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Investors drive up Boston housing prices - especially in poor neighborhoods
By adamg on Thu, 12/14/2023 - 9:40am
The Dorchester Reporter sums up a recent Metropolitan Area Planning Council report that found that 21% of the home sales in the Boston area between 2004 and 2018 were to investors - but that that figure rose to 31% in parts of Roxbury, Dorchester, and Mattapan.
The complete report and a map: Homes for Profit: Speculation and Investment in Greater Boston.
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Comments
Interesting
This is everywhere. Their map is all of eastern MA.
In Chelsealand, my neighborhood is the highest color in their map (30-100%). Not surprising. I can count one hand how many homes are owner occupied. (5). The rest are rental properties, so those are all owned by corporations. (they are the dumpiest properties on the street too b/c investors don't care about neighbors, just $$$)
We need to put an end to this. If Minnesota of all places can ban corporations and LLCs from buying homes and turning them into rental properties, why can't we do this here?
why can't we do this here?
Because the vampire is already inside. Too many people around here derive their self-worth, both real and imagined, from running housing investment companies. They will never allow it to be regulated.
We outnumber them
We outnumber them, but we don't have our act together to get our asses to the polls, much less to lobby effectively for public good.
The issue at it’s core is still a shortage of homes
It’s only profitable for investors to invest in homes because there aren’t enough to go around. Also, banning investors from owning SFH and small multi family homes essentially makes it so you can’t rent out single family houses - ergo you can only live in a SFH neighborhood if you’re rich enough to afford a down payment and a mortgage. Banning investors from owning homes doesn’t increase supply at its core. It increases the supply of homes for sale while lowering the supply of homes for rent. Not everyone can afford to own a home, or even wants to!
Banning investors from markets does not always lead to the intended affects: https://reason.com/2023/06/19/study-banning-investors-from-buying-homes-...
Also, apartments are homes too. Especially not everyone wants to buy an attached home too. So is this just for single family houses, or for all homes?
I’ll also admit. This is not a hill I’m willing to die on. I just think this is a case of missing the forest for the trees when the real issue we’re facing is an undersupply of homes for people to live in.
https://www.theatlantic.com/ideas/archive/2021/06/blackrock-ruining-us-h...
https://www.theatlantic.com/ideas/archive/2023/01/housing-crisis-hedge-f...
Bingo
There's demand for new homes in Boston.
But because a portion of our population wants nothing to change, there aren't enough houses. So capital which might otherwise build new housing looks at the regulatory environment and says "I'd love to build a three-decker, but that's not allowed, so I will instead buy and rehab a three-decker where it is grandfathered in" and goes searching for the neighborhoods where the homes are less expensive.
We're 200,000 homes behind where we need to be in the past decade based on population growth but because many communities balk at new housing (cough Newton cough) there's a regional shortage. Newton doesn't pay the price, because it's already priced everyone out. So it flows downhill and the capital winds up in the neighborhoods which can least afford it.
The MBTA communities act is a start. It needs more teeth (Chapter 90!) and it needs to be updated so that cities and towns with more than n transit stations have higher goals (i.e., Newton). We have to keep the gas pedal depressed all the way to the floor on this.
The guy at MAPC actually gets it, too...
But, according to Draisen, the scarcity blamed for driving thousands of people to leave the state continues to attract investors. “A lot of the money that is being made through this process,” he said, “stems from the fact that we have a shortage of housing that has occurred in large part because of government action, public action taken at the federal, state, and particularly local level, to intentionally constrain the development of housing and the development of affordable housing.”
LLC's
An LLC that owns a property does not automatically mean it is a large company with hundreds of units. More often than not that LLC owns one or maybe two properties. Holding a property in an LLC is simply one way to protect your assets.
Also, a blanket statement that investors don't care about neighborhoods is simply incorrect. Just the opposite in most cases. Banning LLC's does nothing to create more housing or affordable housing.
Minnesota can do it because
Minnesota can do it because the DFL actually gets shit done, unlike the Massachusetts "Democrats" running both houses of the legislature. https://prospect.org/politics/2023-12-04-massachusetts-blues-progressive...
Why isn't this illegal yet?
My Cambridge rental property was purchased by a group of investors and they have raised rent $400 for prior tenants and are renting at $800-$1k increase to new tenants. They also kept our old leases At-Will, so we have no security.
Same cost problem everywhere else, so there is nowhere to go.
the problem
is permanent and will only get worse. You will learn only what they allow you to learn, you will be on universal basic income but it won't be something that helps you much, and you will eat soilent green (only it won't be made of people, in the beginning, but waste scraps from Big AgriPharma). You are born to belong to the permanent renter class. Most of the microchips will turn people into slavish MuskBois. If you are lucky enough to have a defective chip in your head, you'll have to act right not to get caught out. The Singularity Landlord will still keep the heat at 58 deg F in winter.
It's already over. The 1% have won.
I don't understand
What is an "investor"? Is the alternative an owner occupant? I don't get it. Isn't anyone who buys a property an "investor"?
Yes, I read the report. Twice.
MAPC seems to be trying to make a point and I don't understand what it is.
Lots of hand waving here
If you bought your house in the '70s and benefited from the huge rise in prices, took out a lot of equity, and are now facing a very small tax as you sell a home and net $600,000 where the value doubled even when accounting for inflation then you're "not rich."
But if you buy a home now that they cost a lot you're an "investor" evidently.
(I copied Rah Rah* on my letter and her response was "yeah, but think of all the real estate taxes they paid over the years." Okay, Shirley. It also says they have three kids. Those three kids all got to go to school. They got their garbage picked up every week. The road outside their house was paved. The Arlington Police showed up if there was any trouble. Animal control dealt with the odd bear now and then. Etc, etc, etc.)
* For those of you who haven't been here long enough, this was a nickname given to Shirley Leung back when she was cheering on everything about the Olympics, which was only derailed by 10 people on Twitter. 2015 was an innocent time, wasn't it?
Good question
This is a good question. Personally I don’t have a problem when a hardworking family invests their savings in an investment property or two. It might even be a good thing to have such people more invested in the community.
The real problem is the massive investors (BlackRock) who don’t give anyone else a shot. I’d be curious to see what the breakdown is of this number.
Reform Probate Processes
These investors often target people who are either selling to resolve a probate or estate.
Probate courts put time and type of offer restrictions on these sales that drive off all but cash speculators.
Reforming probate would be a good place to start. Anyone who has ever initiated a probate can tell you about the circling buzzards that flock in once it hits a public record.
So in other words
They are doing something completely legal. That is not quite the definition of targeting people.
Perfectly legal
Yes, it’s perfectly legal that the probate court stacks the deck in favor of corporate investors and against people looking to buy a house to live in. That doesn’t make it good policy or in the public interest
‘Stacks the deck’?
Because the corporate investors got there first? Ultimately, it’s up to the sellers to sell, or not sell. The corporate investors can’t and are not forcing the sale. I’m failing to see how probate is giving the upper hand to corporate investors.
I’m failing to see how
The average buyer needs to obtain a mortgage. Obtaining a mortgage takes time. Short limits on time to sell disfavor the average buyer and favor the corporate buyer
Short limits on time to sell?
Probate can take a year depending on debts and you can sell your house during this time. Assuming a pre approved buyer, the mortgage process can take as little as a month and a half.
I think what you’re trying to say is investors usually come in with cash offers at or above market value, which is a ‘problem’ regardless of probate.
Have you handled a probate?
I think the answer is "no".
You can't sell an asset in probate unless you have a court order to do so. You can't just say "we'll sell the house and then figure this out". Does. not. work. that. way.
Once the decision is made to liquidate an asset to cover debts, the sell window is short, even if the complete probate process is over a year. In my case, I wasn't even allowed to pay off the debts, including the mortgage, until I was granted permission by the court. Everything having to do with probated property has to go through the court. My brother and I settled the debts with negotiations and with cash, so we were able to sell the house in a more conventional way, but my lawyer briefed me on what could happen if the judge required selling it out of probate - and why that was not desirable due to how the price would be far lower due to the financial risk assumed by the buyer.
I found the Probate for Dummies book to be a very good and quick - if not state specific - read when I ended up being an executor named on short notice. It also helps that I managed to get a referral to a totally awesome lawyer who really knew what she was doing.
As a side project, I teamed up with a city council candidate and real estate professional/old friend in PDX and we got some data on how houses in a traditionally redlined area that he grew up in were getting scooped up by outside investors. We were, in short, investigating the mechanisms of gentrification. It had a lot to do with probates, but also with all the heirs having moved away and wanting a quick cash sale because they were required to split the proceeds. That means it was not only a complicated issue, but not nearly as nefarious as some were making it out to be. The answer was to promote formation of neighborhood co-ops, such as the one that I sold to, who would redevelop the property from within the community.
BTW, I believe that Bob is an actual lawyer - we should both defer to him on this.
Once again you assume
And assume wrong. I have, and very recently. Nice try though. You can sell an asset as long as estate taxes are defined, or sign an affidavit saying that there are no estate taxes. If ownership transfer
isn’t defined then what you say is correct, but that’s a whole different can of worms and takes years to resolve.
Corporations are didn’t cause this issue. The MA government did by limiting housing for decades. MA (Boston) has one of the highest average rents in the US. The corporations are seizing on this opportunity.
I agree that limiting housing is the problem
You were lucky - there was probably no debt involved with the property. I couldn't even kick in my own cash to clear the note until the court sorted the entire debt picture.
But one of the best things that you can do to prevent investor sales driving up prices further is to have a will, encourage others to have a will, and state your intentions.
As part of our side project, my friend talked to community activists in the area where he lives, works, and grew up in who were concerned with gentrification and community stabilization. Many owned some property or lived in multigenerational situations with elders who owned property, and yet very few had a will in effect for that property.
Probate exists for the creditors, not for the heirs, and courts act accordingly in their interest.