The Massachusetts rental vacancy rate is 6.2% for the first quarter of 2011. Multifamily income property investors should be concerned about vacancy rates. Is a 6.2% vacancy rate high or low?
To find out, I first looked back a couple of years and saw that the vacancy rate is down from the first quarter of the last few years. However, a 6.2% vacancy is higher than the 5.4% rate that we saw in 2005 & 2006. It is also higher than vacancy rates in the 3% to 5% range for many years from the late 1950's through the 1980's for the Northeastern United States.
Secondly, I compared the Massachusetts vacancy rate to other states. For Q1 2011, Massachusetts had the 7th lowest vacancy rate of all 50 states. Massachusetts also had the 7th lowest vacancy rate of all 50 states for all of 2010.
From prior knowledge about demographic trends and economic conditions, I knew that there are many potential renters waiting in the wings who will drive down vacancy rates. Some people who moved in with relatives will want their own place as their financial condition improves. I also know echo boomers are a growing segment of the population and they are reaching their prime renting age.
Finally, I came across a very interesting report titled, "How Rent Control Drives Out Affordable Housing". One of the things that it talked about is how Rent Control reduced the vacancy rate. For much of the period when the vacancy rates were very low, rent control was in effect in parts of Massachusetts. I don't know that rent control was the major contributing factor but I suspect it played a role.
Based on the above, it would seem that rental vacancy rates are at a safe level for investors. That's my conclusion. Check out my sources and do your own research. What do you think about the Massachusetts rental vacancy rate?