Boston renters are stuck in a vicious spiral
There are no homes to buy, so more people are renting instead of buying, but that’s driving the cost of rent up.
Apartment-dwellers in the Boston area with dreams of no longer paying rent and becoming a homeowner face two major challenges with this goal.
First, Boston rents are so high it prevents them from saving money for a down payment. Second, there are very few affordable homes available to buy in the area. That’s a tough combination.
According to Zillow, Boston-area renters spent 34.1 percent of their monthly income on rent in the first quarter of 2015. And the Zillow Rent Index reveals Boston’s median rent reached a new high of $2,212 per month in June, far above the national median of $1,369 per month. Nationwide, rents are up 4.3 percent in June.
Zillow Senior Director of Economic Research Svenja Gudell says the increasing rent may be because more people are getting homes of their own and creating households (a term known as “household formation’’), but are staying in the rental market longer instead of shifting towards homeownership. That means more people are competing for homes for rent, driving up prices.
“Boston is one of the bigger cities in the country and has historically been among the more expensive markets,’’ said Gudell. “Rent has grown due to higher demand and tightening supply.’’
Boston homeownership struggles also seem to be part of a nationwide pattern. On Tuesday, the U.S. Census Bureau reported homeownership in the U.S. fell to 63.4 percent in the second quarter of 2015, from 64.7 percent in the previous quarter. This marks the lowest rate of homeownership since 1967.
Meanwhile, a series of maps produced by online journalist Ken Schwencke shows the rental market commands a dominant share of most U.S. cities. Boston is no exception as the screenshot below reveals.
Gudell believes three things are necessary to break the pattern of renters devoting such a large portion of their monthly incomes to rent instead of saving for a down payment. First, incomes need to start increasing to help renters save. Second, more affordable starter homes must become available on the market. And, finally prospective buyers need greater mortgage availability.
But she also points out there is no easy solution or a “one-size fits all’’ answer that can easily be implemented to address it.
“My hope is in the not too distant future, people who want to become homeowners will financially be able to do so,’’ she said. “My fear is we’ll have to deal with high rents for quite some time.’’
To comment, please create a screen name in your profile
To comment, please verify your email address
Conversation
This discussion has ended. Please join elsewhere on Boston.com