Why More Affluent Americans Are Choosing to Rent Instead of Buy

A significant shift is occurring in the U.S. housing market: a growing number of high-earning households are opting to rent rather than purchase homes. According to a recent analysis of U.S. Census Bureau data, 35 of the 50 most populous metropolitan areas have seen an increase in affluent renters since 2019. This trend is most pronounced in Sun Belt cities like Raleigh, North Carolina, and Orlando, Florida, where the high cost of homeownership and a desire for lifestyle flexibility are key drivers.

An affluent renter is defined as a household whose income falls within the top 20% of their local metro area's income distribution. This article explores the data behind this trend and the financial and lifestyle considerations influencing these decisions.

Why Are Wealthy Households Choosing to Rent?

The primary catalyst for this shift is the dramatic rise in the cost of buying a home, which has far outpaced rent increases in many popular markets. Mortgage rates near 7% have made monthly housing payments significantly more expensive than they were just a few years ago.

• Financial Calculations: For many, renting frees up capital that can be invested elsewhere for potentially higher returns. In markets like Tampa, Florida, the median home sale price has surged 67.4% since 2019. The income required to afford that home jumped 63.1%, while rents increased by a smaller, though still substantial, 51.6%.
• Affordability Gap: The analysis found a direct correlation: on average, for every 10% decline in homebuying affordability in a metro area, the share of wealthy renters increased by 0.5 percentage points. A home is considered affordable when a buyer's monthly mortgage payment, including principal, interest, taxes, and insurance, does not exceed 30% of their gross income.

Beyond finances, lifestyle flexibility is a major factor. In a dynamic job market, the ability to relocate quickly for a new opportunity without the burden of selling a property is a powerful incentive. This is especially true in regions where rising costs for homeowners' association (HOA) fees and insurance add to the long-term financial commitment of ownership.

Which Metros Have the Highest Concentration of Affluent Renters?

The metros with the largest shares of high-income renters are typically those with extremely high barriers to homeownership.

These areas, with the exception of Orlando, have long been among the nation's most expensive housing markets. In San Jose, for example, the median home price is $1.4 million. The gap between the cost of renting and buying is stark; an affluent resident would need to spend about 21% of their income to afford a median-priced home versus just 10.5% for a median-priced rental.

Where Has the Trend Been Most Pronounced?

The increase in wealthy renters is not uniform across the country. The following metros saw the largest jumps in their share of affluent renters between 2019 and 2023.

• Raleigh, NC: Increased to 7.7% from 4.8%
• Orlando, FL: Increased to 10.8% from 8.5%
• Buffalo, NY: Increased to 6.6% from 4.6%
• Tampa, FL: Increased to 9.4% from 7.9%
• San Diego, CA: Increased to 9.3% from 8.0%

These markets, largely in the Sun Belt, experienced explosive home price appreciation during the pandemic, making the math of renting versus buying increasingly favorable for tenants, even those with high incomes.

Are There Metros Where Affluent Renting Is Declining?

In contrast, some metros saw a decline in their share of wealthy renters. These are generally areas where homebuying remains relatively more affordable, making purchasing an attractive option.

• Birmingham, AL and New Orleans, LA saw the most significant declines.
• Other metros like Pittsburgh, PA and Oklahoma City, OK also experienced drops.

In these regions, the income needed to afford a home has risen less than the national average. In Pittsburgh, for instance, the required income is up only 19.5% since 2019. For an affluent household earning at least $145,295, buying a median-priced home is a highly achievable goal, leading many to transition from renting to owning.

Based on our experience assessment, the decision to rent or buy is increasingly nuanced. For affluent individuals, the choice is not always about what they can afford, but what aligns with their financial strategy and lifestyle goals. Key considerations should include the local cost gap between renting and buying, potential for alternative investments, and your need for geographic flexibility. In today's market, a lease can be a strategic financial move, not just a temporary solution.