Conversation About How New Supply Impacts Boston Housing Costs Boston Condos For Sale Ford Realty

"You might think adding supply for Boston condo and rentals brings prices down, yet when a lot of new Boston high rise condo and apartment buildings go up in a neighborhood, the Boston media reports median asking Boston apartment rents goes up. But wait, doesn't that defy the laws of economics? It is simple math some would argue: these new high rise buildings are priced above the median sale or apartment rental price to make their investment work, so the median rises."

"On the flip side, tenants in older, occupied units like Beacon Hill enjoy smaller increases than usual when they renew leases because their landlords don't want to lose them to the nicer high rise buildings. But here is what you need to know, the media reports based on listings, not renewals, which are released to the media each month. They show Boston housing costs, soaring as a flood of luxury buildings started leasing."

""A substantial body of long-term research demonstrates that increased inventory moderates rent," they wrote, " ... the effects of increased supply on demand - and the resulting moderation of rent growth - emerge only over time." Let me clarify that last paragraph:. Census data, and the sophisticated housing studies that use it, take much longer to come out. They offer a fuller, more accurate picture that includes lease renewals."

Two opposing effects shape local housing prices when new market-rate development occurs. Increased supply should relieve demand pressure and lower rents and condo prices, while luxury development can attract higher-income households and new amenities that push local rents and prices up. New high-rise units priced above the median raise median asking rents because listings data reflect asking prices, not lease renewals. Tenants in older occupied units often see smaller renewal increases as landlords try to retain them. Long-run census-based and housing studies that include renewals show increased inventory moderates rent growth over time. Short-term listings-based reports can create misleading impressions about development and price increases.

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