Finally. After years of soaring into the stratosphere, apartment rents are starting to stabilize in Boston thanks to a surge in new residential construction.
But the frenzy of tower building has yet to make a dent on soaring home and condominium prices in the Hub, with the vast majority of new units being built as rentals, rather than homeownership units.
Two and a half years after Boston Mayor Marty Walsh took office pledging to make Boston affordable again for middle-class families, the cost of buying a home or condo in almost every city neighborhood has gone through the roof.
From Charlestown to Jamaica Plain, several city neighborhoods have seen home and condo prices jump by more than 20 percent over the past two years, according to The Warren Group, publisher of Banker & Tradesman.
The rising prices come with condos and homes accounting for just a quarter of all new residential construction in Boston, with new apartments accounting for 75 percent.
The bottom line is not enough new homeownership units are hitting the market to meet the demands of buyers and end a years-long shortage in the number of condos and homes for sale.
Yet the changes in Boston’s apartment market provide more than just a few rays of hope for would-be buyers despairing over the high cost of buying a condo or home in the city.
The laws of supply and demand don’t work like clockwork, and the process can be messy at times, but when you build a lot more of something, prices will eventually start to flatten and fall.
Scott Van Voorhis
Cooling Rents
A new city study, released last week, pointed to a number of signs that the city’s housing strategy is finally paying dividends.
Boston’s strategy, which took shape under the late great Thomas M. Menino and which Walsh, if anything, has only intensified, has been to give a green light to encourage new apartment construction of all types, even if it is heavily tilted towards luxury units.
More units at the penthouse level of the housing market will encourage renters to trade up, freeing up older apartments and helping stabilize rents.
Downtown Boston saw more than 3,000 new apartments come on line over the past two to three years, expanding the rental market by a sizable 25 percent. Rents in downtown’s older apartments have fallen by 1 percent, according to a new survey put out by the mayor’s office.
A similar pattern is playing out in the Fenway, with a bevy of new, deluxe rental towers taking shape around Fenway Park.
The new construction has expanded the neighborhood’s rental market by 6 percent, while helping reduce rents on older apartments by 4 percent.
Meanwhile, rents in the South End are essentially flat after a .3 percent increase following a surge in apartment construction that has increased the number of units in the neighborhood by 10 percent, the city study shows.
Boston’s long-standing mandate that developers rent out 20 percent of all new apartments in a new project or tower at subsidized, below-market rates is also helping to put a dent in the housing crisis. Boston has the highest number of deed-restricted, affordable units of any city in the country, city officials contend.
“Increased growth is leading to rent stabilization in several areas,” writes Gina Physic, a spokeswoman for the Boston Redevelopment Authority.
A Tale Of Two Markets
Even as rents stabilize in some key Hub neighborhoods, condo and home prices are soaring across the city.
Some of the biggest increases are coming in the neighborhoods beyond the orbit of downtown, which, like the rest of the city, are starved for new listings.
However, on top of that, far fewer new apartments and condos are being built right now beyond downtown and its bevy of big skyscrapers.
Prices are rising across the city as buyers flee other, more expensive neighborhoods that are transforming rapidly from middle- and working-class areas to increasingly upscale enclaves.
JP, for example, has seen a 23 percent in its median home price over the past two years – to $765,000 – and an 18 percent increase in its median condo price ($485,000). South Boston saw a 20 percent rise in its median home price ($663,750), and a 26 percent condo price jump, to $625,000, according to The Warren Group.
Roslindale saw a 22 percent in its median home price ($511,250) and a 18 percent jump in its median condo price ($385,000), Warren Group stats show. West Roxbury has seen its median condo price rise 25 percent, to $345,000, while the neighborhood’s median home price is now above the half-million dollar mark, at $530,000.
Overall, the majority of new rental and condo units built over the past few years – 67 percent – have come online downtown, bringing little relief to the city’s housing-starved neighborhoods.
Still, the good news is that the success Boston is starting to enjoy taming one of the country’s expensive rental markets provides a model for how to deal with soaring condo and home prices.
In fact, help is already on the way – it is just going to take a couple years to get there, given that big new housing developments take time to get built.
Condo and apartment developers are finally starting to shift their attention away from a sole focus on gilded downtown luxury projects. So far this year, 69 percent of the housing permits filed with City Hall have been for the city’s outer neighborhoods, with the remaining 31 percent slated for the downtown core, according to last week’s city report. There are also signs that developers are starting to shift towards condos and other homeownership projects.
While 82 percent of the housing permits taken out by developers were for rental projects, that number has fallen to 43 percent in 2016.
Overall, new apartments and condos built for middle-class families surpassed the 1,000 mark in the fiscal year ending June 30, a spokeswoman for the Boston Redevelopment Authority noted.
In the end, it’s a numbers game. And if Mayor Walsh & Co. can succeed in flooding the market with new condos the way it has with luxury apartments, the laws of supply and demand will take care of the rest.
