Trying to buy a home in the city of Boston can feel like trying to paddle across Boston Harbor in a nor’easter — excruciating with all of the elements working against you.
Many of Boston’s leading employers are in the high-paying technology, life science, and financial sectors. That means all-cash bids and offers over the asking price can wash away younger bidders without much of a nest egg, even if they take advantage of the city’s first-time home buyer programs.
The easy answer to a housing shortage crisis like Boston’s is to ramp up the supply, which should bring prices down. But housing costs haven’t dropped amid an ongoing city initiative to create 69,000 new housing units by 2030.
Boston leaders point to a variety of programs to provide younger people with a clearer path to homeownership at a time when the housing market is brutally competitive.
“We all know we’re dealing with a high-cost city,’’ said Maureen Flynn, deputy director of Boston Home Center, the city program that “helps Boston residents buy, improve, and keep their homes.’’ “We’re constantly working on increasing supply so that the prices go down, but our division is trying to figure out how we help the individual. So, we’ve got folks working on the supply side, and we’re working on the demand side.’’
Boston ranks 80th out of the 100 largest US metropolitan areas for homeownership rates for individuals between the ages of 25 and 40, according to a Harvard Joint Center for Housing Studies tabulation of census data. It’s not hard to figure out what’s driving the city’s poor standing.
While the pandemic may have driven many people out of the city in search of more space in the suburbs, Boston’s notoriously high cost of living didn’t budge. An October report from Zumper showed Boston was the third-most expensive city for renters, behind New York City and San Francisco, respectively.
Astronomical rent payments don’t leave much room for younger people to save.
“There’s a large segment of folks that don’t have the incomes to afford a down payment to get through the current seller’s market,’’ said Raheem Hanifa, research analyst at Harvard’s Joint Center.
Boston’s median sale price for a single-family home was $727,500, according to the Greater Boston Association of Realtors. The median condo sale price clocked in at $725,000. The soaring costs are a headwind for millennial buyers, as the standard 20 percent down payment means buyers would need to put down roughly $145,000 for a single-family home or a condo.
“When you have high student loan debt, you can’t save that much for a down payment,’’ Flynn acknowledged. “I was 40 before I bought my first house because I was paying off my student loans.’’
A majority of millennials are doing just that — trying to pay off school debt while trying to live in a high-cost city like Boston.
The city has other options for prospective homeowners at certain income levels, but like affordable homes in Boston, patience can be in short supply.
“Realistically, I would not have been able to buy a house for probably another 10 years or until I was married and had a dual-income family,’’ said Abigail Peterson, a 32-year-old art director who qualified for and purchased a one-bedroom condo in the West End through the Boston Planning & Development Agency’s income-restricted housing lottery.
The city touts its Inclusionary Development Policy as a vital vehicle to providing affordable housing in Boston for “households earning too much for a housing subsidy but not enough to secure housing they can afford on the open market through use of private funds,’’ according to the city’s most recent annual report on the program. The IDP homeownership platform is available for those with a household income that is less than 80 percent to 100 percent of the Area Median Income.
Twenty-two percent of the 3,238 units of housing created through IDP are condos that go into the housing lottery for qualified buyers, according to the report. But 700-plus condos aren’t going to make much of an impact in boosting Boston’s millennial homeownership rate.
Peterson was in the lottery for two years before her name was drawn. While it was an incredible opportunity to become a homeowner earlier than she had anticipated, she had to scramble to come up with all the necessary financing in a quick timeframe.
“It was the most stressful thing that I’ve ever done,’’ she said. “They basically give you two weeks to decide if you want to buy the place and then secure financing. I don’t think anyone who doesn’t have the support system that I do could possibly even contend with something like this.’’
Had it not been for supportive parents to help navigate the process, as well as an ability to tap into retirement savings at her job, Peterson said, it would have been impossible to move forward — and this is in a program aimed at making the home-buying process more accessible to a larger swath of Bostonians.
The city appears to recognize where it is falling short in efforts to provide homeownership opportunities to more segments of the population, especially people of color.
A working group comprised of real estate agents, lenders, advocacy groups, and grass-roots organizers has assisted the Boston Home Center’s push to help individual buyers while other city departments work on the supply side of the equation, Flynn said.
Some of the group’s work resulted in low-interest loans through the city’s One Mortgage and One+ Boston programs, which can offer interest rates that are 0.5 percent to sometimes as high as roughly 1.5 percent lower than a conventional mortgage for qualified first-time buyers below certain income thresholds. Applicants also have to put down 1.5 percent of the purchase price from their own savings, take part in a first-time home buyer class, hold less than $75,000 in total household assets, and have a credit score of at least 640 if they are planning on buying a single-family home or a condo. They also must live in the property as their primary residence.
Acting Mayor Kim Janey this summer signed off on a major boost to the city’s first-time home-buyer assistance program for those who qualify. Individuals can now get as much as $40,000 to put toward a down payment and closing costs compared with the $10,000 previously offered.
The city also is exploring ways to persuade prospective buyers to improve their credit scores to the 660 minimum some lenders require for a mortgage. While the program is in its planning stage, Flynn said, the city is looking at providing grants.
Other initiatives underway include finding ways to help potential buyers who are burdened with student loan debt. People of color tend to graduate with more student loan debt than their white classmates, according to the Brookings Institution, and Boston leaders note this has a long-term impact on housing opportunities.
One of the city’s initiatives includes outreach and advocacy work with lenders like Fannie Mae and Freddie Mac to view student loan debt differently when they assess risk profiles for potential buyers.
“We know that buyers can handle high rent payments. They’re making those rent payments at the same time they’re paying their student debt,’’ Flynn said. “Sometimes when they buy a home, their mortgage payments are going to be less than their rent payments.’’
City leaders are even considering ways to provide income-restricted buyers with a leg up in the general home buyer pool instead of just relying on the housing lottery. That means going head to head with cash buyers.
“One solution may be that some third-party nonprofit or something makes that cash offer on behalf of the home buyer,’’ Flynn said. “We’re not exactly sure how that would work. But we are … trying to figure that out with our partners.’’
Cameron Sperance can be reached at [email protected]. Subscribe to the Globe’s free real estate newsletter — our weekly digest on buying, selling, and design — at pages.email.bostonglobe.com/AddressSignUp. Follow us on Facebook, Instagram, and Twitter @globehomes.