As new stock becomes occupied, rental market in some high-growth neighborhoods beginning to moderate; more than 20 percent new units are affordable
BOSTON – Monday, September 12, 2016 – Mayor Martin J. Walsh today announced that the City of Boston has completed more than 10,000 units under the administration’s housing plan Housing a Changing City: Boston 2030. In order to accommodate the growth of the city, the plan calls for the creation of 53,000 new units of housing to be created by the year 2030.
Along with the 10,486 units completed, 7,242 housing units are currently under construction, another 17,285 are currently in the development review process, and 4,167 are in the pipeline. This brings the total number of units towards the housing plan to just over 39,120 – enough housing for 67,600 new residents.
In addition, the administration announced that trends are beginning to show potential stabilization in select high-growth rental markets.
“Boston is growing faster than at any time in the last 50 years, and we need to make sure that anyone who wants to help make our city better can afford to live here,” said Mayor Walsh. “In today’s strong housing market, that means we have to create housing at all levels – from luxury units to housing for seniors and formerly homeless people. I am so pleased that we have reached this milestone, and we are not going to rest until we have reached our goals.”
Boston leads the nation in percentage of its housing stock set aside as deed-restricted affordable units. The current round of completions maintains that status, with twenty percent of new units set aside as affordable housing. Of those units, 60 percent are affordable to families making less than 60 percent of Area Median Income (AMI) – a combined household income of $53,000 or below for a family of three. The remaining 40 percent are affordable to middle-income residents – those families with household incomes between $60,000 – $125,000.
A fundamental principle of the City’s housing plan is that as new housing stock comes on line, it will relieve pressure on the City’s existing stock. As people who wish to upgrade do so, the result will be higher vacancy rates in existing stock and diminished pressure on rents.
Based on a new City analysis of rental trends, this stabilization appears to be underway in several of the neighborhoods that saw the highest growth. For example, Central Boston saw 3,030 units completed – a 25 percent rate of growth. Rents in older units in this neighborhood have now declined by just over one percent.
In the Fenway, which grew by six percent, rents in older units declined by .4 percent. And in the South End, which grew by nearly ten percent, rents in older units only rose .3 percent.
To better understand the forces behind rental trends, the City also analyzed job growth in Boston’s neighborhoods to understand whether rental prices correlated with significant job growth. Early results point toward this trend bearing out.
For example, the neighborhood of South Boston, which includes the Seaport District, grew its housing stock by more than 26 percent, yet still posted a 6 percent increase in rents; however, the neighborhood also added enough floorspace to accommodate more than 8,000 new workers, which suggests that supply has not yet caught up with demand. The City will continue to closely monitor these trends on a neighborhood-by-neighborhood basis.
The City hopes that increased production in the neighborhoods will also begin to moderate rents outside of the downtown core. Of the 10,000 completed units, 67 percent were downtown, while 33 percent were in the outer neighborhoods; however, current trends in permits show a reversal of this trend. Sixty-nine percent of the permit applications in 2016 have been in the outer neighborhoods, with 31 percent in the downtown core.
Nearly one-quarter of the completed units represent homeownership opportunities, with that trend continuing to grow as the City sees a shift in permits pulled from rental to condominium. For example, in 2013, 82 percent of permits pulled were for rental property; in 2016, that number has decreased to 43 percent.
The numbers also demonstrated an almost even split between smaller units and family size units: 52 percent were one bedroom or smaller; while 48 percent were two-bedroom units or higher.
To begin to identify the remaining units, the City will this week begin convening department heads across agencies to identify even more new strategies for development.