Introduction to the Shift in Millionaire Housing Preferences
The number of millionaires opting to rent a home rather than buy one has soared — signaling a shift in how the wealthy think about investing in real estate. Between 2019 and 2023, the population of millionaire renters in the US more than tripled, reaching 13,692, according to RentCafe. While most in this deep-pocketed class still own — the tally of millionaire homeowners topped 143,000 last year – the surge in luxury leases suggests that liquidity and flexibility are trumping the pride of ownership.
Reasons Behind the Shift
The pandemic years coincided with the sharpest gains, especially in low-tax Southern metros such as Houston, Dallas, Miami, and Atlanta. Large coastal cities, however, still dominate. New York counted 5,661 millionaire renters in 2023, up from 2,204 four years earlier. San Francisco ballooned from 321 to 1,411 in the same period. Analysts say high interest rates, soaring insurance premiums in disaster-prone states, and softer real estate returns have made renting more attractive, while cash freed up can be deployed into stocks or other investments with higher yields.
Flexibility and Liquidity as Key Factors
“They’re choosing flexibility and liquidity over ownership,” Glen Stegemann, a broker with The Agency in Miramar Beach, Florida, told the New York Times. “They don’t want to be bothered with the inconveniences of homeownership, which includes paying real estate taxes and insurance, especially in markets like Florida and California, where we’re seeing a lot of natural catastrophes.” Douglas Elliman’s Keyan Sanai, who represents a $35,000-a-month Turtle Bay penthouse, said high-end tenants often rely on financial logic, not sentiment. “Typically speaking, wealthy people are either smart or have very smart advisors,” he told The Post.
Financial Logic Behind Renting
“Why wouldn’t someone who has the disposable income, who can probably find some sort of home office loophole to write off at least a part of it, rent here for $30,000, keep a primary residence elsewhere and then have no liability?” Sanai added. “For example, if the fridge broke, the building has to fix it. If the dishwasher leaks, call the super. It’s not on you.” He said insurance has become prohibitive in disaster-prone states. “A year before those horrible wildfires happened, Warren Buffett’s company pulled insurance from that area because the wildfires were a real concern,” Sanai noted. Returns also matter. “The market is, on average, returning — even the S&P Index — 8% over the last couple of years. Whereas in real estate, if you’re looking at Manhattan over the last 10 years, you’re either losing money if you’re selling right now or you’re not making money, you’re breaking even,” he said.
Personal and Career Considerations
One of his clients, a CFO earning $4 million a year, chose to rent a $25,000-a-month apartment. “The living expense, which is, for most people, the biggest monthly or yearly expense — if you still have 93% of your income, that’s pretty damn good,” Sanai said. Priyanka Shah, 39, a biotech venture-capital investor, has lived at 67 Wall St. since March 2023. Despite having plenty of savings to purchase, she prefers renting. “I actually have a lot of money saved down to buy, whether by down payment or even kind of putting up all cash — that is not an issue for me, but I’ve intentionally chosen to rent just because of the flexibility that it offers,” she said.
Conclusion
The shift towards renting among millionaires signals a change in how the wealthy perceive real estate investment. With factors such as high interest rates, insurance premiums, and the desire for flexibility and liquidity influencing their decisions, renting has become an attractive option. As the market continues to evolve, it will be interesting to see how this trend develops and whether it will have a lasting impact on the real estate industry.
FAQs
- Why are millionaires opting to rent instead of buy?
Millionaires are choosing to rent due to factors such as high interest rates, soaring insurance premiums, and the desire for flexibility and liquidity. - Which cities have seen the largest increase in millionaire renters?
New York and San Francisco have seen significant increases in millionaire renters, with New York counting 5,661 millionaire renters in 2023 and San Francisco having 1,411. - What role does financial logic play in the decision to rent?
Financial logic plays a significant role, as wealthy individuals often prioritize investments with higher yields and consider the costs and liabilities associated with homeownership. - Are there any personal or career considerations that influence the decision to rent?
Yes, personal and career considerations, such as the desire for flexibility and the ability to pursue new opportunities, can influence the decision to rent. - How might this trend impact the real estate industry?
The trend of millionaires renting instead of buying could have a significant impact on the real estate industry, potentially leading to changes in the way properties are marketed and sold.
