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Construction of new housing in Boston slowing
By adamg on Mon, 01/02/2023 - 10:13am
Last week, the BPDA issued a press release that it had approved 3,247 new housing units in Boston in 2022. Good news, right? Well, yeah, unless you make like Scott Van Voorhis and look at similar data for 2021, which showed 6,643 new approvals, and 2020, with 10,123.
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Comments
Interest rates
Look at the rise in interest rates and it will correspond with the drop in housing starts.
And what is gonna happen to all the empty office space around Boston, seems like an opportunity to convert some of the office space into housing knocks :)
it’s all in on labs
and the BPDA is moving forward neighborhood zoning changes to eliminate housing requirements in favor of biotech labs and commercial space driving young professionals and their families out of Boston.
Office conversions
Very few of the office buildings downtown will be converted to housing. The open plans, floor plates, HVAC and plumbing systems do not lend themselves to individual apartments throughout the building. The expense involved in the effort can't be mitigated without very generous tax abatements and other public incentives. Not gonna happen at scale. Might see a few that are converted but that's it. Either way, the tax base for the city is in a perilous state in the long run.
The office vacancy rate in Q3
The office vacancy rate in Q3 in Boston was 12.7%. Lab conversions have slowed down and workers aren't returning to offices anytime soon. When lenders take back buildings that are defaulted on, what's gonna happen to the buildings if they arent converted to residential, demolish the older ones perhaps?
https://www.avisonyoung.us/web/boston/office-market-report
There are $10 million plus
There are $10 million plus properties that still need to be sold in East Boston
Follow the money
… or, more specifically, the significant rise in interest rates for construction loans. This makes it even more likely that labs will be the preferred option to build.
I'm sure the YIMBYs will all be out in force with alternate theories, but this is pretty basic economics. I expect that Boston will likely step up with more tax-supported money going toward construction of subsidized housing. I would also expect to see zoning proposals to artificially make it more advantageous to build (subsidized) housing in exchange for density and height bonuses for such projects. The issue will be how much.
Something's seriously broken
Something's seriously broken if there's not enough of an incentive to build unless there's overwhelming demand, regardless of interest rates. Remember when you could actually choose where you wanted to live and offering asking price meant you were determined to purchase the property? Remember hiring a home inspector without worrying it would affect the seller's decision to accept your offer? As long as the buying process is absolutely nutty then there should be incentive to build more housing. We need a radical zoning overhaul in ALL towns and cities, the state needs to force some of the surrounding communities who think they're special to pitch in and do their part, and we need to put in place a sensible community review process that doesn't permit the loudest and wealthiest complainers to shut down a project.
It's worth noting that the
It's worth noting that the numbers Mr. van Voorhis is using in his article are BPDA approval numbers, not issued building permits (which always tend to be much lower, and never got above ~3,600 in 2020 or 2021). The fact that they have fallen off a cliff is probably more of a sign of dysfunction at the agency than it is an indicator of the housing market (which is also down, but for different reasons).