Boston's Multifamily Market Is In One Of The Nation's Steepest Declines
Boston’s multifamily property owners are under unprecedented stress because of the coronavirus pandemic. A slow start to October rent collections won’t help matters.
Boston landlords collected 68.6% of rents between Oct. 1 and Oct. 6, compared with 80.3% for the same period in 2019, according to RealPage's monthly rent collection survey. The 11.7% drop-off was the largest among major markets in the country, outpacing Los Angeles at 9.8% and Las Vegas at 8.2%.
Whether this data indicates a more serious problem for Boston landlords is hard to say. Massachusetts doesn’t allow landlords to assess penalties for late rental payments until they are 30 days past due, an unusually long time.
“We’ve got the metro on the watchlist for this month, we won’t know whether or not there’s actually a challenge there for up to a couple weeks,” RealPage Chief Economist Greg Willett wrote in an email.
Meanwhile, the rental market in Boston has softened amid a glut of apartments.
Rents have fallen 12% in Boston over the past year, well above the national average of 1.4%, according to Apartment List. They have fallen 9% since the pandemic started in March.
Though other high-rent cities such as San Francisco, New York and Washington. D.C., are in the same predicament as Boston, there are some unique characteristics to the city’s market. Many renters are college students who are attending class online and don't need to rent an off-campus place. Some are stuck home overseas because of travel restrictions.
Even so, renters pay a steep price to live in Boston. The median two-bedroom rent is $1,928, well above the national average of $1,106, according to Apartment List. Similar accommodations in Philadelphia cost $1,179.
Boston Pads has more than 6,000 apartment listings on its website, a gain of more than 366% versus the 1,289 that were on the site in September 2019, according to CEO Demetrios Salpoglou. The company’s real-time vacancy rate has surged more than 730% since the pandemic struck in March.
Not surprisingly, many landlords are offering tenants some pretty sweet deals.
“A lot of landlords have dropped last month’s rent,” he said during an Oct. 6 Bisnow webinar. “They’ve dropped security deposits. They have added one month’s free rent, two months free rent. Yesterday I saw a luxury building offer three months of free rent.”
Nearly 60% of landlords are also offering to pay renters’ brokerage fees, something that Salpoglou said he had never seen before. Some landlords are looking to sell their small property and redeploy their cash elsewhere. Many also could do without the headaches, said Nik Ligris, co-managing partner of Ligris + Associates, a real estate law firm, on the webinar.
“What I am seeing with a lot of my clients, especially some of the older residential landlords who have had a great run, is that they don’t want to deal with the market changes,” Ligris said.
CORRECTION, OCT. 9, 5:30 P.M. ET: A previous version of this story misattributed a quote by RealPage Chief Economist Greg Willett to a RealPage spokesperson. This story has been updated.