New research from an established regional planning body suggests investors and speculators are playing a much bigger role in Boston’s housing market than previously thought. iStock illustration

Great report, problematic recommendations.

That’s my takeaway from a concerning new report from the Metropolitan Area Planning Council that finds speculation by investors, especially in small rental properties, has been running rampant in the Boston area for years now.

It’s an astounding number: Investors or speculators snapped up more than 20 percent of all multifamily buildings and homes sold in the Boston area over a 14-year period ending in 2018, according to MAPC’s new report, “Homes for Profit: Speculation and Investment in Greater Boston.”

The frequency and percentage of these deals appears to be growing as well, having risen from 16 percent of all sales in 2004 to 23 percent in 2018, with rental properties in low-income minority neighborhoods a hot spot for investors and speculators.

Of all the two-family homes sold in Greater Boston in 2018, investors were the buyers in 30 percent of the deals. When it came to three-families, that number rose to 50 percent.

Overall, 12 percent of apartment buildings bought between 2002 and 2022 were later flipped, as well as 11 percent of three-family homes.

Speculative buying and selling of homes and rental buildings locally has not exactly been a secret. But the level of activity in Greater Boston has long been thought to be lower than in other markets, such as Sunbelt cities like Las Vegas.

MAPC’s study challenges that perception, raising troubling questions on the impact this kind of speculation has had on runaway home prices and rents.

Boston Market Is Investor Bait

Yes, there are likely some quirks in the report’s numbers that will surface in the coming weeks and months. The use of LLCs, for example, is popular among high-income single-family and condominium buyers, and doesn’t necessarily signal that an apartment building or home-flipping outfit is at work.

The report also categorizes as flips properties sold within two years of when they were purchased.

That said, MAPC’s research team literally spent years working on the report, and clearly took care to try and plug obvious and maybe not-so-obvious holes and discrepancies.

And while the overall numbers may be surprising, they also make sense.

The Boston area has been suffering for years now from a shortage of housing, the result of decades of chronic underbuilding that has turned housing into both a scarce and incredibly expensive commodity.

That was bound to attract investors intent on profiting off of that scarcity by buying and reselling small rental buildings and homes, while avoiding the local regulatory runaround and red tape that developers looking to build new housing routinely face.

“It stems from the fact that we have a shortage of housing that has occurred in large part because of government action to intentionally constrain the development of affordable housing,” said Marc Draisen, MAPC’s executive director, in a webinar the group hosted on Thursday to detail its research. “We need to keep all these factors in mind as we learn from this research.”

Scott Van Voorhis

Rent Control Would Make It Worse

Really, the question is not whether this is new trend, but what exactly to do about it.

And that’s where things get tricky.

The report offers a wide-ranging menu of proposals aimed at discouraging investors from buying up rental properties and then reselling, at least not within two years.

But inexplicably missing is any mention of statewide zoning reform that would require cities and towns across the state to open their doors to new apartment and condo buildings or, for that matter, smaller starter homes like the ones that powered the American economy and housing market in the decades after World War II.

Rather, the report recommends that communities be given the option to enact housing “stabilization” regulations – or, in plain English, rent control.

However, rent control has a long track record around the country – including in the Boston area in the decades it was in force – of depressing and discouraging the construction of new apartments.

If anything, bringing back rent control would make our already-dire shortage of new housing even worse.

MAPC itself has published research showing that scarcity of homes is really the thing that drives up prices and attracts the investors and speculators looking to make a quick buck. So why is it advocating something that would hurt housing production?

If you want to put the flippers and speculators out of business, build more housing.

Scott Van Voorhis is Banker & Tradesman’s columnist; opinions expressed are his own. He may be reached at sbvanvoorhis@hotmail.com.