High-income renters are the fastest-growing housing segment in the United States, representing renters with six-figure incomes who choose to continue to rent rather than buy, according to new research from Apartment List.
Across the United States there has been an increase of 48% in the number of renters who earn at least $100,000 per year. Growth in this segment in the future is expected to be much faster in multifamily homes than in single-family homes.
What is driving the high-income renters market
There are interacting supply-and-demand forces that are encouraging high-income households to rent instead of buy:
- Growing supply: In the wake of the Great Recession, rental housing is booming across multifamily and single-family markets.
- Growing demand: Now more than ever, even wealthy Americans are demanding rental options as they struggle to afford homes and increasingly value the flexibility of renting.
Why the surge in high-income renters in multifamily?
During the first three years of the recession, as single-family rentals were surging across American suburbs, funding for new housing construction had mostly evaporated.
But in 2011, the multifamily sector came back to life and brought new renter-friendly housing to dense urban cores. As Apartment List previously analyzed, multifamily construction quadrupled between 2010-2017 and has returned to pre-recession spending levels.
Most of this supply was geared towards the higher end of the market, providing new amenities for high-income renters at a time when single-family home construction lagged.
High-income multifamily renters growing faster
From 2008-2011, high-income renters left multifamily homes in favor of the vacant single-family homes left behind from the Great Recession, according to the Apartment List research. Then, following the resurrection of multifamily construction in 2011, high-income households moved into these homes at such a fast rate that they overtook single-family in just five years.
By 2017, there were 1.8 million new high-income renter households – 960,000 occupying multifamily and 860,000 occupying single-family.
Portland Oregon High-Income Renters
Conclusion
High-earning renters have multiplied especially quickly in mid-size, supply-abundant cities with strong economies.
What does this mean for the future of the housing market?
- In the short-term, Apartment List economists expect the influx of high-earning households into multifamily rentals to continue, as multifamily construction remains strong and workers value the job opportunities and amenities of living in urban areas. With higher incomes, these households will demand new amenities from their homes and neighborhoods. High-income-renter growth in the single-family segment began to level off last year, but it will take a major shift in housing affordability to completely reverse the trend.
- In the medium-term, economists expect the growth of high-income renters to create both policy challenges and opportunities. On one hand, the trend will likely lead to greater inequality within the rental market. As cities debate solutions to disappearing affordability and gentrification, high earners are increasingly competing with everyone else for finite city space. On the other hand, these high-earning households may bring new momentum for policies that affect all renters. This may even solicit policy response at the federal level, which is currently a quiet topic but one that expected to ramp up in the near future.
- In the long-term, this decade’s trend may be indicative of changing norms around how we pay for our housing. If today’s high-earning families increasingly value the centrality of living in cities or the flexibility of renting instead of owning, the traditional paradigm of homeownership as a paramount metric for financial success may begin to evolve, the Apartment List report says.
Seattle High-Income Renters
High-Income Renters Phoenix
About Apartment List
Apartment List is a fast-growing online apartment rental marketplace “on a mission to make finding a home an easy and delightful process,” according to the company. The company currently has over four million units on the platform and has reached more than 150 million users in over 40 cities since launch.
