Boston's Housing Market Isn't Keeping Pace With Its Growing Population, Wealth And Costs
Boston’s housing shortage has caused prices to soar, but it will take more than the city’s existing toolkit for affordable housing to find a cost solution.
“[More supply] will help, but the fact is that Boston is an incredibly hot city right now, and projections have us continuing to grow at a record pace,” National Development Managing Partner Ted Tye said. “That’s why Mayor Walsh raised the bar on his housing goals.”
Boston Mayor Martin Walsh revised his new housing goal for the city in September by 30%, up to 69,000 from his prior target of 53,000 new units by 2030. The move was in response to faster-than-anticipated population growth and includes a push to create nearly 16,000 new affordable units. The revised income-restricted affordable target would mean Boston has about 70,000 affordable units by 2020. On the other end of the income bracket, many of the cranes on the Boston skyline are for ultra-luxury developments with condos that fetch as much as $40M.
But reaching the middle market isn’t easy. More than a million Class-A multifamily units, which have the highest rents, have been built during this economic cycle, but Class-B and C production has remained stagnant.
“The reality is that it is tough to build in the middle,” said Tye, who is speaking at Bisnow’s Multifamily Annual Conference New England event Nov. 8. “Land costs are high and construction costs are not proportionally lower.”
Finding available housing for workforce renters, or those making between 60% and 120% of an area’s median income, has become a national problem. More than 25% of the 13 million people who make up this renting bloc spending more than 30% of their income on rent. Just under 4% spend more than half their income on rent, according to an Enterprise Community report.
Boston’s Inclusionary Development Policy is the city’s key tool in advancing affordable housing throughout the city. The plan requires the developers of multifamily projects with 10 or more units to set aside 13% of the project as affordable housing. Developers have created 2,072 affordable units since the IDP was created in 2000 and have contributed $123.5M to the IPD Fund used toward creating another 1,140 affordable units.
While Boston leaders herald the IDP as a success, it is primarily focused on those who make 50% or less of the area median income. Solving the housing shortage for middle-income earners has been a multi-pronged, sometimes trickle-down, approach.
City Hall has pushed for Boston’s numerous colleges and universities to build more on-campus housing to free up rental housing stock that was being taken by students and not full-time residents. Developers are also including smaller micro-units with lower price points within luxury developments like at One Seaport.
National Development is partnering with New York-based Ollie on a 14-story co-living apartment building at Ink Block in the South End to appeal to millennials looking to live in the area but pay less rent than some of the development’s full-size residential units.
“The more luxury housing, dorms and other forms of housing that get built, the more existing middle-market housing stock becomes available,” Tye said.
The luxury side of the Boston housing market is having no problem finding buyers and renters to migrate into the upper echelon. Several hotel-branded luxury condo projects like the St. Regis Residences and Raffles Back Bay Hotel & Residences are either under construction or in the planning stages across the city.
The Fenway, which has broadened its residential appeal from a haven for off-campus student housing in recent years, has seen a rise in luxury housing stock thanks to developer Samuels & Associates.
Pierce Boston, a 30-story apartment and condo tower on the Fenway stretch of the Emerald Necklace, has exceeded the developer’s expectations. The project includes 240 rental units and 109 condos. Six months after residents started moving in, only nine condos are available and the rental side is 95% occupied, Samuels & Associates Chief Operating Officer and principal Leslie Cohen said.
“For us, it signifies Fenway as a really strong submarket where people want to live, invest time and spend their dollars for the long-term,” Cohen said.
Developers are responding to calls from city leadership to deliver more housing, and Cohen remains optimistic over how the sector will perform in the coming year. The HYM Investment Group also plans to help move Boston closer to its 2030 housing goal. The residential component of the developer’s 2.9M SF Bulfinch Crossing mixed-use development will add more than 800 residential units in downtown Boston.
HYM also owns Suffolk Downs, a 161-acre site in East Boston the city has touted as its preferred location for Amazon should the Seattle-based company decide to locate HQ2 in New England.
Before Amazon announced its search for a second headquarters, HYM indicated it planned to transform the former racetrack into a mixed-use development. The project could include up to 10,000 units of housing if HQ2 goes elsewhere, according to HYM Investment Group Partner and Director of Development Douglas Manz. But the developer stressed a more concerted effort is needed to alleviate Greater Boston of its housing crisis.
“The surrounding region needs to create housing supply, and it can’t just be Boston and Cambridge by themselves,” Manz said. “It has to be a comprehensive regional effort.”
The mayors of 15 regional municipalities, including Boston and Cambridge, set a goal in early October of 185,000 new housing units by 2030. This Metro Mayors Coalition acknowledged not enough was being done to keep up with job growth. While the towns and cities that make up the coalition have grown by a combined 110,000 residents and added 148,000 new jobs since 2010, only 32,500 housing units have been permitted. Manz thinks it is a step in the right direction.
“Boston can do a lot, but it can’t solve the region’s housing problem on its own,” he said. “We need to build more housing supply, or we could hinder our growth.”
Hear Tye, Cohen, Manz and others at Bisnow’s Multifamily Annual Conference New England Nov. 8 at the Colonnade Hotel.