No matter how drastically the national economy fluctuates, Boston’s multifamily market, supported by an educated workforce, hardly wavers. Supply and demand are rarely that far from equilibrium, given the tightness of the residential housing market and the hurdles facing multifamily developers.
Consequently, rent growth is dependable, and modest vacancy rates are the norm. Never as flashy as New York City or San Francisco — or such relative newcomers as Austin and San Jose — Boston is sometimes overlooked, but it has long been one of the top multifamily markets in the country.
Economy Attracts Top Minds
From the moment Harvard College welcomed its first students in 1636, Boston has been the foremost city for higher education in what would eventually become the United States. Today’s presence of over 100 colleges and universities in metro Boston, including MIT, Tufts, and Boston College, ensures the city remains at the forefront of fields like finance, healthcare and biotechnology.
Research conducted at these institutions, as well as at Mass General Brigham and Women’s Hospital, Beth Israel Deaconess and Dana-Farber Cancer Institute, has spilled over into thousands of tech start-ups in Boston, Cambridge and along Massachusetts Route 128.
Boston’s highly educated workforce — almost a quarter of adults 25 and older hold a graduate degree — makes it a logical headquarters location for such diverse companies as Liberty Mutual, Boston Scientific, Iron Mountain, Bose, Fidelity Investments and Bain Capital.
Boston is also known for its quality of life. Thanks to its world-class museums, longstanding sports franchises and proximity to the ocean and mountains, Boston was recently rated by RentCafe as the most liveable city in the United States.
Boston attracts some of the smartest people in the nation and offers attractive employment opportunities and amenities that keep them in the area. As a result, Boston has a stable population for a city of its size, including a larger-than-average cohort of people in the 20-to-34 age group, the prime rental demographic. Population figures in this age group declined nationally between 2020 and 2021 but remained steady in Boston, according to the U.S. Census Bureau.
Supply on Par With Demand
Stable population is one reason that Boston has avoided the oversupply issues that hang over the Sun Belt. On the demand side, Boston has one of the tightest and most expensive residential housing markets in the country.
According to a new report by Oxford Economics, a household needed an annual income of about $104,000 in 2019 to buy a median-priced, single-family home in the city, make mortgage payments and pay taxes and insurance. Today, a family needs roughly $194,000 to afford the same home, an increase of 86 percent. Those who can’t afford to buy, rent.
There are also barriers on the supply side. High labor and materials costs, zoning regulations and complicated permitting processes have constrained inventory growth during each of the past four years to less than 2 percent of overall supply. In fact, supply growth totaled just over 7,000 units in 2024, the lowest recorded volume over the past decade, reports Yardi Matrix. With projects under construction down sharply and starts dwindling, absorption is expected to outpace new deliveries in 2025 and 2026.
Because demand and supply are nearly in equilibrium, rent growth and occupancy in Boston have been strong compared with the nation as a whole. While rents in Boston were only up 0.6 percent on an annual basis as of January 2025, they are forecast to increase 2.1 percent by year-end 2025, according to Yardi Matrix. Occupancy increased 10 basis points over the same period to 96.6 percent, compared with the national average of 94.5 percent.
Developers Drawn to the Suburbs
Out of 58 submarkets tracked by Yardi Matrix, asking rents are highest in the South End, Boston Downtown and South Boston neighborhoods. Rent growth and occupancies in some of these expensive areas lagged the rest of the metro. And while developers continue to be active in core Boston submarkets, many developers and renters have looked for opportunities outside the city limits.
As of January, the Boston metro had roughly 20,000 units under construction, representing 2.7 percent of existing stock. Most development activity is spread evenly across the city proper and the suburbs, though east Middlesex County north of downtown Boston has a concentration of activity with just under 3,500 units underway. This includes a 741-unit community Greystar is developing in Everett. The first phase of this project is called Jade, which opened earlier this year. The second phase, Juniper, is slated for a mid-2026 completion.
Renters have also been looking even farther afield. Transit-oriented apartment activity has grown in more distant suburbs like Beverly and Quincy. This trend is likely to continue. The Massachusetts Bay Transportation Authority (MTBA) Communities Act passed in 2023 encourages development along the metro area’s extensive commuter rail network. The stage is now set for groundbreaking in such places as Attleboro, Salem and Swampscott.
Boston Delivers on Price
Transaction activity in metro Boston remained moderate throughout 2024, buoyed by growing interest from institutional investors during the second half of the year and slowing much less than the rest of the country.
In addition to Boston-Downtown, Middlesex County has been a hub of activity, seeing total sales in 2024 exceed $200 million. These include a 235-unit property in Marlborough, a 324-unit property in Billerica and 195-unit and 696-unit properties in Waltham. While cap rates for premium properties in downtown Boston dropped as low as 4.5 percent over the course of 2024, overall cap rates were generally in the mid-to-low 5 percent range as 2024 came to a close.
But even the Boston market is not immune from ups and downs, including volatility in interest rates and changes in the formula for academic research funding. Permanent agency debt on acquisitions and refinancings are a great way to minimize volatility going forward, and borrowers are increasingly looking to variable-rate structures that offer greater flexibility in terms of prepayment should rates drop.
— Michael McNeill is a Boston-based director of conventional multifamily production at Lument. He joined the firm in 2020 and is responsible for agency and proprietary debt origination. This article originally appeared in the March/April issue of Northeast Multifamily & Affordable Housing.