As demand increases, rents rise for first time since '01
By Kimberly Blanton, Globe Staff | June 21, 2006
Rents are rising around Boston for the first time in five years.
Surging mortgage rates, high home prices, and a belief that prices may tumble are driving more people to give up on or postpone buying a home and to rent instead.
Buying property ``is less attractive than it was a year ago," said Tom Meagher, president of Northeast Apartment Advisors Inc., an Acton research and consulting firm. In a housing boom, he said, people ``make sure they don't miss the train when rising prices might freeze them out of the market. It works in reverse if prices are in decline. People don't want to be a homeowner."
The average monthly rent in Greater Boston climbed to $1,355 this spring, up 3.6 percent from a year earlier, according to a survey by Northeast Apartment conducted over four weeks during late March and early April. The survey stretched as far west as Worcester, and from New Hampshire to Rhode Island. The rental rate is now the highest it's been since 2001 and halts four years of declines. The national market also peaked in 2001 but has started to rise again recently, too.
Kevin Mulrenin, 36, a police officer in Amesbury who once built his own house and later sold it for a profit, considered buying a house or condo but said he couldn't `` get over the fact I felt I was being completely ripped off by the building industry."
So he rented a one-bedroom apartment in Residences at Riverwalk in Amesbury, which offers high-end amenities like top-of-the-line gym equipment that appeal to single working people like himself or baby boomers downsizing from the family home.
Riverwalk was developed by brothers Samuel and Jeffrey Zell, who transformed their family's former furniture factory from an eyesore into 87 apartments on the Powow River, a tributary of the Merrimack . Mulrenin agreed to $1,170 rent for a one-bedroom, starting in July. He currently pays $750, his half of the rent for a two-bedroom Colonial he shares . While he doesn't think house prices will crash, he said renting is his best move, because prices will fall and provide a better buying opportunity later.
For years Boston has been a tight rental market. But it's gotten tighter. The average occupancy rate hit 96.1 percent in 2006, up a percentage point from 2005, according to Northeast Apartment.
Seemingly small, that's enough to drive up rents and once again give landlords the upper hand over tenants. Carl Valeri, president of Hamilton Cos., a developer with nearly 5,000 units in the Boston area, said tenants, rather than landlords, are again paying broker fees, and landlords are withdrawing rental inducements.
``We've gone from free rents, paying brokerage commissions, and flat-screen TVs as incentives, to no free rents, no TVs, and most of the commission being paid by the tenant," he said.
Brokers in some towns and neighborhoods, such as Brookline and Beacon Hill, say renters' choices are growing scarce. Janet Lamb, a Ford Realty agent, said Beacon Hill apartments that rented for $1,250 last year went for $1,450 recently.
``It's getting harder" to find apartments, Lamb said. ``That's why the rents are going up."
Rents are higher despite the addition of 3,500 apartments to the market statewide last year, a recent high, said Chris Reilly, vice president of Equity Residential, a real estate investment trust that owns 9,800 apartments in Massachusetts. Equity Residential has been able to raise rents at two of its Boston buildings, Emerson Place and Longfellow Place, 10 percent to 15 percent from a year ago.
Nearby, the firm broke ground this week on Boston's first major housing project along the Charles River in 25 years. Mayor Thomas M. Menino backed the five-building development to bring more housing into the city. Rents will average more than $3,000.
Rents outside the city are also rising. In Quincy, Equity Residential has extensively renovated Lincoln Heights, a 336-unit complex. One-bedroom apartments now fetch $1,400, up from $1,050 last fall, and two bedrooms rent for $1,775, up from $1,450. The rental market ``is picking up" for landlords, said Reilly, who predicted more increases .
New luxury apartments with steep rents are rapidly coming on line. For example, rents go as high as $2,950 for three bedrooms in the 331-unit Arborpoint at Seven Springs in Burlington, being built on 70 acres with ponds, hiking trails, and a big clubhouse by National Development.
As luxury apartments are leased in the suburban market, they pull up average rents. In the past year, 8,730 apartments were taken by renters in Greater Boston, compared with just 1,578 the prior year, and about $20 billion in apartment projects are under construction, said Meagher, the consultant.
``In the face of tepid job growth and a condominium market that hasn't died," he said, ``the fact the rental market has done this well is remarkable."
Kim Kilchenstein, who just returned to the Boston area after three years in Colorado for training in alternative healing, said rents are much higher now. At 42, she is ``past the partying stage" and a neatnik who doesn't wear shoes indoors. While she believes her plan to get a Siberian Husky, fully disclosed to prospective landlords, may be an issue, her rent maximum -- $900 a month -- makes it difficult to find a place in a quiet suburb.
She said she is finding city-style high rents ``further and further from Boston." She has looked as far north as Boxford during a monthlong search. The result: She's staying at an aunt's house in Cambridge, and her search continues.
Kimberly Blanton can be reached at
blanton@globe.com. BUY OR RENT?
