The rise of the forever renters

With income to spare, the family plans to buy new furniture and décor for their home and to repaint their 12-year-old daughter’s bedroom. They also splurged on three domestic vacations in the past year, and increased their savings.

Sustained high interest rates in the U.S. have made mortgages unpalatable to many, though the Federal Reserve recently signaled an end to more rate hikes.

There has been a dearth of inventory of homes for sale and there are more rentals available with luxuries that make life seem easy. About 64 percent of people in the U.S. are homeowners compared with about 89 percent of people in China and 72 percent in Brazil, according to a Euromonitor analysis.

Real-estate investor GID, which owns and manages about 50,000 apartment units across 30 markets in the U.S., says nearly a quarter of its residents earn over $200,000.

“Not an income you typically would have associated with a renter versus homeowner, but that is increasingly the case today,” says GID Chief Executive Greg Bates.

The influx of higher-income renters has in part led to a decline in the number of lower-priced rental properties available in the U.S.

The number of renter households with incomes of more than $1 million reached a record high of 4,453 in 2022, according to census data compiled by the IPUMS. That is more than four times as many as there were in 2017, when 956 millionaires were renting their homes. The number of renters earning over $200,000 a year is up fourfold since 2010, according to the census bureau.

Luxury rental buildings are quickly filling up in cities across the country. There were nearly 103 million people living in rental housing in 2022, according to the National Multifamily Housing Council, a 15 percent increase from 2007.

For decades, renting was merely a steppingstone for the upper and middle class before it was time to buy. And a home was considered a key asset that would appreciate over years and help its owner fund retirement.

New subdivisions full of single-family homes for rent—all but nonexistent a decade ago—are springing up from coast to coast. More rentals are advertising themselves as kid- and pet-friendly and permitting renters to make extensive modifications to their spaces.

“A lot of that growth is coming from renters who are married, who have a college education and in some ways fit the profile of what would have been first-time home buyers,” says Whitney Airgood-Obrycki, a rental-housing researcher at Harvard’s Joint Center for Housing Studies who herself leases an apartment with her family.

With a combined household income of $122,000, Alicia Couch says she and her husband could comfortably afford a mortgage and down payment on a house in Dawsonville, Ga. Instead, they are choosing to stay in the four-bedroom townhome they rent for $2,085 a month.

“It’s not that we can’t afford to buy, it’s that we don’t want to and we don’t feel like it’s worth it,” says Couch, who is 37 and works in operations for a veterinary clinic.

With income to spare, the family plans to buy new furniture and décor for their home and to repaint their 12-year-old daughter’s bedroom. They also splurged on three domestic vacations in the past year, and increased their savings.

Rental subdivisions like the one the Couchs live in, known as build-to-rent communities, are designed to replicate the look and feel of white picket-fenced suburbia. The only difference: All the houses are rented, not owned.

There are currently 553 of these developments completed or under construction, with a combined 84,459 units, according to property-management software firm Yardi, roughly triple the 185 projects with 21,231 units as of 2019. Their average occupancy rates are currently 97 percent, Yardi says, above the already-high industry average of 95 percent.

Ark Homes for Rent, which owns the Cottages at Riley Place subdivision where the Couchs live as well as 14 others in various stages of development, says it receives between eight to 10 qualified applicants for every unit that comes on the market.

Tenants who sign two-year leases renew their contracts 80 percent of the time, the company says, above the overall industry resigning average of 60 percent.

Deborah and Joseph LaLonde, 71 and 68 years old, knew they could no longer handle the upkeep on their large family home.

When they toured Phoenix retirement complexes, however, they disliked their hotel-style, multi-floor designs and the homogeneity of being surrounded exclusively by seniors.

“It really made us feel like we would get older faster,” says Joseph LaLonde, a retired physical education teacher who works part time at an Amazon robotics center.

With renters staying in their spaces longer, they are more likely to spend money transforming them to match their tastes and preferences.

Tempaper & Co., a removable wallpaper brand, says their website traffic in the fourth quarter of 2023 is more than double last year’s. At Poplight, which sells battery-powered and easy-to-remove light fixtures, online store visits more than quadrupled from October to November.

Homeownership tracks with age

Historically, homeownership rates have tended to increase with age. The median age of renters who are the heads of their households is 41, up from 37 in 2000 according to a Zillow analysis of census data.

But millennials have been taking longer to make this transition compared with previous generations. At age 34, 52.7 percent of millennial households owned a home, compared with 57 percent of Gen Xers and 58.9 percent of baby boomers at the same age, according to NMHC tabulations.

Renting allows Cary Beale and his family to live in more expensive and beautiful homes than they could buy, he said. Cary, 49, his wife Jamie and their three children have been renting for about 12 years.

They also love the flexibility of renting. His family moved to Costa Rica during the pandemic. He pays about $7,500 a month to rent an oceanfront 5-bedroom home valued at about $4.5 million.

There is a cost to all of this change. As the rental market shifts to appeal to higher income tenants, renters who make below the median wage are left in the lurch.

From 2012 to 2022 the number of units available for less than $600 a month plummeted 23 percent, from 9.4 million to 7.2 million units, according to the Harvard Joint Center. At the same time, those charging $2,000 or more jumped from 3.2 million to 7.3 million.

See the graphic version of this article in the November December 2023 flip book version.