Although rental housing suffered through a sluggish year, home sales and prices surged, surpassing the expectations of industry watchers who had anticipated a more moderate market and deflating the notion floated by others that 2004 would be the year the “housing bubble” burst.
Double-digit home price appreciation, which many thought would be unsustainable this year, continued to be the norm in many parts of the Bay State. Sales of all residential property shot up 14.2 percent during the first three quarters of the year compared to the same period last year, according to information from the Massachusetts Association of Realtors.
“It’s [the market] obviously better than we expected,” said Judy Moore, 2004 president of MAR.
According to MAR, sales in Massachusetts remain historically high and on pace to make 2004 a record year for home sales. Through the first three quarters of the year, sales of detached single-family homes were up 10 percent from a year ago and 4 percent higher than 1998, when a record 50,401 single-family homes were sold, the group reported.
The condominium market was particularly robust, spurred in part by empty nesters and first-time homebuyers who could not afford detached single-family homes. Condo sales jumped more than 25 percent over 2003 levels when an all-time high of 15,738 units were sold.
Realtors in many parts of the state were reporting signs that the real estate market was slowing. Homebuyers had more properties to choose from, and some residences were taking longer to sell, many reported. But those observations weren’t backed up by statistics.
Listings for all residential property were up only 3.3 percent during the first three quarters, according to MAR, and the number of single-family homes listed for sale actually slipped 0.5 percent. Meanwhile, the average time it took to sell residential property increased only about four days.
Low mortgage interest rates continued to be a major boost for the residential sales throughout the year. A slight increase in rates pushed many consumers to jump into the homebuying mode in the spring and summer.
But the low interest rates, which encouraged some to take the plunge into homeownership for the first time, continued to chip away at the supply of renters throughout Greater Boston at a time when the supply of newly constructed apartments grew.
Pressures on the multifamily housing sector mounted as construction costs climbed. “It’s been a very difficult year” for the rental market, said Ted Jankowski, chief executive officer of the Greater Boston Real Estate Board.
The rental market began to show some signs of recovery, however. Even though some of the larger property owners continued to offer various concessions and smaller landlords slashed rents to keep their units filled, some apartment managers were reporting improved occupancy rates.
Still, a study released by the National Low Income Coalition in November revealed that Boston was one of the top five cities experiencing the greatest loss in median gross rents in 2003. According to the study, Boston’s median gross rent was $933 in 2003, a 7.6 percent decrease from the prior year. Only Aurora, Colo., where the median gross rent was $687, experienced a greater decline, according to the study.
Despite the drop in Boston rents, many tenant advocacy groups argue that housing costs in Massachusetts are still way beyond the reach of many working individuals and families. In fact, in another study conducted by the National Low Income Coalition, Massachusetts was listed as the second least affordable state in the country for renters. The study showed that a renter would have to earn $20.93 an hour, or more than $43,500 a year, to afford a typical two-bedroom apartment in the Bay State. Nationwide, an individual would have to earn $15.37 – almost three times the federal minimum wage — in order to afford a two-bedroom apartment.
Meanwhile, low-income renters in Massachusetts and across the country faced a potential crisis when severe cutbacks to the Section 8 rental housing voucher program were proposed. Tenants use Section 8 vouchers to pay rents at private-market housing. Aggressive lobbying from housing advocates, the state’s congressional delegation and Gov. Mitt Romney this year helped ensure that program included adequate funds.
On the political front, real estate industry leaders were buoyed by several major victories, including the defeat of a rent stabilization proposal in Boston.
The defeated measure, which many in the real estate industry referred to as another form of rent control, would have enabled tenants to challenge rent increases of between 5 percent and 10 percent depending on their incomes. Groups like the Greater Boston Real Estate Board and the Massachusetts Association of Realtors opposed the effort.
Watershed Events
Realtor groups scored another victory when the Legislature and governor passed a law in December that would enable landlords to install water meters in rental units in order to charge tenants for water usage. Both GBREB and MAR had long pushed for such a law, which advocates say will provide incentives for users to conserve water.
However, one legislative effort that elicited significant controversy within the real estate industry this year was the so-called agency law. The law, proposed by MAR and designed to clarify the way real estate agents work with and represent consumers during a real estate transaction, was passed earlier this year. It goes into effect in July 2005.
Supporters say the law is consumer-driven and reflects years of research and input from many real estate professionals and legal experts as well as changing industry trends. Up until this year, Massachusetts, unlike many other states, lacked specific laws that guide the fiduciary relationships and practices of real estate brokers and agents.
Regulations that are currently being drafted by the Board of Registration of Real Estate Brokers & Salespersons will provide clarity for both Realtors and consumers on agency relationships, said Moore, the MAR president.
But there was enough opposition to the agency legislation to spur some local Realtors to create a group called Real Estate Agents for Real Agency, which fought to prevent the legislation from passing.
Debate over the issue came to a head in June after an amendment including the agency law was quietly slipped into the budget. That infuriated some Realtors, including Fred Meyer, a past president of MAR, who ultimately resigned from the association’s board of directors in protest.
Perhaps one of the biggest wins for the real estate and homebuilding industries, as well as for affordable housing advocates, was the preservation of Chapter 40B, commonly referred to as the state’s anti-snob zoning law. The law has been credited with increasing the supply of mixed income housing, particularly multifamily housing.
Seventy-eight bills were filed to amend Chapter 40B, but lawmakers couldn’t agree on how best to resolve the debate over the issue and the 35-year-old law ultimately remained intact.
The affordable housing agenda was also bolstered by the passage of several other measures. The low-income housing tax credit, a program that provides tax incentives to developers to build affordable rental housing developments, was extended for another five years. Established in 1999, the tax credit program has helped create an estimated 1,800 new homes.
In addition, the Legislature approved a $200 million bond bill that provides funding to create community-based housing for people with disabilities and also to make homes more accessible for disabled people.
A new $2 million homelessness prevention program, Residential Assistance for Families in Transition, was created this year. The program helps families pay first-month’s rent and security deposits.
State leaders also passed a smart-growth zoning law known as Chapter 40R, which provides financial incentives to communities that create housing in specially established smart-growth districts.
And following three years of cutbacks, the housing budget was increased by $12 million.
“Overall, we think there was significant progress made on affordable housing. There was a greater attention to the issue,” said Aaron Gornstein, executive director of the Citizens’ Housing and Planning Association.
While legislative agendas were being pursued on Beacon Hill, industry trade associations were experiencing some changes within their leadership.
Ted Jankowski became GBREB’s new chief executive officer in March and was instrumental in recruiting a new legal counsel and finance director, and an executive director for the group’s Greater Boston Association of Realtors. At the state Realtor association, John Fridlington, MAR’s top full-time employee, announced that he was leaving his post as executive vice president for a similar position at the much larger Florida Association of Realtors.
Aglaia Pikounis may be reached at apikounis@thewarrengroup.com.
