New York City bounced back from a mass exodus of wealthy people during the pandemic and maintains its spot as the city with the highest number of ultra-rich people, but it might have to reckon with the reality that several other burgeoning hubs are starting to attract more millionaires.
The Big Apple is the world’s wealthiest city by a wide margin, according to a new report released Wednesday by investment migration consultancy Henley & Partners. The global financial and cultural hub boasted 340,000 high-net-worth individuals last year, defined as people worth over $1 million, while 290,300 millionaires lived in the world’s second-wealthiest city, Tokyo.
New York also came out on top for being home to the most centimillionaires, with 724 people worth more than $100 million, 95 more than second-place Bay Area, which includes San Francisco and Silicon Valley. When it came to where the wealthiest of all chose to settle down, however, NYC slipped to second place, welcoming only 58 billionaires compared to the Bay Area’s 63.
But the biggest sign that the picture of America’s wealth is changing may not be in how many rich people are still in New York City, but in how fast smaller hubs are gaining ground on the country’s traditional economic hotspots. Cities in the U.S. Sunbelt have become havens for wealthy retirees and high-flying tech multimillionaires, with generally lower tax burdens, more space, and the modern ability to work from anywhere.
Rise of the Sunbelt
Over the past decade, the number of high-net-worth individuals in New York increased 40%, but that pales in comparison to the growth registered by other American cities, many in the South and Southwest, where waves of rich households decided to move during the pandemic as offices closed down and the business world went online.
In Austin, which made headlines in 2021 when it became the new headquarters of Elon Musk’s Tesla, the population of individuals worth at least $1 million rose 102% between 2012 and 2022, the biggest growth rate in the U.S. and second largest in the world behind Hangzhou, China. West Palm Beach saw the fourth-largest increase of ultra-wealthy residents, with its population of new millionaires and billionaires growing 90%, finishing just ahead of Scottsdale, where the wealthy population has grown 88%.
The Sunbelt was one of the country’s fastest-growing population centers even before the pandemic, and not just for rich people. In 2019, census data showed that 14 of the 15 cities with the largest population growth over the two years prior were in the South and West, with cities in Arizona and Texas experiencing the largest surge. Meanwhile, populations in the Midwest and Northeast declined, largely as households who had recouped wealth following the 2008 financial crisis made a bigger splash in suburban housing markets.
The Sunbelt made up 75% of all population growth in the U.S. between 2009 and 2019, with tax-friendly Texas and Florida accounting for most of the gains, according to a 2019 report by Clarion Partners, a real estate investment firm. California was the only Sunbelt state where population declined in that period.
When the pandemic hit, many people with means were able to leave big expensive cities for smaller ones. Around 2,000 wealthy New Yorkers fled the city in 2020 and 2021, according to the New York Times, citing IRS data showing people who moved away from New York in those years had incomes on average 28% higher than those who stayed.
The same scenario played out in other major economic hubs, including San Francisco and Los Angeles, where wealthy Californians have been leaving the state in rising numbers for two decades because of high housing costs and scarce employment opportunities, according to the Public Policy Institute of California. But many more of the state’s wealthiest residents and tech moguls also opted to leave when the pandemic began, largely because of high tax rates and strict regulations.
A permanent shift?
Worryingly for financial centers like New York and California, some businesses also moved their headquarters to other states where tax regimes are especially kind to the ultra-wealthy.
Moving Tesla’s headquarters from California to Texas may have saved Musk $2 billion in various taxes and fees, according to a 2021 Bloomberg analysis. In 2020, billionaire investor Paul Singer dented New York City’s reputation as a global financial capital when he announced his multibillion-dollar investment firm would move its headquarters to West Palm Beach, citing the pandemic and the gloomy future for New York offices.
But even if millionaires are spreading more evenly throughout the U.S. than they have in years past, the upper echelons of wealth are still concentrated in the traditional hubs. Austin ranks 32nd in the world for number of billionaires, home to only nine last year according to Henley & Partners’ report. Slightly further up the list at joint-25th place with 12 billionaires is Miami, which also welcomed droves of former New Yorkers and Californians during the pandemic.
Along with New York, Los Angeles and the Bay Area rounded out the three U.S. cities in the top 10. But other than the two California representatives, Houston was the only Sunbelt city to graze the top of the list, sitting at 13th place with 20 billionaires. However, the Texas city’s wealth is hardly new, given it is where 44 of the nation’s 113 publicly traded oil and gas companies are headquartered.
