Inspired-slash-frustrated by a conversation on Twitter a few weeks ago, which I am too tired now to find, I went and dug into just how many people actually live, more-or-less full-time, in Boston’s Millennium Tower. I was reminded of this by a conversation today, and, since the question seems to keep coming up, I might as well post my back-of-the-envelope analysis here.
A very light sketch of the background: Millennium Tower is a 60-story, 442-unit super-swank luxury condo development in the heart of downtown Boston; the tallest to date in the city, and by far the most expensive. This makes it a very visible target for the ire of folks who are rightly concerned about rising housing prices in Boston, with housing prices up 50% over just the last five years and rents quickly following.
It’s been widely reported that many of the buyers at Millennium Tower are non-local, even international, and so while there may be 442 units in the building, the question is, are there 442 units’ worth of people actually living there? (Millennium Tower replaced a Filene’s department store, so it’s not like houses or smaller apartments were torn down and people were put out of housing by its construction, but you can rightly ask the same question of developments where they were.)
First an existence proof: you can in fact find properties in Millennium Tower available for rent. I found these by searching Boston Craigslist for “Millennium Tower”: you’ll pay somewhere between $2500/mo (two units available at that price) and $4600/mo for an 800 sq. ft., 1-bedroom apartment. That $2500/mo figure is comparable to what I’ve heard for 1-bedrooms in Harvard and Porter Squares, which surprised me. Considering where and what Millennium Tower gets you, from a tenant perspective that $2500 is actually quite a steal, assuming it’s legit, which I have no reason to doubt. So that’s not just an existence proof but a really positive one. Rents are priced to move.
Now the question: just how many units in Millennium Tower are either owned or rented by people who live there full time? That’s a hard question to answer, so I’m going to answer the related and somewhat easier question of how many units are either owned by people as their principal residence, or rented (and I’m going to assume the rental tenants live there full time). That’s probably not entirely true, but I think it’ll let us start to put some bounds on our uncertainty.
To do that, I turn to the Bates Real Estate report on Millennium Tower from last month, which I encourage you to check out if you’re interested, as it’s the best source of this data I’ve found. (It’s free, you just need to give an email address.)
Bates looks at the first 425 sales (of the 442 total). Of those 425 sales, 20% (85) were declared a “homestead” by their buyers, which means a number of things under Massachusetts law, but relevantly for our purposes means they are claiming it as their principal residence. So that gives us a floor on the number of units where people live full-time. This is low relative to other comparable properties in Boston (the report cites 79% of the units at The Seville declared a homestead).
Now for rentals: as of this report, “more than 100” residences had found tenants. (I count 106 lines, but the report doesn’t make it clear that they correspond 1-to-1 with rentals, so I’ll take the more conservative number for now.) That’s another 23% of the units which have people likely living in them full-time.
So together this gives us a rough guess, that, as of March, about 43% of the units had people living in them full-time, and that that’s much less than other comparable, but more-established, properties in Boston.
The report makes a big deal of how fast the units sold (90% from October 2014 to September 2015, 11 months) relative to other comparable properties, so while it does seem that there’s a disproportionately high number of non-resident owners, some of what may be going on here is that it takes time to find tenants, and perhaps also the Boston market for luxury housing isn’t what the buyers may have hoped.
Those two units listed for $2500/mo are asking below what the lowest rent the report found circa March ($3500), so at least some buyers are in fact responding to market pressures and lowering rents to try to find tenants. Mr. Bates, if you read this, I’d love to read an update on Millennium Tower in a year or two’s time. I expect based on this trend line that more of Millennium Tower will have found residents.
There’s a perception among some activists who I respect that luxury developments are mostly unoccupied, and the owners are investors, likely foreign, buying condos like stocks and letting them sit empty, and so cities allowing developers to build luxury housing just makes housing prices go up, and it effectively takes housing away from the people who would otherwise have lived there if the developers had built a more reasonably-priced building.
There’s a question which I don’t have the information to answer on how developers decide how many units to build (would they have built 442 units if they had positioned the building at market rate?). There’s also an argument I don’t have time to pursue about whether it’s better for investors to spend $3 million on a condo in downtown Boston or $1 million each on three houses in Jamaica Plain or Somerville, but I’ll leave those for another time.
This certainly shows that at least this one new development isn’t doing as much to increase the supply of Boston housing as it might appear on paper. It’s not housing a full 442 units’ worth of people, at least not yet.
It is, however, housing at least 185 units’ worth of people, which is nothing to dismiss either.