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Only the rich can rent?

By Judy Martel · Bankrate.com
Tuesday, January 22, 2013
Posted: 5 pm ET

Are rentals the next housing bubble? If you ask builders and brokers, the answer will likely be yes. October's multifamily apartment starts were up 10 percent from a month earlier and 63 percent from a year earlier, suggesting that contractors are scrambling to keep up with the demand.

And in some sought-after areas such as New York City and Los Angeles, brokers report that rentals are going for more than their monthly asking prices, similar to what was happening with home prices during the homebuying frenzy a few years ago.

Much of the demand is a consequence of people losing their homes after the housing bubble burst. But The Wall Street Journal also reports an increase in "trophy" rentals by rich renters who prefer luxury leases over homeownership. That's driving up rents.

This particular segment of the rich population prefers to rent, so they can keep capital flowing into the stock market or a business. But they don't want to forfeit a wealthy lifestyle. Brokers in New York say they're showing apartments that rent for $15,000 a month and higher, and it's the same story in San Francisco and Los Angeles.

In Los Angeles, Developer Rick Caruso just opened an 87-unit apartment building near Beverly Hills that features a three-bedroom, fully furnished penthouse unit with a monthly rent of $40,000.

Of course, if you truly want to rent like the rich, you could shell out $500,000 to $600,000 a month for the Beverly Hills home formerly owned by William Randolph Hearst. But for the average renter, the supply-and-demand situation means that apartment buildings approved for construction now won't be available for a year or two, so finding a deal will be difficult.

Keep up with your wealth and mortgages, and follow me on Twitter @JudyMartel.

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7 Comments
Jake
March 12, 2013 at 6:02 pm

I cant even believe this was published. This is a weak opinion based on NO facts, only agenda of hating the rich....which most of us who arent even rich are getting tired of. Im glad you didnt bother to report even ONE average rental market price. Instead you went after the most expensive rentals you could find in your 2 minutes of online research. The prices you found reflect which percentage of Americans average rental? .000001? Great job Judy, your article is worthless.

skizma
January 25, 2013 at 8:02 am

You must be kidding. The rational for the rich causing rents to raise is absurd. The majority of rentals are not the wealthy. They are for the ordinary. The rich don't rent everyday places.

J
January 24, 2013 at 3:34 pm

What a ridiculous article. Those of us in the real world, aka not living in NY, SF or LA, can buy a home for less than one months rent in LA, as you decribed. Check rental prices around the country. They are actually very reasonable.

ralph
January 24, 2013 at 2:02 pm

I am an owner of rental property and I can say that it is usually feast or famine. I have nearly lost rental property to the banks because the market was "into ownershi"p and there was a lot of cash around forhome mortgages. I have also had people placing a deposit on an apt. sight unseen. It has always been a roller coaster ride.

Bob
January 24, 2013 at 10:51 am

And how much money does this owner of the rental have? He is likely to be wealthy as well, so there goes your argument. The fact is, rents in cities are ridiculously high. In many places, the people who support the community and keep it running, the police officers, firefighters, wait staff, etc, cannot afford to live in the communities they work in.

Rob
January 24, 2013 at 9:02 am

Lets keep creating more anomous against the wealthy. They have the money to do with what they want. One thing is a fact, it is the owner of the rental that benefits from this. So it is the 'not wealthy' that benefits. This article does nothing but fan the flames of envy and discontent. I cant afford these type of rental fees and hope that maybe one day I could.