By Tom Hopper, MHP Center for Housing Data
Articles published in the past few weeks highlight a reduction in rents across the Boston region. Here’s a sampling of these stories:
These pieces highlight a sudden, major shift in prices in one of the most expensive cities in the country. Our team wanted to dig into the data a little more on this issue: Are some neighborhoods seeing bigger changes than others? These stories focus on the inner core neighborhoods of Boston, but are rents decreasing elsewhere across the state? To answer these questions, we’ve accessed information from CoStar Group, a real estate research and data service. CoStar collects information from thousands of multifamily properties across Massachusetts and provides analysis for large market areas and smaller submarkets. For this brief we accessed vacancy rates and market asking rent over time.
Vacancy rate can be a good indicator of the balance between supply and demand in the market. In theory, a “healthy” vacancy rate somewhere between five and six percent provides enough open inventory for apartment seekers to search and find the housing that is suitable for them. Vacancy rates below this level, which we’ve seen in Greater Boston and across the state for many years now, place upward pressure on prices as renters compete amid a scarcity of units. In the past few months, vacancy has spiked in the Greater Boston housing market but not in other parts of the state. The Worcester, Springfield and Providence, R.I., markets (which includes Bristol County, Mass.) have not seen the same increase in vacancy.
As the articles cited above mention, Boston is seeing a reduction in rents due largely to a decrease in demand for housing from the student population. Data show that the drop in rent is most acute in relatively more expensive inner core neighborhoods such as the Seaport, Alewife in Cambridge and Downtown Boston, as well as areas with high student populations, such as Harvard/MIT and Somerville. However, based on this first look at the data, the neighborhoods most of us associate with students, Allston/Brighton and Fenway, are not showing the same declines. While that may change as we move deeper into September, for now it seems that more modestly priced neighborhoods have seen less dramatic rent reductions. It should also be noted that CoStar’s data set does not include many properties under five units, so data for neighborhoods with many small rental properties (such as Allston/Brighton) may be impacted by the bias in the sample.
Meanwhile, areas outside of Greater Boston are seeing multifamily rental prices stabilize or even increase. Cities such as Holyoke, Fall River and Fitchburg have seen the highest year-over-year rent increases in the data we examined. This is not surprising given these areas are less impacted by the moving patterns of out-of-state student populations. It could also indicate an increase in demand for lower-cost housing amid a pandemic and unemployment crisis. This could incentivize landlords to evict tenants who have fallen behind on rent once the CDC-ordered eviction moratorium ends (January 1, 2021, as of the date of this brief).
Although rent trends are moving in opposite directions for Greater Boston and other parts of the state, these changes show how quickly the pandemic has altered patterns of housing demand. These are likely to be temporary shifts during the crisis, so what should we make of the lower rents in the Greater Boston market? For some renters, this could be a rare opportunity to find a great apartment at a lower rent in a highly sought-after neighborhood. For renters who have lost employment or income as a result of the pandemic, these slight drops in price may not provide the same opportunities. One potential benefit of high vacancies in the inner core and a lack of new renters, however, is that landlords have more of an incentive to work out a repayment plan for any rent arrearages rather than pursue an eviction in January.
Thinking beyond the pandemic, reduced demand for Greater Boston is an unappealing way to achieve housing affordability and would come at the expense of the culture, vibrancy and economic viability of our region. Affordability is better maximized through increasing housing stock, removing barriers to production such as exclusionary zoning, and expanding the supply of income-restricted housing, along with achieving greater wage equity for low-income households. These strategies would help expand opportunities and provide homes for more people while improving affordability for all. If we wish to see long term improvements to rental affordability, these are our best options once the virus is behind us.