May 11, 2023 - News

Northwest Arkansas' growing share of wealthy renters

Data: RentCafe; Chart: Tory Lysik/Axios Visuals

As many would-be homebuyers rent longer, the market is responding to those high-income residents with an influx of upscale apartment complexes flush with amenities, Axios' Sami Sparber and Tory Lysik report.

By the numbers: The number of metro-area renters earning at least $150,000 annually grew 95% between 2016 and 2021, per U.S. Census data.

  • The national average increased by 87.5% during that period.
  • The intrigue: In NWA, the reason high-earners are renting is likely because of location, Duke McLarty, executive director for the Northwest Arkansas Council's workforce housing center, told Axios NWA.
  • Many millennials and Gen Zers who were locked into renting right out of college are comfortable continuing to do so. Those who make more money can better afford upscale rentals near downtowns and commercial area than to make a down payment on a house in the vicinity, McLarty said.

Yes, but: Real estate developers and investors have little incentive to build rentals below market rate when there's opportunity to build high-end housing and charge more rent. This makes it increasingly difficult for teachers, firefighters, restaurant workers, etc., to find attainable housing.

  • "The market is not going to provide this out of the goodness of its heart. The market is a capital venture," McLarty said.
  • The Northwest Arkansas Council launched a workforce housing center in 2021 to tackle this very issue. McLarty said the center has spent the past year developing relationships with municipalities, employers and developers to determine what can be done for people who make 50-100% of the area median income to have housing options in all NWA communities.

The big picture: Apartment construction is booming nationwide. Historically, new rentals tend to be higher end, Chris Salviati, senior economist at Apartment List, tells Axios.

  • That trend has grown more pronounced in recent years as rising project costs squeeze developers, he says.

Between the lines: High listing prices and mortgage rates aren't making home buying as desirable as it once was, Salviati says.

  • "A lot of folks in that high-income band, who in the past would have owned homes, are now continuing to rent — whether that's for lifestyle reasons or because they are feeling like it's not a good time to buy," he says.
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