News Summary
Boston is witnessing a significant decrease in housing construction, with a 36% drop in units being planned compared to last year. The number of housing units under construction has reached a ten-year low, attributed to high interest rates and strict regulations. While some banks are becoming more favorable towards financing multifamily projects, local building codes continue to hinder development. The projected construction of new units by 2024 aims to address the shortage, though challenges persist in completing apartments and affordable housing remains a concern.
Boston is experiencing a notable slowdown in housing construction, as recent data reveals a significant decrease in both the number of units being built and the overall construction pipeline. As of the end of the first quarter of 2023, the Boston metro area reported approximately 11,000 housing units in various stages of planning, representing a 36% decrease from the peak seen in the second quarter of 2022. This decline has brought the number of housing units under construction to a 10-year low, comprising only 4.4% of the market’s total inventory—nearly half the amount recorded in 2020.
The reduction in housing development is attributed to a combination of factors including high interest rates, economic uncertainty, and stringent regulatory frameworks. Despite the city granting approvals for thousands of planned units, the actual number of development starts for apartment buildings in Boston is anticipated to decrease in 2023 and 2024. According to research, financing conditions have become increasingly challenging over the last five years, leading to fewer projects breaking ground.
However, some reports indicate that banks are beginning to take a more favorable stance on construction financing for multifamily projects. Lenders with excess capital are actively seeking investment opportunities, which may enhance funding options for developers. This shift could help alleviate some financing challenges, particularly in the affordable housing sector, where potential cuts in federal funding pose an ongoing concern.
The current slowdown in construction may offer unexpected benefits to those who own existing multifamily properties, as reduced supply could lead to higher rental income. Data shows that average rent in the Boston area has surged by 34% over the past decade, hitting approximately $2,939 per month as of the end of Q1 2023. Furthermore, institutional investors are cautiously re-entering the market, with recent acquisitions suggesting renewed interest in multifamily investments.
In addition to economic factors, local building codes in Boston are cited as significant barriers to new housing construction. A report from Boston Indicators has highlighted that longstanding regulations require residential buildings with more than three stories to include two staircases, limiting the feasibility of smaller apartment projects. By potentially amending this requirement to permit a single staircase in buildings up to six stories, it is estimated that over 130,000 new housing units could be developed throughout Greater Boston.
Technological advancements in fire safety have diminished the necessity for strict adherence to older building requirements. In comparison, other cities and countries, such as New York City, Seattle, and various regions in California, have begun allowing buildings with one staircase to exceed three stories in height. This trend highlights a growing need for discussions surrounding necessary changes to building codes to effectively address the housing crisis in Boston.
Looking ahead, projected construction data suggests that Boston will see the development of 8,022 new apartment units by the end of 2024, positioning the city 19th in nationwide rankings for new housing construction. Nonetheless, despite the introduction of new units, a decrease in the number of completed apartments is expected over the next five years, indicating persistent challenges within the housing market.
On a more localized note, the redevelopment of the Mary Ellen McCormack public housing complex in South Boston is poised to commence, supported by a $70 million construction loan. This initiative is part of a broader strategy aimed at creating mixed-income housing to help alleviate the persistent housing shortage in the city.
Deeper Dive: News & Info About This Topic
HERE Resources
Boston Mayoral Forum Addresses Immigration Tensions
Boston Man Pleads Guilty to Child Sexual Abuse Charges
Abington and Nearby Areas Showcase Diverse Real Estate Listings
Horse Racing in Massachusetts Faces Increased Scrutiny
Boston Mayoral Race Heats Up Between Wu and Kraft
Super PAC Backs Josh Kraft Against Mayor Wu in Boston
Colombian Woman Indicted for Identity Theft and Voter Fraud
Massachusetts Cities Ranked Among Best Places to Live in 2025
Landlord Faces Financial Crisis After Tenants Exploit Legal Loopholes
Boston Life-Science Real Estate Market Faces Rising Vacancies
Additional Resources
- MultiHousing News: 1st Financing Package Aligns for $2B Boston Redevelopment
- Housing Finance: WinnCompanies and Boston Housing Authority Launch First Phase of Long-Awaited Project
- MassLive: Building Code Change Could Unlock Boston Housing Construction, Report Says
- Boston Real Estate Times: Financing Secured to Start Redevelopment of Boston’s Oldest Public Housing Complex
- Bisnow: WinnCo’s Secures $70M Construction Loan for South Boston Public Housing Project
- Wikipedia: Housing in the United States
- Google Search: Boston housing construction
- Google Scholar: Boston housing development
- Encyclopedia Britannica: Boston housing
- Google News: Boston housing news
