Why Would Anyone Spend $3,000 Renting a One-Bedroom Apartment?
I’m going to break the news to you gently. There are plenty of people in Boston who can afford to pay $3,000—even $4,000—to rent a one-bedroom apartment in the city; in fact, there are thousands of them. According to the Census Bureau, there are more than 64,000 households in Boston where annual income is in excess of $100,000; 17,000 households made more than $200,000 last year. Paying $3,000 per month is considered “affordable” to these couples earning more than $100,000 a year.
The fact is that these people can afford to pay that much. What’s less clear is, why don’t they just buy instead of rent? And, paying $36,000-$48,000 in rent each year is throwing away money, right? If you spent that same amount of money on a mortgage, you could deduct a large portion of it on your income tax form, so you’d end up paying considerably less while building equity.
These people aren’t stupid. What they’re doing is actually quite practical and reasonable. They’re assessing how much they want to spend and where they want to live, just like everyone else who lives here.
Boston renters have two choices when it comes to housing. They can enjoy the “Classic” Boston experience by renting an apartment in a brownstone in the Back Bay or in a Victorian in the South End, putting them right in the middle of the neighborhoods, in buildings offering ease of access. Or they can rent in one of the newer buildings, choosing a completely different quality of life in a building that often offers unobstructed views, central air and heat, concierge services, and amenities and features you don’t find in a traditional Boston-style apartment: fitness centers, barbecues/grills, media rooms, roof decks, swimming pools, storage, and garage parking.
Based on the number of mid-to-high rise apartment buildings opening these days, developers believe that renters are looking for the new style of living.
But there’s another reason “people of means” are renting rather than buying: There just aren’t that many one-bedrooms in the “luxury” condominium towers in Boston, compared to the number of two-bedrooms available. In the past 36 months, there were 58 one-bedroom condos sold at The Clarendon, Ritz-Carlton Towers, Four Seasons, The W, Heritage on the Garden, Belvedere, 45 Province, Trinity Place, Atelier, and Millennium Place, while 398 2-bedrooms or larger sold during the same time, a ratio of about 1 to 6. This group is renting versus buying because they basically don’t have much of a choice.
What you get for your money drives the decision-making process. If you spend $3,750 per month in Boston, you can either get an apartment with the above amenities and features or a condominium costing you more than $775,000, based on current mortgage interest rates, and the price only goes up when you add in condo fees and property taxes.
These are advertised rents on the websites of the new luxury apartment buildings:
|Waterside Place||Seaport District||766 SF||$3,213|
|Avalon Exeter||Back Bay||763 SF||$4,550|
|Arlington||Bay Village||750 SF||$4,195|
|Radian||Rose Kennedy Greenway||751 SF||$3,915|
|Avalon North Point||East Cambridge||805 SF||$3,075|
|Watermark||Kendall Square||763 SF||$3,424|
|1330 Boylston||The Fenway||761 SF||$2,696|
|West Square||South Boston||768 SF||$2,725|
Meanwhile, the lowest-priced one-bedroom listing at The Clarendon is $789,000 (589-square feet); at Millennium Place it’s $935,000 (855-square feet); and at 45 Province it’s $975,000 (994-square feet).
To this group, the decision seems an easy one. Rent and get the freedom and quality of life they desire, or buy and be tied down to a mortgage payment, while having to pay the same or more for the same features and amenities.
As time passes, smart condominium developers will understand this situation and adapt, either by adding more one-bedrooms to the mix of units in their new condo buildings or by converting existing apartment buildings into condominiums at some time in the near future.
Until then, all these new apartment buildings opening in downtown Boston? Within a year, they’ll all be full. So will all the other buildings currently under construction or even just on the drawing boards.