High-income households are migrating toward the rental market.
Looking at the five years ended 2021, the US Census Bureau found an 87% increase in the number of renters with annual earnings of $150,000 or more. That’s over 3 million households, out of 44 million total renters in the US.
Some geographic areas are seeing a higher concentration of high-earning renters. Cities that saw spikes in popularity during the pandemic — such as Austin, Nashville, Atlanta, and Phoenix — have a particularly high concentration of renters in this category.
Recently, it’s not only the number of high-income renters that have increased, but the total number of Americans with incomes over $150,000. Despite this, many are finding home ownership remains out of reach. Broad-based inflation has reduced purchasing power and trends specific to the housing market have created a challenging dynamic for would-be home buyers.
The housing market flourished during periods of low interest rates, driving prices skyward. Though the market has since softened a little, prices are still high. And with mortgage rates up, financing the purchase is unaffordable for many — even high-income households.
But the influx is not all for want of funds. Some prefer the freedom of renting, or want to get to know a location before committing to buying, while some see this as an inopportune time to buy and are willing to wait for more favorable conditions.
Seeing opportunities to profit by catering to the high-income renter, investment companies are swooping in to certain markets, buying up properties to rent out. Builders too are keeping this new market segment in mind as they decide on the specs for their properties.
As a result, more of these rentals will offer amenities designed to attract the affluent renter. Expect to see more properties with swimming pools, fire pits, and gyms on the market, as well as more single-family homes available to rent instead of buy.
The market is hot, which could send rental prices higher. But with more supply coming in, the point of equilibrium may be near nonetheless.
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