Residents looking to rent in Greater Boston face prices near an all-time high, thanks in large part to a dramatic increase in students occupying rental housing in the area, according to a new housing report.
The seventh annual Greater Boston Housing Report Card, prepared by the The Kitty and Michael Dukakis Center for Urban and Regional Policy at Northeastern University, for the first time devotes an entire chapter to the effects students have on the region’s rental market – and according to the report, there are many.
“The reason why rents have remained so high … is you have this almost massive number of [post-secondary] students,” said report co-author Barry Bluestone. Approximately 336,000 college students live in Greater Boston alone, according to the author’s research. The report estimates that in the region, approximately 177,000 students live off-campus, with more than half being graduate students mostly living in rental housing.
In Greater Boston, rental vacancies remain far below the national average, with the major difference likely related to the concentration of college and university students who provide a relatively steady demand for rental apartments, the report states.
Added to the rental pool are homeowners who have recently been forced to become renters due to the recession, and with requirements for loans tightening, many would-be owners have been unable to secure funds to purchase a home, Bluestone told Banker & Tradesman.
Nationwide, the average rental vacancy rate across all large metropolitan areas combined has risen sharply since 2006. The rate now exceeds 10 percent for the first time since at least 1956, and possibly for the first time ever, according to the report.
Rental housing rates began rising by the second quarter of 2010, and this year, Greater Boston will likely remain fifth on the list of most expensive metro areas in the U.S. in average rent, exceeded only by New York City; Westchester County, New York; San Francisco; and Fairfield County, Conn.
Buyers Wary of Home Sales
For those interested in buying a home, prices remain “relatively stable,” Bluestone said. Even so, many people who do qualify for the historically low mortgage rates currently available are choosing not to buy because they worry that even though prices are low now, they could drop even more, further decreasing their homes’ value.
“A lot of people moved purchases forward,” to take advantage of federal homebuyer tax credits that expired in September, Bluestone said. However, many of those people may not have acted so quickly without the incentive, and now that it is past, we could see a lull in purchases, he added.
Although single-family home prices increased between March and June in Greater Boston, they fell again in July, Bluestone said. If this summer’s price softness is merely a temporary situation after the homebuyer tax credit programs expired, the study indicates prices could be similar to the recovery from the 1988-1997 housing cycle, when it took five years for homes to regain their pre-recession peak.
Considering what the authors see as a “close parallel” between the timing of the two cycles, single-family home prices likely will not recover to their 2005 peak until 2014.
Other findings from the report:
Even with the economy seemingly bouncing back, new housing construction in Greater Boston has been minimal, with the number of building permits for multifamily developments in 2009 down 74 percent from a 2005 high.
Foreclosure petitions rose in the first half of 2010, and the number of deeds and auctions in the first half of 2010 suggest that the number of households losing their homes to foreclosure this year will easily exceed the total from 2009. (Editor’s Note: According to The Warren Group, publisher of Banker & Tradesman, through August, the number of Massachusetts foreclosure deeds have already exceeded those recorded in 2009.)
In Massachusetts, the past year has seen efforts to address the foreclosure situation by doubling the Department of Housing and Community Development’s (DHCD) budget. During fiscal 2010, DHCD received $643 million in federal funds and an additional one-time funding of $357 million by the federal American Recovery and Reinvestment Act (ARRA) for a range of programs.
