More millionaires opt to rent in NYC instead of buy

Feeling the pinch of high prices and elevated mortgage rates, New York City millionaires are increasingly choosing to rent instead of buy. A new report from RentCafe finds that millionaire renter households have nearly tripled in the past four years, mirroring national trends.

The report, which defines millionaire households as those with annual incomes of $1 million or more, said New York now ranks #1 for high-income renters, with 5,661 millionaire renter households in 2023, up from 2,204 in 2019, a 157 percent increase according to RentCafe’s analysis of Integrated Public Use Microdata Series data.

NYC far outranked second place San Francisco, with 1,411 millionaire renter households in 2023, compared to only 321 households in 2019. Los Angeles was in third place (823) and Miami in seventh (314).

Nationally, the number of renter households with incomes of $1 million or more grew during the same four-year period from 4,500 to 13,700.

Significantly higher borrowing costs

A rise in mortgage rates after the Federal Reserve began a series of interest rate increases to tame inflation likely played a role in spurring NYC millionaires to rent instead of buy.

“When rates jumped from around 3 percent to over 7 percent, even wealthy buyers faced significantly higher borrowing costs,” said Adina Dragos, a research analyst and writer at RentCafe who authored the report.

“We’re talking about hundreds of thousands in additional interest on million dollar-plus properties. Many affluent renters prefer to keep their capital invested in higher-return assets rather than tying it up in real estate,” Dragos said.

3 percent rates lock up inventory

The “lock-in effect” limited luxury inventory in particular, she said. For millionaire owners who secured mortgage rates around 3 percent in 2020-2021, selling would mean giving up those terms for rates that were 3 to 4 points higher.

“Even for wealthy sellers who can afford the higher payments, the financial logic often doesn’t work, why trade a 3 percent mortgage for a 7 percent one? This has created a luxury inventory shortage that’s pushed more high-income buyers toward renting as their best available option.” Dragos said.

There were other contributing factors like a preference for a flexible lifestyle, investment strategy, and urban housing market dynamics, she added.

More NYC millionaire owners

The report also found that NYC millionaire homeowners grew from 13,204 in 2019 to 26,767 in 2023, a 103 percent increase, which tracked closely with broader wealth accumulation trends seen nationally among high-income households.

“This doubling is in line with what we’d expect given several factors: significant asset appreciation during this period in both real estate and stock markets, substantial high-income job growth in tech and finance sectors, and income inflation among top earners,” Dragos said.