On Mar.13, the Wall Street Journal reported that a hike in the cost of homeownership and a limited supply of homes has driven the rise of rental properties, with the story noting, “three million U.S. households making over $150,000 are still renting.”
According to the U.S. Census Bureau, five-year estimates show that between 2016 and 2021 the number of renter households making $150,000 or more a year rose 87%. The Census also reported that about 44 million households rented and the median income of these households was nearly $71,000 in 2021.
The city with the biggest increase in “high-earning renters” was Austin, Texas,” reported The Journal. Austin saw a 154% increase of renter households making more than $150,000 or more a year. Although Austin showed the largest shift, cities across the country experienced an increase in high income-earners renting in the perspective regions during the pandemic.
In recent years, the number of Americans making more than $150,000 annually has risen, but so have mortgage rates and home prices. This increase in mortgage and home prices has put the purchase of homes beyond the reach of these high income earners. The WSJ reported, “affluent renters can’t find a house that meets all their expectations, or want to rent in a new city before making a decision on what to buy.”
Furthermore, real-estate companies have helped accelerate the trend of wealthier renters. Investment companies have begun buying thousands of suburban homes and then renting them out to high-income earners. Apartment complexes have stared amenity-focused buildings, and home builders are catering to “single-family houses designed to be rented instead of sold,” reported The Journal.
Whitney Airgood-Obrycki, a researcher at Harvard University’s Joint Center for Housing Studies, told the newspaper, “There are markets that are already tough on lower- and middle-income renters, and it’s just becoming more difficult with this influx of higher-income earners.”
The WSJ said that, “while rents have softened recently, the high costs associated with homeownership and the unusually low supply of homes for sale are likely to leave more people renting.”
Chief Executive of AHV Communities Mark Wolf told The Journal, “Higher rents are here to stay.” AHV Communities is a development company that builds single-family rental homes near Seattle, where the average household income is more than $200,000.
Some high-earning renters encounter other barriers when attempting to buy homes such as debt, bad credit, and minimal savings. Developers call these individuals “structural renters,” and believe they will make up a large portion of renters for the foreseeable future.
High-earning renters have more spending power than low-income renters, so builders have begun competing for them with more modish amenities. Co-chief executive of real-estate investment firm Capital Square, Whitson Huffman, said, “they really demand what they want, because they’re able to pay for it.”