy the benefits of a luxury skyrise without the stress of homeownership.
San Francisco, which has had the largest increase in millionaire renters between 2015 and 2020, is a testament to this philosophy. The number of millionaire renters in the California city grew by 1,629%. Keep in mind the numbers are small. Rent Café reported that there were 17 millionaire rentals occupied in 2015 and 294 in 2020. We also don’t know if these millionaires put down roots with a home purchase after the pandemic ended.
What other cities are millionaire magnets for renters?
Cities with the Greatest Increase in Millionaire Renters
- New York, NY
- San Francisco, CA
- Los Angeles, CA
- Washington, DC
- Jersey City, NY (a suburb of NYC)
Top 10 Cities with the Greatest Increase in High Income Renters
As millionaires flock to the coastlines, high-income households also choose renting over buying in many major U.S. cities, although at a different growth rate. In the case of families earning more than $150,000, the choice to rent may be driven largely by rising home prices.
The top 10 cities with the greatest increase in high-income renters show home price increases exceeding 50% between 2015 and 2020. They are:
- Seattle, WA
- Miami, FL
- Portland, OR
- Nashville, TN
- San Jose, CA
- Denver, CO
- Indianapolis, IN
- Las Vegas, NV
- Phoenix, AZ
With the money these renters save on repairs and maintenance in these booming cities, they can set savings aside to buy when home prices and/or interest rates drop. Or, the new American dream may include something other than homeownership in the picture as younger generations embrace tight-knit communities living in luxury high-rise units in active cities.
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