Average Rent Prices Stagnant in Boston Despite Rising Vacancies

This year has brought some big changes to the apartment rental market in Boston. The city began this year with record low vacancies and record high rents, but the coronavirus caused a huge shift in the housing market as residents fled the city for open spaces. Now Boston is noting some of the highest vacancy rates it has seen in years.

Conventional economic wisdom would tell you that with all of this added supply, huge price reductions should follow. That has yet to come to fruition, as rent prices overall have only dipped 2.1% on average for all sized Boston apartments.

The price drops have been even smaller in the areas surrounding Boston. Apartments prices in the suburbs of Boston have only dipped 1.8%, supporting the notion that higher demand is propping up prices in the suburbs much more than it is in the City, which is to be expected as vacancy rate increases have been over 400% this year inside City limits.

Still, with such a huge increase in vacant apartments, you would expect to see a much larger reduction in prices than we’ve seen. So what’s keeping the rent prices from dropping?

Rental Concessions

Many of the area’s local landlords have been successful at keeping rent prices high by offering other concessions. Many have been able to keep their units rented at normal pricing by waiving move-in fees such as deposits and first month’s rent. There have been instances of some landlords offering 3 months free rent to fill vacant units.

By doing so, they are able to offset a big reduction in rental income they would have incurred by dropping rent prices by a large margin. They’ve even written in sublet clauses to be more flexible with renters. This has been effective at steadying the ship through hard times.

Spring Semester

The majority of Boston’s leases are signed on 9/1. This is because of the large student population inhabiting Boston. When fall semester commences in September, it’s usually a scramble for local landlords to fill units before the ship sails on the leasing season.

Only in 2020, most universities adopted a remote learning model that severely limited the influx of students. To pile it on, the international travel ban did a number on the international student population. These factors combined to leave many units vacant as 9/1 came to pass.

The fact that rent prices haven’t dropped significantly could be because many landlords are holding off to see what happens with the spring semester. While 3 months of having an empty unit is far from ideal for any landlord, anything more than that causes a big dent in ROI. That being said, landlords will be forced to reduce prices if their units stay empty leading up to January.

For this reason, we expect price reductions to accelerate throughout the rest of December in January, especially if some of the bigger universities extend remote learning into the spring semester. Judging by the increases in cases that have dominated news headlines in recent weeks, we expect the local schools to follow suit and keep classrooms closed for at least the first part of the spring semester.

We will continue to monitor this trend is it develops.