Remote learning was and still is one of the worst debacles of the last two years. Aside from school performance metrics and overall student morale being abysmal, the effects remote learning had on local economies was significant in many areas nationwide. Few metro markets saw the same housing market upheaval as did Boston, where the apartment vacancy rate soared to a record 8% in September 2020.
I suppose that shouldn’t be a surprise in a city where it’s estimated that nearly half of all leases are signed for 9/1. Boston’s many area Universities account for roughly 138,000 residents, a large percentage of which seek off campus housing in various neighborhoods around Boston. When campuses mandated remote learning for Fall 2020, the effect it had on the demand for apartments in Boston was seismic.
Not only did vacancies soar to record levels, apartment availability hit an unprecedented 13.4% in March of 2020. That same month, many of Boston’s largest schools announced plans to eliminate remote learning for Fall of 2021. As a result, if you analyze apartment supply data from April 2020 through today, you’ll see one of the fastest market corrections in history. Over 85% of the available inventory was absorbed and we’re now seeing some of the lowest apartment supply on record in many neighborhoods.
It’s easy to write this off as a temporary phenomenon related to remote learning with no long term effects on the Boston housing market. But a closer look at the data shows that not all has remained the same since COVID came to town. Here are some notable changes.
Suburbs Outperformed City Throughout Pandemic, But Lagged During the Recovery
In terms of rental demand, Boston’s suburban markets benefited from a nationwide trend noted over the past two years of population dispersion away from densely populated city centers into outer suburbs. While vacancy rates soared in Boston’s student and Downtown rental markets, the lowest apartment supply numbers were being recorded in outer areas like Mattapan and Roxbury.
However, since schools nixed remote learning in March of last year, Boston’s inner markets have absorbed most of the supply glut compared to suburban areas. Perhaps the temporary renter’s market attracted students to some of Boston’s core areas when they returned for in-person class last year. It was reported that as many as 75% of landlords were covering the broker’s fee at one point in 2021, a number that typically stays below 5% in a healthy market.
Many of the suburban student enclaves are seeing higher than average apartment availability as a result. Cambridge (+20.78%), Somerville (+40%), Arlington (+43.59%) and Medford (+71.61%) are currently seeing the largest increases in real-time availability rate (RTAR) compared to pre pandemic levels in the suburbs. For comparison most (7) out of Boston’s 12 closest suburban rental markets are seeing lower apartment availability over the same time span. Look for prices to stay level or even drop in these markets as a result of diminished demand.
Downtown Proves that Remote Work May Be Here to Stay
When apartment demand came roaring back in the city of Boston last year, it left a few neighborhoods behind in the recovery. Out of the 23 neighborhoods that comprise Boston, only 4 have recorded an increase in RTAR since January 2020. Two of these, Hyde Park (+65.71%) and Roslindale (+13.64%), can be explained by the inward shift in apartment demand noted earlier. These two are neighborhoods located far from Boston’s core. The other two, Downtown (+34.78) and Beacon Hill (+13.73%), are Boston’s core.
These two areas are not the most popular for students seeking off-campus housing. High rent prices and location make these areas more suitable for Boston’s professional crowd, and this was evidenced last year when Downtown’s vacancy rate hit an astounding 25%.
Now that Boston’s students have come back, we can see that these two neighborhoods are seeing some of the long term effects remote work has been having on metropolitan housing markets. Look for rent prices to stagnate or even drop in these neighborhoods as a result of this trend in 2022.
Prices Will Start Low This Year And Continue to Climb
If there’s one positive thing remote learning did to Boston’s local housing economy is that it created, at least for the shortest of time, a renter’s market in Boston. Rent prices dropped for the first year in over a decade in 2021, albeit by small margins. When Boston’s students returned last year, they saw a record number of landlords waiving fees and pricing down by 5-7% in some of the neighborhoods most affected by the supply glut.
All that was short-lived, as now apartment availability in Boston is as scarce as it’s ever been. The market will react accordingly in 2022, as prices will surge in Boston’s core markets where availability is lowest. Still, at least for now, Boston’s average rent price is down -1.84% compared to January 2020, so renter’s getting an early start in 2022 will likely score better deals than later on.
Whose Addressing the Rental Shortage?
With apartment availability as low as it is currently, it leaves the question, “Who is addressing the short supply of apartments in Boston?.” With a new administration in City Hall, it will be interesting to see how they address the shortage of affordable housing in the City of Boston. This will be a critical factor in keeping rent prices under control.