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Old 02-23-2016, 11:59 AM   #21
KentXie
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Re: Why Boston rents are so high.

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Originally Posted by curcuas View Post
Similarly, the point about unit size is silly. Developers will not build what the market does not demand.
No, it's not silly and this statement is clearly false. Certain demographics have certain needs. People looking to start a family are not looking to rent out micro units, grandparents are not looking to live in multi-room condos, rich entrepreneurs are not looking to live in triple deckers with roommates. Again, it's not that there is no market demand for cheaper housing; the fact that rent at the middle class level has been increasing is evidence that there is a demand that supply can't keep up. It's the return on investment that's determining whether developers build high-rise condos or high-rise middle class apartment. Unlike a factory that can produce different products without much change in capital, this is not the case in real estate. Land is a scarcity so developers will build whatever can generate the highest return on their investment on the limited land they own, i.e. luxury housing. This does not mean that there is no demand for housing in the lower rent brackets, only that building luxury housing is more desirable from the developers point of view.

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Free months of rent are ways to lower the effective rent without changing the sticker price for the future. Their commonality is a sign of falling rents - which is a great thing!
It is a sign of falling rents...but only for the luxury housing market. The fact that none of this has trickled down to the lower class housing market (and as stated in numerous article, the lower class housing rent has been going up, not down), shows that these are two different markets, serving two difference demographics. You can even look into the uber-luxury housing market as well (the Four Seasons and the Millennium Tower) and see that those units are not offering free months of rents because those are also in a separate market serving a different demographic (rich investors, not families). The drop in price for one market does not necessarily translate into other markets.

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Furthermore, as mentioned above, by pulling younger people out of shared apartments in triple deckers etc, multibedroom housing will be freed up.
The article states the opposite. The current housing market is unable to pull younger people out of shared apartments because they cannot afford the high cost of micro units that serve a very niche market (high earning entrepeneurs, doctors, techies). As a result, they stay in triple deckers and multibedroom housing and compete for the same housing as residents with families.
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Old 02-23-2016, 04:19 PM   #22
curcuas
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Re: Why Boston rents are so high.

You do realize that your second point shows that your first and third will gradually be corrected, yes? As rents fall for "luxury" housing, more people can afford it and will move out of triple deckers etc. Similarly, the profit maximizing type of housing to build will change as the rent on "luxury one bedrooms" or what have you falls.
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Old 02-23-2016, 04:57 PM   #23
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Re: Why Boston rents are so high.

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You do realize that your second point shows that your first and third will gradually be corrected, yes? As rents fall for "luxury" housing, more people can afford it and will move out of triple deckers etc. Similarly, the profit maximizing type of housing to build will change as the rent on "luxury one bedrooms" or what have you falls.
No, it does not. I'll re-iterate the same point I have mentioned in other threads before. Luxury housing has a price floor. How? Remember how I mentioned that developers would rather build luxury housing because they can get more in return and remember how I mentioned that land is a scarce resource? As rent continues to drop, developers will stop building luxury housing. Would that mean they would start building lower quality cheaper housing? No, they won't and the reason is pretty simple. Again, land is a scarce resource. Developers would rather sit on an undeveloped plot and wait until rent prices recover because building cheap housing means in the long run they are set at that lower fixed return (i.e. you can't just demolish that cheaper apartments to build luxury housing when the market recovers).

Furthermore, the whole free rent for the first month/below market rate rent for the first 18 months, and etc. is a gimmick. My friends who currently live in One Greenway was given that deal when they rented out one of the apartments there. As soon as the 18 month lease is over, they are moving out because they can no longer afford. These gimmicks are everywhere and when the deal finally expires, expect many residents to be back in the market looking for cheaper housing again which would only exacerbate the situation.
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Old 02-23-2016, 05:43 PM   #24
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Re: Why Boston rents are so high.

Developers build what they can make a reasonable risk-adjusted financial return on. They will build middle-income housing where they can make a return on investment. When zoning limits, years long community processes and the costs of community mitigation increase their costs, that will inevitably price certain developments out of the market. I'm not sure how building housing needs mitigation, but that's just me.

In downtown markets, you wont likely get cheap housing, but that's ok. That's why we need to make it cheaper and quicker for developers to build. Now, its basically an insiders game where if you don't play ball with the connected folks in government, you aren't building. It seems much better than under Menino, but still not great.

Also, why do most housing proposals (outside of the seaport where there are few current residents) always end up with fewer units than original proposed - there is some assumption that more housing is bad and must be limited.
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Old 02-23-2016, 08:02 PM   #25
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Re: Why Boston rents are so high.

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I'm not sure how building housing needs mitigation, but that's just me.
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Also, why do most housing proposals (outside of the seaport where there are few current residents) always end up with fewer units than original proposed - there is some assumption that more housing is bad and must be limited.
I dream of the day when a developer will propose a, say, 40 unit building, and the community will respond with "We think that lot should be able to fit at least 50!"
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Old 02-23-2016, 09:27 PM   #26
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Re: Why Boston rents are so high.

@KentXie you do realize your example is one demonstrating how luxury housing does not, in fact, have a price floor. Look at Chicago, look at Houston, heck look at Miami. "Luxury" housing goes for half as much there that it does here. There's no intrinsic price for which it must sell. In fact, a developer will rent those units at the market clearing price rather than eat all the costs and not rent them at all.

Your claim about developers sitting on land rather than building is one without empirical evidence. Everywhere that it has been studied, building in aggregate is a function of zoning, regulation, and the cost of construction. Sure some scummy slumlord may sit on land hoping it will appreciate, but that's not what happens most times and places. We'll get more housing with liberalized zoning, faster permitting, and lower costs of construction. And I'm not even sure the last one matters.

On that, the empirical evidence is unanimous.
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Old 02-23-2016, 11:30 PM   #27
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Re: Why Boston rents are so high.

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You mean the genius NYC mayors who created the second worst housing crisis in the country? To pay for all his upzonings, Bloomberg allowed massive downzonings of the outer boroughs - the places where affordable housing was built in the first place. Walsh is committed to building far more housing per capita than any recent NYC mayor - and is allowing far more zoning variances to do it.
Maybe party true. No comparison of any of the New York mayors of recent times to menino or Walsh in terms of smarts or vision overall. I don't blame our mayors for everything but our recent leaders haven't been world class, no way of arguing that. But we can debate the finer points of whether their housing polices were successful or not elsewhere.
-----------------
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The Boston magazine article gets one thing right: reform zoning. Right now, the cost of waiting for approvals and paying the cost of capital over years of no profits. This makes development all but impossible for the well connected. Historically, real estate development has not been an industry dominated by a handful of politically well connected developers. Before zoning and where zoning is weak, there are numerous small scale builders working at all levels of the market. Once you need connections and insane wealth, not merely ordinary wealth, that becomes considerably harder. Chapeau to Boston Magazine for getting this frequently overlooked point.

That said, there's plenty wrong with this article. The idea that housing needs to be built not only at the upper end of the market is flat out wrong. Even in New York, most neighborhoods were built for the wealthy or prosperous and then filtered down over time (at least while rent was still cheap until 1990 or so). Those former tenements in the Village were once mansions and so forth. City Observatory has been harping on this point (with far more data) for a long time:
http://cityobservatory.org/urban-myt...me-households/
http://cityobservatory.org/another-r...ng-roundtable/
As they point out, most households can't afford a new car - that doesn't mean, though, that they are shut out of the car market - they buy used.
No. That's NOT true, particularly in Boston. The streetcar suburbs of the late nineteenth and early twentieth century were laid out for a great variety of social classes, and mostly specifically not geared towards high end markets. In fact, many entire neighborhoods that are now deemed "really nice" because they happen to have old architecture were never built for anything above middle of the middle class. Dorchester, Roxbury, even much of north Brookline...

I don't know as much about New York (though I happen to be visiting right now, ironically) but many of the former tenement neighborhoods that I've seen certainly do not have the appearance of what I could ever envision as 19th century "mansions" or even proper townhouses... I doubt that this was the case and more likely they were at best mid or lower middle class townhomes... This is certainly the case with buildings of similar architecture in Boston. So share whatever links you want but the local patterns of development in Boston do not fit the schema that somehow all the affordable housing stock came out of some romanticized process of decaying of once glamorous homes. The only area in Boston where that was the case was the back of beacon hill and the west end, and even so that's only in a relative sense; those were never as nice as the other neighborhoods and it's no coincidence they became squalid over time. As you point out at the end of your post, unrestricted development was the reasons urban affordability was successful, and building a bunch of luxury housing and then waiting ain't gonna work.
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Old 02-24-2016, 12:18 AM   #28
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Re: Why Boston rents are so high.

Legitimate question. What is an excessive rent? Given our economies dependence on STEM jobs (of which I belong to), is rent actually out of whack?

Senior software engineers (5+ exp) pull 120K+. Is a 2K/mo+. apartment really out of reach for that? it doesn't seem so IMO.
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Old 02-24-2016, 02:57 AM   #29
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Re: Why Boston rents are so high.

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Legitimate question. What is an excessive rent? Given our economies dependence on STEM jobs (of which I belong to), is rent actually out of whack?

Senior software engineers (5+ exp) pull 120K+. Is a 2K/mo+. apartment really out of reach for that? it doesn't seem so IMO.
When someone who makes median wage (~50k a year) pays 30%+ on housing themselves. Anyways, you might be making good wages but the guy serving you your coffee can barely afford renting his friends closet to live in (and yes this is a thing)
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Old 02-24-2016, 03:03 AM   #30
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Re: Why Boston rents are so high.

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I dream of the day when a developer will propose a, say, 40 unit building, and the community will respond with "We think that lot should be able to fit at least 50!"
How do we pacify NIMBYs so we are the only voices heard? We could make it happen if we could make them complacent. Schedule meetings during the season finale of the nimby demographics favorite tv show?
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Old 02-24-2016, 11:40 AM   #31
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Re: Why Boston rents are so high.

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@KentXie you do realize your example is one demonstrating how luxury housing does not, in fact, have a price floor. Look at Chicago, look at Houston, heck look at Miami. "Luxury" housing goes for half as much there that it does here. There's no intrinsic price for which it must sell. In fact, a developer will rent those units at the market clearing price rather than eat all the costs and not rent them at all.
I have to agree with this. Moreover, on a long enough timescale housing becomes almost fungible. Eventually the price or value of a property is a strong function of "the times" and a weak function of its initial condition.

You can build something today with the finest treatments in the most popular neighborhood. If you neglect the building, if you replace/repair with cheap materials, if trends change, if the neighborhood takes a turn - the true value of what was originally "luxury" falls. Even a luxury form factor (mansion) can be altered (subdivision into smaller apartments). In its worst form we call this urban decay, but it doesn't need to go as far as broken windows and graffiti.

The reverse is called gentrification. I will accept an argument that we are in a period of gentrification and that trend will not reverse any time soon. However, I cannot accept that the reverse of gentrification is impossible. History proves that is possible and our city is filled with old buildings that have risen and fallen in relative value/class over the decades.
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Old 02-24-2016, 12:13 PM   #32
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Re: Why Boston rents are so high.

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I have to agree with this. Moreover, on a long enough timescale housing becomes almost fungible. Eventually the price or value of a property is a strong function of "the times" and a weak function of its initial condition.

You can build something today with the finest treatments in the most popular neighborhood. If you neglect the building, if you replace/repair with cheap materials, if trends change, if the neighborhood takes a turn - the true value of what was originally "luxury" falls. Even a luxury form factor (mansion) can be altered (subdivision into smaller apartments). In its worst form we call this urban decay, but it doesn't need to go as far as broken windows and graffiti.

The reverse is called gentrification. I will accept an argument that we are in a period of gentrification and that trend will not reverse any time soon. However, I cannot accept that the reverse of gentrification is impossible. History proves that is possible and our city is filled with old buildings that have risen and fallen in relative value/class over the decades.
Exactly. The price of a condo in Southie that's simply floor of a triple decker has only to do with supply and demand. What the market will pay, the market will pay. It has nothing to do with how much it cost to build. Nothing to do with how much the previous owner paid for it. Is there a buyer willing to pay $500,000? If so, then it will sell for at least $500,000.

Simply put, in a free market the developers will build what is profitable. The most profitable units are the ones that are in-demand. Therefore, developers will meet consumer demands. That is how it works for any goods and services.

Where this relationship breaks down is where our supply is artificially constrained. The incredible barriers to development that exist in our city and region. The outdated zoning laws. The public process. And yes, the forcing of developers to subsidize units for low-income people. Regardless of whether you agree with any of these actions (zoning and subsidized housing both have their merit, in my opinion), the objective reality is that these things are barriers to development.

These barriers to development increase the cost (in money, time, resources, etc) of building a free-market unit. Therefore, supply is artificially constrained. Therefore, prices increase. Ancillary effect: if developers can only build 50% of what the market wants, due to these artificial constraints on supply, you better believe they will build the most profitable units. Those units are ones they can market as luxury units and sell for seven-figures.

You lower price, by either increasing supply or decreasing demand. Plain and simple.

Decreasing demand is a bad idea, in my opinion: let infrastructure decay further, encourage jobs to move out of the region, make sure there are lots of violent crimes, work to worsen the schools, things of that variety.

Increasing supply is a great idea, in my opinion. Remove as many barriers to development as you can. Heck, even encourage developers to build! Look at this:

Houston council expands subsidy for downtown development

EDIT: I know Houston is not the same situation as Boston. But encouraging residential developers to build units downtown is a good thing.

If I were king: the city would subsidize affordable units, as they saw fit. But, the city would never force developers to subsidize those units as that is SO counterproductive. They are trying to address high cost, by restricting supply (unintentionally, but obviously)! That is the opposite of what any Economist would tell you is the right thing to do. Heck, any Econ 101 student with a B+ would tell you how silly that is.

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Old 02-24-2016, 12:24 PM   #33
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Re: Why Boston rents are so high.

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I don't know as much about New York (though I happen to be visiting right now, ironically) but many of the former tenement neighborhoods that I've seen certainly do not have the appearance of what I could ever envision as 19th century "mansions" or even proper townhouses... I doubt that this was the case and more likely they were at best mid or lower middle class townhomes... This is certainly the case with buildings of similar architecture in Boston. So share whatever links you want but the local patterns of development in Boston do not fit the schema that somehow all the affordable housing stock came out of some romanticized process of decaying of once glamorous homes. The only area in Boston where that was the case was the back of beacon hill and the west end, and even so that's only in a relative sense; those were never as nice as the other neighborhoods and it's no coincidence they became squalid over time. As you point out at the end of your post, unrestricted development was the reasons urban affordability was successful, and building a bunch of luxury housing and then waiting ain't gonna work.
That's the magic of renovation!

Seriously though, are you so sure about those patterns in Boston? Vast areas of Roxbury were former estates of the wealthy - Highland Park / Fort Hill clearly still look that way. Same with northern brookline. At some point, there was added infill, yes, but that infill often looks to have been designed for the middle-upper middle classes - as the estates were broken up. This fits the narrative of filtering quite nicely....

Moreover, it shows the benefit of upzoning - it can be profitable to build en masse for not just the wealthiest. While a unit of housing is a unit of housing, no matter its price, it's nice to see that one can successfully build at may different market points. There are acres of townhouses in Texas you can see, if you doubt that...
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Old 02-25-2016, 01:58 AM   #34
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Re: Why Boston rents are so high.

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That's the magic of renovation!

Seriously though, are you so sure about those patterns in Boston? Vast areas of Roxbury were former estates of the wealthy - Highland Park / Fort Hill clearly still look that way. Same with northern brookline. At some point, there was added infill, yes, but that infill often looks to have been designed for the middle-upper middle classes - as the estates were broken up. This fits the narrative of filtering quite nicely....

Moreover, it shows the benefit of upzoning - it can be profitable to build en masse for not just the wealthiest. While a unit of housing is a unit of housing, no matter its price, it's nice to see that one can successfully build at may different market points. There are acres of townhouses in Texas you can see, if you doubt that...


Very sure. Rx highlands - yes, old land, was once farmlands and some of it did become fancy estates. NB (North Brookline) - yeah, a little of this too... but in the great urban expansion of the 1870s/80s-19xx's, those lands were divided and those homes torn down, big subdivisions planted in their stead. North Brookline to people not from there gets a lot of attention from outsiders for its seeming beautiful, rich homes - but in reality, most of them are nothing special - just real estate developer's packed construction on what then wouldve been considered very small lots, typical, primitive cookie cutter homes (still having detail, of course, in the spirit of the day) - but certainly nowhere near anything that would be the parallel of the modern income bracket's equivalent of the "luxury" housing we are talking about today. Firmly in the middle class (excluding the TINY enclaves of cottage farm and pill hill). Ditto for Rox - estates divided, and most housing built in the neighborhoods you mention - Ft Hill/Highlands - nicer than the rest, maybe, but nothing better than solid middle class. old SOUTH Brookline, Chestnut Hill... now THAT is where the upper class went when they grew out of Boston.. and that is where they have remained, unbroken, thru all the recessions and adjustments ever since.

So - yes - massive land tracts from centuries ago were divided up for cheaper housing more recently as in 100 yrs ago, but I am addressing your claim that the shithole tenements of the E Village and their Boston equivalents - the buildings themselves - were at one point built for the rich and then just degraded in value, happily, thru market adjustments - to produce the salad days of urban affordability... and that simply (at least for Boston, cant get feisty about NYC history) is not the case. And that's why you can't simply use that as your only justification for assuming that luxury housing will somehow get nice n shitty for the po' folks to move in on in the future and restart that grand old cycle again.

And yes - building en masse for multiple different classes - which is what happened in Boston in the fin de siecle - is what we need now and exactly why the lux-only business ----- at least by past principles ----- aint gonna cut it.

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Old 05-16-2016, 03:04 PM   #35
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Re: Why Boston rents are so high.

A good read on today's globe

https://www.bostonglobe.com/business...ESO/story.html
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Old 05-16-2016, 03:24 PM   #36
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Re: Why Boston rents are so high.

Like I said:

"Boston and cities such as Somerville and Chelsea have encouraged dense development, especially near T stations"

We should have built a strong MBTA infrastructure along with expansion.
* This would help relive traffic (which benefits all taxpayers)
* Developments near Hardrails need to be maximized to as many units as possible.

Boston/Cambridge/are the educational hubs. Students come all over the world to participate and be part of something in Mass.

Solid infrastructure is key and I believe we need to set a budget and a vision for upgrading our MBTA system.
I would bring the vision to MIT Students to help make 21st century MBTA Grid Expansion along with making the entire system Energy- Self-sufficient, Weatherproof.
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Old 05-16-2016, 03:36 PM   #37
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Re: Why Boston rents are so high.

The cities with the worst rent problems are also the ones where the suburbs build the least. San Francisco barely builds, but none of its suburbs build any housing at all. Almost none of the New York suburbs of New York City build anything - especially the dense ones along rail lines. It's no surprise that rent problems are at their worst there.

Regional planning tends to be a good solution to the provincialism of numerous small jurisdictions. Especially if said towns are benefitting from rapid transit service.
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Old 09-13-2016, 04:16 PM   #38
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Re: Why Boston rents are so high.

Boston rents have decreased a good chunk in the past month according to this article. Maybe the construction boom will finally make Boston more affordable!

http://www.bostonmagazine.com/proper...rent-decrease/
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Old 09-13-2016, 05:48 PM   #39
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Re: Why Boston rents are so high.

We get these stories about month-to-month or month-over-month decreases every once in a while, and then we're back to business as usual the next month. It's nice to see, but it's not significant.
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Old 09-14-2016, 08:03 PM   #40
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Re: Why Boston rents are so high.

Why Boston rents are so high?

There is alot of factors:
Boston/Cambridge is a major College Hub
MIT---the top scientists, Engineers continue to come to the city
#1 in Startups
#2 City is very accessible and offers jobs-
#3 Everybody wants to live in the same area Somerville, Charlestown, Boston, Cambridge, Southie,
#4 Top of the Tier students from other countries
#5 Boston has HISTORY
#6 Sports Teams (Pats, Celtics, Bruins, Redsox)
#7 4 Seasons
#8 Essex (Truly New England)
#9 Cape Cod
#10 Leader in Biotech

Bottom Line Massachusetts is a beautiful State--
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