Area's rents up 4.2% in one year

Analysts cite higher demand amid surge in home foreclosures

Rents in the Boston area spiked 4.2 percent over the past year, the biggest increase in seven years, while rising foreclosures and a slumping housing market pushed more people into apartment living.

Average monthly rent in the metropolitan area increased to $1,659 in the third quarter, from $1,592 a year earlier, according to a report from Reis Inc., a New York research firm that tracks rents for apartments in buildings with at least 40 units. Boston's increase exceeded the national rise of 3.5 percent, Reis said.

Rents are up because families who are losing their homes in foreclosures are driving up demand for apartments, housing analysts said. As demand rises, it becomes easier for landlords to raise the rent.

Rapidly falling house prices also have put buying on hold for many potential homeowners, who are staying put in their apartments as they wait to see how low prices will go.

These factors pushed rents to "an unaffordable level" for many Boston-area residents, particularly low-wage workers, said Barry Bluestone, director of the Center for Urban and Regional Policy at Northeastern University.

He is lead author on the annual Housing Report Card from the Boston Foundation, which was also released yesterday.

The Housing Report Card said higher rents are creating a crisis because families are spending a greater share of their income on housing. Seven years ago, rent consumed 28 percent of household income in the Boston area, on average, but that hit 35 percent by 2006. Large rent increases in 2007 and 2008 pushed that to about 38 percent currently, Bluestone said.

Rent is considered affordable when it is 30 percent or less of income. More than half of Boston-area renters pay more than that.

The housing downturn has also, indirectly, worsened problems for renters.

During the first nine months of this year, Massachusetts posted nearly 31,000 home sales, or 14 percent fewer sales than in the same period in 2007, according to Warren Group, which tracks the housing market. This has curtailed the flow of first-time homebuyers out of rental properties, which would otherwise create space for new renters and take the pressure off rents.

The Boston area's "major affordability crisis is getting worse for renters," Bluestone said.

Paul Donahue, senior vice president of CB Richard Ellis, a real estate management firm, said rent increases over the past three years mark a departure from most of the decade, when rents held steady or even declined as home purchases soared.

But some rents rise faster than others, depending on location and type of apartment.

The market is tighter in Boston than in the suburbs, where rents are not rising as quickly as in the luxury apartment buildings downtown, he said.

High-end apartment buildings are raising their rents more than, say, owners of two- or three-family units in and around Boston, Donahue said.

Kimberly Blanton can be reached at blanton@globe.com.