AT THE START of the COVID-19 pandemic, it looked like Greater Boston housing markets were about to take a nosedive. Rents dropped dramatically, a potential eviction crisis loomed, and residents left the urban core for more space in the suburbs or moved in with family as work and schools went virtual.
Three years later, rents are soaring and housing production is still nowhere near what it needs to be to meet demand, according to the new Greater Boston Housing Report Card from the Boston Foundation.
“What I think people didn’t anticipate is how broad-based consumer inflation would be the challenge coming out of the pandemic,” said Luc Schuster, the executive director of Boston Indicators, a research center at the Boston Foundation. “In a sense, the economy became too hot rather than entering into a deep recession. Housing costs rebounded really quickly. I mean, rents were back up to their pre-pandemic levels in early 2021. And now, we’ve just seen a consistent continuation for a couple of years now of rising rents and rising home values. So in a way, we’re problematically back on the pre-pandemic thread with housing issues in Greater Boston.”
Massachusetts is constructing new housing units of all kinds far below historic levels, with only 2.5 homes permitted per 1,000 residents in 2022. This puts the Bay State behind all but eight states for housing production, with an overall US permitting rate of 5 per 1,000 residents.
While neighbors to the north in Vermont and New Hampshire are doing slightly better – 3.6 per 1,000 residents and 3.4, respectively – other New England states are lagging still further behind. Connecticut and Rhode Island sit at nearly the bottom of the list, with 1.6 and 1.3 units permitted per 1,000 residents last year.
The report found that the Metro Mayors Coalition – which includes Arlington, Boston, Braintree, Brookline, Cambridge, Chelsea, Everett, Malden, Medford, Melrose, Newton, Quincy, Revere, Somerville, and Winthrop – is not on pace to meet its housing production goal of 185,000 new housing units between 2015 and 2030. As of 2022, those cities were shy about 43,300 units – just half of their projected goals.
Even when bureaucratic approvals are handed out, housing doesn’t follow briskly, in large part because of soaring interest rates and materials costs that have increased by almost 50 percent since the start of the pandemic.
“We’re seeing a rise in the number of projects that are actually authorized for construction. So the regulatory barrier has been overcome, and yet construction hasn’t started because the costs are starting to not pencil out on many more projects,” Schuster said.
He said the trend is especially tough for large multi-family projects, which would create the largest number of units.
“And there’s some pretty strong evidence that those projects just take longer to get to the construction phase of the project,” he said. “They take longer to permit and then longer to get the financing in place to actually start the project. And there’s been a real slowdown on the multifamily side in particular in the last year, which is, I think, among the most troubling data in the report card this year.”
The tight housing market is worsening the trend of residents leaving for other regions, the report card found. Greater Boston’s population has declined for two years in a row – down 36,000 residents from 2020 to 2022. That out-migration has grown “from a stream to a river,” according to the report, more than offsetting a surge of international migrants settling in Greater Boston. The rate of international migration into the region more than doubled in 2022.
That immigration likely includes the surge of new migrants needing emergency shelter, the report notes.
But the loss of residents from Greater Boston spans all income levels and educational attainment levels, with the “extraordinarily expensive housing market” making it difficult to retain recent college graduates as they search for jobs.
“Policymakers can control a lot of the puzzle but not all of it,” Schuster said. “And I’d say I am somewhat optimistic that state leaders have been acting in a new way, sort of region-wide or statewide at scale.”
He points to the new MBTA Communities Act, which requires multi-family zoning within a certain district of public transit, and Gov. Maura Healey’s proposed housing bond bill, which includes policy provisions like as-of-right accessory dwelling unit construction.
This market is especially hard on Black and Latino residents, who are more likely to experience housing instability. While 49 percent of Greater Boston renters overall pay 30-50 percent of their income on rent, that rises to 55 percent of Black residents and 57 percent of Latino residents. They are similarly cost burdened even when homeowners.
Rent burden exists throughout the state, but the report card found cost burdens tend to be higher in the immediate urban core—like Boston, Chelsea, and Everett—as well as in communities north and south of Boston—in places like Lawrence, Lynn, and Brockton.
The pandemic presented a complicated opportunity for housing markets – one that did not ultimately pan out. Maybe mortgage rates could have stabilized. Maybe rents could have moderated with the new reality of hybrid work. Maybe there was something in between a recession and a return to a pre-pandemic housing squeeze where Greater Boston got used to just 1 percent of its housing stock being available at any given time.
“In a way, the housing market has kind of frozen in place,” Schuster said. “With mortgage interest rates so high, it’s just made it much harder for an existing homeowner to consider selling their home and moving into a new one, because they might shift out of a low-interest-rate mortgage to a much higher one. And so those predictions just proved to be way off and the housing inequality we’ve seen for a long time between renters and homeowners just continued for another year.”