The single-family rental sector is seeing more and more luxury homes

The single-family rental (SFR) market has gained momentum since the financial crisis of 2008. Now, a new segment within the SFR sector—luxury homes—is gaining popularity.

Point 2, The international real estate search engine analyzed its internal data, public records, and other sources to determine that luxury rentals are a growing share of all single-family home rentals, with cities in California leading the way. Luxury rentals were defined as rentals with monthly rents of $5,000 or more.

“By choosing a single-family rental home, they get the indoor and outdoor space they need without having to pay a mortgage, maintain, or feel the stress of living,” the report says. “It really does seem like a match made in heaven as more and more renters are starting to see the benefits of renting instead of buying, especially in the current market.”

This trend is being driven by several factors. First, the number of homes being built to rent has increased significantly. In 2014, the number of completed homes being built to rent was 4,056. In 2023, that number reached 27,495, a 75% increase over the previous year.

At the same time, the incomes of single-family renters have skyrocketed. Between 2017 and 2022, Point 2 found that the number of renting households earning more than $150,000 has doubled. The higher the income bracket, the more renters in those brackets are choosing to rent single-family homes.

Households earning less than $50,000, however, shrank by 17%, suggesting they are being priced out. Households earning between $50,000 and $75,000 grew by a more modest 10%.

This trend is not evenly distributed geographically. Five of the six cities with the largest share of single-family rentals in the luxury segment are in California. Irvine has the most, with a whopping 73.6% of single-family rentals in the luxury segment.

In Los Angeles, 58.9% of single-family rental homes are in the luxury zone, while 29% are in the ultra-luxury zone (monthly rent of at least $10,000). Boston’s share in the luxury segment is 42.7%, San Diego 40.7%, and San Francisco 37%.

According to Point2 analysis, single-family rentals currently account for 32.5% of all rentals nationwide. US Census Bureau data.

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