Rising foreclosures and the ongoing credit crunch have combined to teach the Boston region’s housing market some tough lessons about apartment supply and demand.
“The foreclosure crisis turned homeowners into renters, and the credit squeeze has meant fewer potential buyers can get financing,” said Aaron Gornstein, executive director of Citizens’ Housing and Planning Association (CHAPA). “More people are competing for fewer apartments and supply and demand is sending rental costs up.”
Last week, CHAPA, the Boston Foundation and Northeastern University’s Center for Urban & Regional Policy released the Greater Boston Housing Report Card/From Paradigm to Paradox: Understanding Greater Boston’s New Housing Market. The 86-page study found that despite the recent decline in housing prices, homeownership remains out of reach for many families.
Researchers found the steep rise in foreclosures has forced many families into rental housing. Additionally, tighter underwriting re-quirements have kept many potential buyers on the sidelines, resulting in fewer available apartments – at higher rents. Average asking rents in Boston’s 15 neighborhoods reached $1,750 in the second quarter of 2008, a 20.6 percent increase from $1,450 in 2001, the re-port found. Renters are being squeezed as real income dropped by nearly 2 percent, researchers found.
Tighter And Tighter
While single-family home prices have fallen by 7.2 percent over the past two years, the region’s housing prices are preventing many potential buyers from getting mortgages. The credit squeeze has raised down payment requirements and restricted mortgage lending to those with higher credit scores.
Exacerbating an already tight rental housing market is the lack of new construction, the survey said. Housing production has almost been cut in half since its peak in 2005, from 15,000 units to 8,000 so far this year.
As the median single-family home price plummets by 10 percent in the Bay State, condominium prices have remained flat. The median price of a single family home fell to $366,282 in 2008 from a high of $407,276 in 2005. Median condo prices were relatively unchanged at $306,303 in 2008, compared to a high of $306,737 a year ago, according to the report.
To ease the affordability crisis, the report recommends continued use of Chapter 40B, the state’s anti-snob zoning law. Under the measure, at least 25 percent of a development must be affordable. While the law is controversial, housing advocates argue that without the statute, 43,000 housing units would never have been built. The law was enacted in 1969 after legislators were convinced towns were erecting barriers to construction with 1- and 2-acre lot zoning, as well as density and growth caps.
The report also calls on the state and federal governments to assure an adequate supply of rental vouchers so that low- and moder-ate-income renters can afford apartments without compromising their ability to pay for everything else their families require.
Despite the gloomy news, the report does contain some optimism. Unlike places like Las Vegas and Miami, Greater Boston has ex-perienced very little speculative housing construction. As a result, when the housing market weakened, the region did not suffer any-where near as serious a drop in prices as other metro areas.
