Boston’s Luxury Condo Boom Exacerbates Housing Crisis: Report

BOSTON, MA — If you've noticed all the new luxury towers shooting up around Boston amid cries for a lack of affordable housing, you're not alone. According to a study released Sept.10, the city’s fancy condo building boom is not exactly helping residents keep affordable homes at a time when residents and advocates are worried about a divide that is pricing out locals.

Researchers with the Institute for Policy Studies, a left-leaning Washington think tank that produced the report, analyzed 1,805 property records for condos in a dozen luxury residential buildings in Boston, such as the Millennium Tower in Downtown Crossing and the Ritz Carlton. The study's authors conceded the residences brought the city money in the form of workers, in the long run the condos, many of which stood empty, contributed to a wealth and racial divide in a city that already has a severe income gap.

"These towers... play a key role in the global hidden wealth infrastructure, a shadowy system that’s hiding wealth and masking ownership, all for the purpose of helping the holders of private fortunes avoid taxes and oversight of illicit activities. Many Boston luxury properties are functioning, in effect, as wealth storage lockers for global capital," wrote study authors Chuck Collins and Emma de Goed.

They found that more than one-third of the units are not owned by individuals with names, but by LLCs, trusts, and other businesses that allow buyers not to reveal who they are. Some 64 percent of owners did not requested the property tax exemption the city offers homeowners, an indicator that the owners don't use their condo as a primary residence.

The study found that more than half of the 51 condos at the Mandarin Oriental on Boylston Street are owned by trusts.

Only around one in five residents at Millennium Tower claim the residential exemption.

Many units in the buildings were bought with cash, property records show, and the institute said the average sale price across all 12 averaged more than $3 million per unit - a price 50 times higher than Boston’s median household income.

With plenty in Boston and many more in the pipeline, the authors said they found the buildings responsible for higher land and housing costs in the city.

The luxury building boom is driving up the cost of land in central neighborhoods, with a ripple impact on the cost of housing throughout the city. Affluent, but not super rich, households in Boston find themselves pushed to outer neighborhoods, increasing competition for scarce affordable and moderately priced housing.

And plenty of Boston neighborhoods are seeing and feeling the impacts, they said.

Luxury real estate has a disruptive impact on local housing markets, pushing up land values and housing costs. Local gentrification trends are being supercharged by global wealth as billionaires displace millionaire housing and push rising housing costs to outlying neighborhoods such as East Boston, Charlestown and Jamaica Plain.

The institute recommended Boston consider doing what Vancouver did by taxing people who own empty-homes for more than six months a year. It also recommended Boston put a surcharge on home sales above $2.5 million.

This report comes on the heels of a city ordinance to limit short-term rentals with the goal of making more apartments available to rent yearly to residents, rather than nightly or weekly to tourists at much higher rates. Three years ago the Walsh administration made developers of luxury condos to contribute more to city programs that finance affordable housing.

Check out the full study:

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Image courtesy Institute for Policy Studies