Luxury homes are sprouting in the single-family rental sector

The single-family rental (SFR) space has taken off since the financial crisis in 2008. Now a new segment within the SFR sector — luxury homes — is gaining steam.

Point2, an international real estate search portal, analyzed its internal data, public records and other sources to determine that luxury rentals are making up an increasingly large share of all single-family rentals, with California cities leading the way. Luxury rentals were defined as those with monthly rents of at least $5,000.

“By choosing a single-family home for rent, they get the indoor and outdoor space they need, while remaining mortgage-free, maintenance-free and stress-free,” the report reads. “This really seems like a combination made in heaven, with more and more renters waking up to the advantages of renting a house rather than buying one, especially in the current market.”

This trend is being driven by a couple factors. First, build-to-rent stock has grown substantially. In 2014, the number of build-to-rent homes completed was 4,056. In 2023, that number reached 27,495, a 75% increase compared to the previous year.

Chart courtesy of Point2

At the same time, incomes among single-family renters have ballooned. Between 2017 and 2022, Point 2 found that the number of single-family renter households making more than $150,000 doubled. The higher the income bracket, the more renters in these brackets are turning to single-family rentals.

Households making less than $50,000, however, shrank by 17%, suggesting they’re getting priced out. Those making between $50,000 and $75,000 grew by a more modest 10%.

The trend isn’t evenly dispersed geographically. Five of the top six cities with the largest shares of single-family rentals in the luxury tier are in California. Irvine has the most, with a whopping 73.6% of its single-family rentals in the luxury space.

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

Nationally, the single-family rental space now comprises 32.5% of all rentals, according to the Point2 analysis of U.S. Census Bureau data.