Mar 4, 2024 - Development

Why Boston rent is still high for most

Change in asking rent by apartment type, Q4 2022 to Q4 2023
Data: CoStar; Note: CoStar rates multi-family buildings on architectural design, structure, amenities, site and certifications; Chart: Alice Feng/Axios

Rent increases for mid-level apartments in Boston outpaced increases for higher-end units at the end of 2023, according to real estate firm CoStar Group, which rates buildings based on design, amenities, location and certifications.

Why it matters: High-rent apartments let developers earn back their construction investment faster than lower-rent spaces. This means more luxury apartments and fewer cheaper places are being built.

  • That fuels the housing crunch for middle-class renters.
  • If anyone was expecting the apartment market to cool off this year, we have bad news. Bostonians are unlikely to catch a break.

Zoom in: Middle tier rents went up 3.5% in Boston last year.

  • Because there are more available luxury units, high-end rents only went up 2%.

The big picture: High demand for more affordable apartments is helping to keep middle-of-the-road rent prices elevated, Jay Lybik, CoStar's national director of multifamily analytics, tells Axios.

Yes, but: A flood of new construction is pushing down U.S. rents at the high end, where there are often more apartments than renters who want them.

  • That means the renters with the deepest pockets are more likely than others to score a deal.

State of play: While the country needs more housing, most new apartments are loaded with amenities in prime locations.

  • Some of Boston's recently built high-rises offer rooftop space, pet spas, concierge serve and luxurious common spaces.

Of note: Prices you see in the headlines are asking rents, meaning new leases only.

What's next: It could be a few years before there's enough demand to soak up the excess supply that's overwhelming some markets like Austin, Texas and Phoenix, Lybik says.

  • "We've got to get these buildings finished, and start filling them, without having more come online," Lybik says.

What we're watching: The pipeline for new projects is already slowing as developers find it harder to get financing.

Go deeper: Housing was wildly unaffordable for half of renters in 2022, report shows

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