Greater Boston homes increasingly bought by investors, per report

“A lot of investors are looking at hot markets and saying, ‘I can get a building from an elderly owner, and because the tenants are sometimes paying below market rent, jack up the rent by an enormous amount, slap on a little paint,’ and all of a sudden, they’re renting to a completely different clientele than has usually lived in that neighborhood,” said Marc Draisen, the council’s executive director. “That’s what often fuels displacement in these communities.”

The council defined private investors as those who used limited liability corporations, purchased more than three residential properties in five years, spent at least $3.45 million over 23 years, or purchased properties with at least four units.

The report revealed that investors play a much bigger role in shaping the region’s housing market than previously known, although Greater Boston has not seen the same level of billion-dollar corporations snatching up cheap single-family homes as other US cities.

Investors, who often either flipped homes for much higher prices within two years or jacked up rents by as much as 70 percent, were particularly active in some lower-income areas and gentrifying neighborhoods, the report said. Parts of East Boston and Lynn, for example, saw more than 40 percent of home sales go to investors.

The report illuminated a dynamic that tenant and neighborhood advocates have been witnessing on the ground for decades.

“The consequences are dire,” said Carolyn Chou, director of Homes for All Massachusetts, a tenant advocacy group. “When people I work with hear their landlord is selling the building, everyone’s stomach drops. Even people with professional jobs. Because they know that pretty soon, they might not have a home anymore.”

There are generally only a few outcomes when a private investor purchases a two- or three-family property, advocates said.

In many cases, an investor will “flip” the property, meaning they put money into some simple repairs, then put the property back on the market within two years for significantly more than the purchase price. Some 9 percent of homes purchased in Greater Boston between 2002 and 2022 were flipped.

In other cases, investors hold onto the property and raise the rents.

Housing has been a hot bed for investment for decades, largely because the nation’s shortage of homes means that properties are likely to steadily increase in value after they’re purchased, particularly in housing-starved urban areas.

Most research into the impact of investor buying has focused on the activity of large-scale institutional buyers, such as Invitation Homes, that have taken to buying up single-family homes or apartment buildings in fast-growing regions such as Atlanta and Phoenix. Oftentimes, those investors will fix up deteriorating properties and rent them out at higher rates, or put them back on the market.

That sort of investor is not nearly as present in Greater Boston as it is in some other areas, according to the report, largely because single-family homes here are so expensive, and because there are relatively few of them to buy.

Instead, the report found, Greater Boston has many more small and midsize investors, people who own between three and five properties, or who purchased between $3.45 million and $10.34 million worth of property in the 23-year period MAPC studied.

Combined, those small and midsize investors made roughly 88,000 purchases in that period, accounting for 64 percent of all investor purchases in the region. (Institutional investors accounted for roughly 25 percent of investor purchases.)

The report found that, overwhelmingly, investors are eyeing two- and three-family homes, the kind of buildings that represent the region’s last remaining “naturally occurring affordable housing.” That deeply concerns affordable housing advocates.

In most cases, two-families and triple-deckers were built decades, sometimes a century, ago. Because of their age, and sometimes their condition, those properties tend to carry cheaper rents and purchase prices. In low-income neighborhoods, areas hit hardest by America’s long history of racist mortgage lending policies and historical disinvestment, these properties tend to be last refuges of affordability in a city and region that is rapidly growing too expensive for people of modest means to stay, housing advocates say.

Those buildings have long been a bastion for Boston’s working and middle classes, who have often purchased small multifamily properties as homes, and rented out the other units for supplemental income or to relatives. But now, the…