Communities north of Boston are experiencing record-high rents as a slow economic recovery and stricter lending criteria have stopped would-be home buyers and increased the demand for apartments.
Further straining the rental stock are those who have been priced out of the metro Boston market and pushed into surrounding suburbs, where, despite the price increases, a renter can still get more bang for the buck.
The average monthly rent in North Shore and Merrimack Valley communities increased by 8.9 percent to $1,427 from prerecession 2007 to the first half of 2012, according to Reis, Inc., a New York-based data firm that tracks real estate trends nationwide. Vacancy rates nose-dived from 7.8 percent to a record low of 4 percent in the same time period.
Area real estate experts say that although the desire for ownership is high and mortgage rates remain at record lows, the difficult underwriting process and lingering economic anxieties will continue to fuel the rental trend for the foreseeable future.
“The rental market is strong and it has been for the last couple of years,” said John Connery of Connery Associates, a land-use planning and development consulting firm in Melrose. “All indications are that it’s going to remain strong for at least the next couple of years.”
Rents in the region can vary greatly between communities such as Somerville or Lawrence, for instance, and also from neighborhood to neighborhood within the same community, Connery said.
In a neighborhood with an older housing stock, rents could average between $800 and $900 for a one-bedroom apartment, while in a newer development a renter could pay about $1,200, he said.
“If we’re talking about the North Shore, that’s made up of Andover and Lynn, which are like night and day,” Connery said. “But the fact is that rent rates are increasing and the demand for rentals is strong across the board for the higher end of the economic spectrum and the lower end.”
Regionwide, demand is greatest for one- and two-bedroom units, as they best fit the needs of young professionals, empty-nesters, and new parents, said Tracy M. Watson, a senior property manager at Barkan Management in North Andover.
They also are attractive to a growing number of people — many well past college-age — who are choosing to go the roommate route in order to split the high rents and other costs, Watson said.
“We’re seeing an uptick in roommate situations. I have friends who are doing it due to divorce or economic situations,” she said. “I’m seeing friends with homes bringing friends in to rent rooms to offset the cost of the mortgage.”
The demand for smaller units, which are more expensive per square foot, also is prompting some developers to include studios in their floor plans, previously a rare move in suburban construction, Connery said.
“No more than 5 or 6 percent of the projects have studios built, but we’re seeing more,” he said.
Despite new residential development projects in the region, from mill conversions in Lowell, including the 130-unit Appleton Mills, to the 180-unit Maxwell’s Green in Somerville, experts say there is still a shortage of affordable housing for low-wage earners.
Watson said when she recently opened up the wait-list for subsidized one-bedroom units in one of her firm’s North Andover properties, she collected over 100 applications in one day.
“There’s definitely not enough low- to moderate-income housing, especially in the North Shore, and that’s been a fact for a while,” said Miranda Lam, professor and chairwoman of the Accounting and Finance Department at Salem State University.
No matter the income level, however, Lam said most renters are now spending more than the recommended 30 percent of their annual gross income in rent. For many, that number is around 45 percent or more, according to several area experts.
“One thing that is quite clear is that wages have definitely not gone up nearly as much as the increase in rent, so people who are really trying to make ends meet month to month, their expenses are increasing at a higher rate than their income,” Lam said. “Rental prices are more rigid. So if you’re in an apartment, once you sign the lease, even if the value of the house has gone down, it’s less likely that the landlords will come and say, ‘I’m going to lower your rent because the house is worth less.’ The only way you can save money as a renter is if you’re willing to move.”
Moving away from hubs such as Boston or Cambridge and into surrounding communities, as professionals have done for years when starting families or when looking for better deals, may no longer be as cost-effective as it used to be, Connery said.Continued...