Private investors are on the rise in Boston’s housing market, sparking concerns about growing pressure on affordability.
One in five homes sold in the region from 2004 to 2018 went to private investors, according to data by the Metropolitan Area Planning Council reported by the Boston Globe. Their share of purchases have steadily risen to account for 23 percent of residential sales in 2018, up from 16 percent in 2004.
The planning agency defined private investors as those using limited liability corporations, buying more than three residential properties in five years, spending at least $3.45 million over 23 years or purchasing properties with at least four units.
The investors, often smaller local operators, have been targeting two-families and triple-deckers with the aim of profiting from the area’s surging housing market.
Private investors frequently used cash for purchases, outbidding prospective homeowners who largely rely on mortgages. The activity has disproportionately driven up rent prices and led to the displacement of tenants, particularly in areas like East Boston with a higher concentration of low-income families of color.
While the report indicated that Greater Boston has not experienced large corporations acquiring single-family homes, it emphasized the substantial role played by smaller actors.
Small and midsize investors, who own between three and five properties or have spent between $3.45 million and $10.34 million over 23 years, accounted for approximately 64 percent of all investor purchases in the region. In contrast, institutional investors represented around 25 percent of investor purchases. Private investors predominantly targeted two- and three-family homes, the last remaining “naturally occurring affordable housing” in the region.
Affordable housing advocates expressed concern over the impact on working and middle-class individuals who historically purchased small multifamily properties for homeownership and supplemental income.
“That model of homes and homeownership that the triple-decker represents, which was so important to this region for so long… it’s not evaporating, but people are being out-competed for those things,” Timothy Reardon, chief of data and research for the state’s Executive Office of Housing and Livable Communities, told the outlet. “We’ve seen that the effects of that can be devastating.”
One way to address the issue, he said, is to implement a real estate transfer tax to discourage speculators and enhance funding for affordable housing efforts. Similar measures have already hit the dockets in markets like Chicago and Los Angeles, as they grapple with homelessness and affordability issues.
Advocates in Greater Boston are also calling for increased transparency around limited liability corporations to better understand the extent of private investor acquisitions and their impact on the housing market.
— Ted Glanzer