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Boston’s glut of new luxury apartments may bring down rents – and banks with them

The numbers are somewhat staggering: 9,800 new apartments are slated to come on line in Boston in coming years – 887 units did so last year, 1,600 will come on line this year, and the rest will follow soon after.

It’s all very welcome. The city – and state – desperately needs new housing.

But that leaves a big: What if there isn’t enough demand for all of these luxury units? What will happen if the market can’t absorb them?

The BBJ’s front-page story today addresses this issue:

(As) high-end developers continue to add inventory to the market, there’s some skepticism among real estate insiders that there won’t be enough demand for all these units. While optimistic developers point to promising demographic trends, others question the city’s capacity to fill the slew of luxury units that will soon flood the market. If the skeptics are right, it won’t be the first time Boston overbuilt one property type. As Harold Brown, the octogenarian developer and landlord, puts it: “The glut will bring rents down, and some developers and banks will lose money.”

If rents fall and some banks lose money, our response would be this: That’s the free market, folks. And that too would be welcome.

And then maybe developers will start doing two other things: 1.) Building more condos (as opposed to apartments) and 2.) Building more affordable housing, a huge niche where demand will remain high for years to come.

There’s an outside chance that the negative effects of overbuilding could lead to more cautiousness on the part of developers and banks. But that’s the free market too, though we suspect developers and lenders simply wouldn’t fold up and go away.

They’d try to find new niches – and that gets back to more condos and affordable housing.

Read other posts about: Boston apartment rents, Boston apartments

2 Responses to “Boston’s glut of new luxury apartments may bring down rents – and banks with them” »»

  1. Comment by Matthew Mowell | 01/24/14 at 6:35 am

    One reason why developers seem to crowd the luxury market – aside from higher margins – is that stringent devlopment regulations (expensive parking ratios and height limits) force developers to cater to the high-end so they can make the project work economically. This is why the city should ease these regulations to make it easier to build for the middle-class. It would be more environmentally friendly (less driving) and we could build taller without looking like New York…

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  1. [...] month—a 3.4 percent bump over 2013. Some industry insiders speculate that rents may have peaked. Ford Realty pointed out in a recent article that with 9,800 new apartments scheduled for Boston over the next [...]


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