The housing market pendulum that swung low in Boston’s poorest neighborhoods during the Great Recession has swung back and held steady, with a new wave of investors chasing profits and capitalizing on a tight regional supply, according to a new report by the Metropolitan Area Planning Council.

By MAPC’s numbers, 21 percent of the Greater Boston homes sold from 2004 to 2018 were bought by an investor. But in parts of Roxbury, Dorchester, and Mattapan that are mainly populated by people of color, the rate of investor buys was 31 percent, or almost one-third.
At an online presentation of the report last week, MAPC executive director Marc Draisen said he was surprised at the market share going to investor-owners.

“We were surprised to see how many of them were cash purchases,” Draisen added, “and we were even surprised to see how many of these were flipped in less than two years, particularly in lower income communities and communities of color.”

The report stated that “although investment happens across the region, lower-cost urban neighborhoods of color experience the highest rate of investment activity, adding to displacement pressures and restricting homeownership opportunities. Institutional and large investors are buying up large swaths of properties at a discount and flipping them at a premium, further adding to the rapid increases in prices around the region.”

MAPC researchers found that investor buys of two- and three-family homes in the metro area spiked in 2008, dovetailing with a surge in foreclosures. In Boston, between 2007 and 2008, the Warren Group reported that the number of foreclosure deeds more than doubled. Filings to foreclose were already starting to fall back, but only from 2,062 to 1,690. In Dorchester alone over those two years, 1,537 foreclosure petitions were filed.

The foreclosures that ushered in the Great Recession were preceded by an earlier frenzy of speculation, with many of Boston’s three-deckers previously held by single owners subdivided and resold as condominiums, allowing developers to harvest sharp gains in the building’s total value. By 2008, many of the mortgages for the newly converted units were in default, in some cases involving fraudulent transactions.

After foreclosure, many properties sold at much lower prices. But, with less access to financing, buyers with cash had an advantage. According to the MAPC report, 39 percent of the three-family homes that changed hands between 2004 and 2018 were bought by investors with cash. The rate was 45 percent for two-family homes and 51 percent for condos.

“There’s been this steady increase in investment activity post-recession,” observed Jessie Partridge Guerrero, the report’s lead author and MAPC’s interim director of data services, “so this gives us a clue that investors really saw that recession period, and the low-cost properties they could get during that period, as a chance to enter the market and perhaps build their portfolios. And this trend has just gotten bigger and bigger with time.”

The MAPC reports that, after the spike in 2008, investor purchases of two- and three-family homes in the region dropped somewhat and leveled off, only to climb again around 2017.

“Investors are taking up more and more room in our housing market in greater Boston, making it hard for anyone else to compete for housing and home ownership opportunities,” said Partridge Guerrero. “Lower cost urban markets with our largest share of immigrant and BIPOC populations experience the highest rates of investor activity.”

Also linked with investor buys and significant rent increases is the expansion of service along the Fairmount-Indigo commuter rail line. The tenant rights group City Life/Vida Urbana (CLVU) has in recent years organized renters near the line’s stops in Dorchester, Mattapan, and Hyde Park.

“Working class renters in communities of color are most harmed by the speculative investment that uproots and displaces communities with a cascade of negative consequences,” said Katie McCann, CLVU’s rent control campaign coordinator. “We are seeing mass displacement by investors of working-class communities of color in Boston and across the state, and most of this displacement happens at the point of sale.”

According to the 2023 “Housing Report Card” from The Boston Foundation and the Boston Indicators Project, Massachusetts housing production remains below the rates in most other states. In the five years before 2023, the City of Boston, with less than 15 percent of the metropolitan area’s population, accounted for almost 49 percent of its new housing production.

Though the “Report Card” found that the metro area’s population has been declining since as early as 2009, the rental market remains tight, with Boston the third most expensive rental market among the country’s 11 most populous metropolitan areas.

The “Report Card” also blames high prices for contributing to the net exodus — even more pronounced among people with higher education: “These trends likely gain momentum from the ballooning cost of housing in Greater Boston, as residents increasingly fail to find housing at their price point.”

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.”

Among the possible remedies suggested by the MAPC report were rent stabilization, rights of first refusal for renters, and disincentives targeting investor owners. Because many investors officially identify as limited liability corporations – often using multiple names associated with individual properties – the report called for more transparency, so the transactions can be more easily monitored.

Despite recent moves to ease long-standing local zoning restrictions, the Report Card says that new housing production remains below the levels of the 1980s. The report notes two additional hurdles since the onset of the pandemic: higher interest rates for mortgages and a sharp increase in construction costs.

“As rising mortgage rates increase monthly mortgage costs for new homebuyers,” the Report Card notes, “many of those would-be homebuyers instead remain renters, gobbling up the supply of rental units and driving down the rate of rental vacancies.”

Tim Reardon, chief of Data and Research in the Executive Office of Housing and Livable Communities, argued in the discussion of MAPC’s report that instead of just being more tightly regulated, investment should be able to flow more freely in a better direction.

“If we can unlock the opportunity for more housing production,” he said, “then we will see some of that capital flowing into new production, creating new opportunities for the residents who are moving here, the folks who are already here, who can afford to move into those units. And then there’s going to be less pressure on the existing units.”