Who Are These Millionaire Renters?
The frequently told story that younger people often rent these days because they want the flexibility and freedom to avoid maintenance issues and move as the winds take them has sounded somewhat contrived. How many people with the full financial ability to buy a home when prices and mortgages are high really choose to rent?
The Wall Street Journal said there are more than you might think, at least if you include the relatively small but growing number of millionaires who rent by choice. Analyzing data from IPUMS at the University of Minnesota, the paper said that between 2013 and 2017, the number of households with more than $750,000 in income that rented was 8.4%. That grew to 10.5% from 2018 through 2022.
Using data from the Federal Reserve's Survey of Consumer Finances, the Journal also calculated that households with a top 5% net worth have seen 5% who rent, a number that has doubled over the last 15 years.
Perhaps the reason is partly the greater number of millionaires, expanding the set of people that might include people who would rather rent. There are a reported 7.43 million people in the U.S. who have investible assets of at least $1 million, not including primary residence, collectibles, or consumer durables, CNBC has reported.
One reason that seems to drive many of these millionaire renters is their inability to find a house that satisfies their desires. Ruthie Assouline, co-leader of the Douglas Elliman Real Estate team, specializing in luxury home sales, told the Journal that many of her wealthy clients say, "Wow, I have all this money, and I can't find a house."
There is the question of turnover of existing housing, which has been low as many people who have low mortgages can't or don't want to pay a much higher interest rate for a new home, so they don't sell and move. Other costs of home ownership — including insurance, property taxes, maintenance, and utilities — have also risen, taking a bigger total bite out of someone's bank account. There can be more time and inconvenience involved as well if owners decide to undertake a major renovation.
Even those who could spend the money may not want to because they'd rather keep the extra cash in other investments that pay more into their net worth than the slow appreciation of a purchased house would.
But just to show that millionaire renters aren't all too rarefied. In 2021, during the Covid-19 eviction moratorium, an attorney told GlobeSt.com, "I have two cases in a high-end coop and condo where the tenants just left. They both bought houses in Long Island. They abandoned the apartment." And their financial obligations.
Source: GlobeSt/ALM