Millionaire renters surge across Bay Area, study finds

The number of wealthy Bay Area residents who are renting rather than buying has surged dramatically in new years A new survey by RentCafe discovered the number of millionaire renters increased fourfold in parts of the Bay Area between and Nationally the number tripled outpacing the development of millionaire homeowners Related Articles Newark apartment complex bought for much less than prior value of California houses are owned by investors Southern California rent inflation cools slower than US M of the nation s poorest renters menace losing their homes with Trump s proposed HUD time limit Where in California do investors own the the bulk houses The review in which the apartment rental site examined U S census figures defines millionaires as individuals from households that earn over million a year Owning a home isn t the right choice for everyone and larger-income buyers are starting to discover that declared Doug Ressler a researcher on the review Renting makes a good choice from a budgetary standpoint because renting is cheaper than buying While home-owning millionaires still vastly outnumber millionaire renters nationally the assessment determined the number of millionaire renters increased from to while millionaire owners increased from to According to real estate agents the trend is driven by three key factors a decline in the desirability of homeownership the rise of a class of tech professionals who prefer a nomadic flexible lifestyle and financial concerns about the wisdom of losing liquidity by investing in a home The Bay Area in particular experienced a steep rise in millionaire renters The number in San Francisco rose from to and in San Jose it jumped from to Katie Fones a San Francisco-based real estate agent at Compass Real Estate revealed the rise of the millionaire renter is the culmination of a decades-long shift in people s perceptions of homeownership as a critical social marker The dream of homeownership has changed dramatically since I was a kid growing up she mentioned Owning a home is no longer the pinnacle of someone s economic dreams Instead Fones revealed that homeownership had become a chore to countless of her clients One of those a multi-millionaire with young children is in the present in the process of selling their San Francisco property to become a renter They re just tired of things urgent and things leaking and just not wanting to spend their extra funds on those things and their time she explained So they re wanting the flexibility of living in a different neighborhood for a year and then maybe living in a different neighborhood in year two Generational differences were another factor behind the rise in millionaire renters Fones disclosed People who are younger under are looking more toward the flexibility that renting gives them she commented This is a real generalization but over maybe once you start to have a family there s more stability with buying Carrie Friedberg a financial consultant and founder of SF Money Coach a personalized financial coaching company agreed In the past decade she s worked with more younger clients with sky-high tech salaries who gravitated toward renting as a lifestyle choice Those million-dollar salary levels used to be a reward for long careers but the industry of tech has changed so much she disclosed The huge expenditure and commitment of being locked into a home and sinking tons of cash and then monthly cash into that is scary and overwhelming for a lot of people especially if they re young and single dating traveling having lots of adventures San Francisco-based real estate agent Qian Xu who earned a Ph D in artificial intelligence before starting her real estate career declared that the AI boom in particular had allowed for a flourishing of young nomadic millionaires One client Xu revealed worked at Coinbase a cryptocurrency exchange which has a domain cap of over billion and no office He travels around the world she noted He can work remotely and at the same time he can explore the world Overall Xu reported her millionaire clients can be classified into two groups There are those who are middle-aged have families and have acquired their wealth from being early investors in tech stocks that have since skyrocketed in value The second is composed of latest AI Ph D graduates who ve exposed themselves among the nouveau riche due to the tremendous pay packages offered by big tech companies These two groups she noted are diametrically opposed in their lifestyle goals and differ fundamentally on the question of whether to buy or rent The key divider between them she commented is marital status I think married people would love to have a house to welcome their children so they want to buy a single-family house she noted But if you are a single young guy then you just want to live in a very downtown area with quick access to restaurants and clubs They look for a couple of months and they say You know what The townhouse or condo is in the downtown area but the return on capital is not so good So let s rent Manoj Viswanathan a professor specializing in tax law at UC Law San Francisco reported a third driver is that real estate just isn t as appealing an venture option anymore He pointed at Proposition a amendment to the California constitution that capped property taxes and provided a substantial financial incentive for homeowners not to sell If you think about a millionaire that s renting a house that was purchased by the owner a while ago the owner s Prop rate is pretty low and that means the rent that s being charged is lower significantly on a cash flow basis than that of a house purchase he announced And in the Bay Area the difference between those two numbers is going to be higher than in other places With remote work still prevalent in the Bay Area Viswanathan disclosed millionaires with children are placing a higher priority on factors like school quality High interest rates also likely played a role in pushing various millionaires away from buying a home If you buy a place there s upfront capital there s closing costs and you re maybe committing to five years he noted You may not need to do that if you re renting You could just rent for a shorter time frame and then maybe buy when you think interest rates are going to go down Ressler the researcher commented developers were already scrambling to capitalize on the trend Developers are responding by building more luxury multifamily units with premium amenities concierge services and flexible lease terms Ressler mentioned But he expressed concerns that the shift could hurt middle-class and lower-income families The influx of wealthy renters can inflate rental prices in premium neighborhoods potentially displacing middle-income renters and exacerbating affordability issues he explained Ultimately Ressler explained the trend was a microcosm of a deeper intrinsic concern with the housing territory in modern-day America If even the wealthy are opting out of ownership it may signal that the system is increasingly inaccessible to average earners he stated Policymakers may need to reframe the American Dream narrative and focus more on housing stability than ownership