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Can surge in apartment construction really keep rents in check?

Posted by Scott Van Voorhis October 17, 2011 06:25 AM

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A wave of new rental towers is coming your way.

Thousands of new apartments are either under construction or about to start across Boston and in the suburbs as well.

This surge in building activity comes with apartment rents soaring amid rising demand as home and condo sales sputter.

After decades of little new rental construction, it is a welcome sight.

End of story? Well hardly, for there are some real things to be concerned about here as well.

After all, will this improve life for the majority of Boston area renters out there, instead of simply providing more choices for upwardly mobile young professionals?

Needless to say, the vast majority of these new towers will be charging top dollar rents, though new apartment developments in Boston are required to provide some subsidized units at lower rents. (Some simply get around this by doling out cash to rental projects elsewhere featuring subsidized rents.)

In theory, though, this surge of construction at the top of the market should have a trickle-down effect, leading to less competition farther down the rungs of the rental ladder.

In fact, it was just this logic that helped demolish rent control in Boston, Cambridge and parts of Brookline in the late 1990s.

But this theory was never really put to the test. The 2000s quickly saw an explosion in the home and condo sales market, with ridiculously easy, no-money-down mortgages drawing off demand from the rental market.

And so instead of booming after the end of rent control, rental construction lagged. Developers gave the cold shoulder to apartment projects, betting instead on the much bigger returns to be made building pricey downtown condo towers.

Now, finally, we have a boom in apartment construction.

But if all these new downtown rental palaces fail to keep the apartment market in check, then why not bring back rent control?

This blog is not written or edited by or the Boston Globe.
The author is solely responsible for the content.

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About boston real estate now
Scott Van Voorhis is a freelance writer who specializes in real estate and business issues.

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