There was a
time when most developers’ purpose was to see their property
re-zoned from residential to commercial.
Residential was the sector that brought up the rear.
Residential prices and profits were always the lowest.
For a long time during the 1970s, apartment rents in Greater
Boston were so low that they could not support the cost of
construction. We stopped
Not any more.
were turned for apartments some time in the 1990s.
Rents in the other commercial real estate sectors lagged.
Apartment rents moved ahead.
With the bursting of the bubble in the housing market in 2007
and the resulting fear that buying a house was a losing proposition,
the demand for rental housing went through the roof.
The Boston Globe
identifies 5,000 new apartments under construction in Boston this
year. The demand has
come not only from people who can’t afford to own a house or a
condominium. It has come
from the high end, from high-salaried people working in the medical
district and downtown.
It has come from suburban retirees with plenty of money in their
pockets. Buildings built
as condominiums became luxury rentals.
“Luxury” is the word that is everywhere in the ads for our
high-end apartments. And
they are luxurious. The
new apartment dwellers want a concierge at the desk, a safe place to
park, an impressive lobby, and a roof deck.
They are willing to pay.
The roof deck at Church Park, a redeveloped complex opposite
the Christian Science Center, has a big, rooftop
Back Bay-style library that the residents share, a grand piano
there for whoever can play, outdoor seating groups separated by
plantings with places to cook, and gorgeous views from Fenway to
the gates for the new apartments was the rise in rents. It was also
a state law called “Chapter 40B.”
Chapter 40B allows developers to build apartments at
locations that are not zoned for apartments, providing that 25% of
the units are rented at rates that are affordable for low-income
residents. Dozens of
attractive, 250-unit 40B developments dot the suburbs, providing
high-quality units while also incorporating space for non-luxury
tenants. Dozens more
apartment complexes were built through cooperation with towns that
were moved to cooperate by the leverage developers gained from the
threat of 40B. In spite
of towns’ general reluctance (some would say NIMBY-style resistance)
to high density development, Greater Boston succeeded in greatly
expanding its multi-family housing stock.
It did that and provided new low-income housing without
spending a taxpayer cent.
only $1,000-a-square-foot real estate in Boston is residential.
Prices at that level are common for Beacon Hill townhouses
and Back Bay condominiums.
They are common for Newbury Street retail condominiums, too.
But Newbury Street retail space rents for $100 a square foot
a year. No one ever
thought that residential could compete on price with sectors that
rented at that level.
Offices certainly don’t.
Nothing else comes close.
prices were knocked down by 30% (and, in satellite cities, more) in
the decline that accompanied the credit crisis of late 2008.
In the nearly four years since, apartments alone have
regained their lost ground.
Some locations – for the most part, the low-income suburbs –
still lag. Others have
gone beyond their previous peak prices of 2007.
They have done that because the lid has come off residential
rents. They have also
done that because interest rates are at record lows, and cheap money
allows higher prices than ever before.