Are Investors the Bad Guys? Tenure and Neighborhood Stability in Chelsea, Massachusetts

Abstract

In this paper we examine the role of investors and occupant-owners in an urban context during the recent housing crisis. We focus on Chelsea, Massachusetts because it is a dense city, dominated by multifamily housing structures with high rates of foreclosure for which we have particularly good data. We distinguish between owner-occupiers and investors using local data, and find that that many investors are misclassified as occupantowners in the HMDA data. Then, employing a competing risks framework to study ownerships during the period 1998 through mid-2010, we find that local investors, who tend to invest more in relation to purchase prices and sell more quickly, experienced approximately 1.8 times the foreclosure risk of occupant-owners, conditional on financing. Non-local investors have no statistically significant difference in foreclosure risk from occupant-owners. Nonetheless, those owners with subprime purchase mortgages (most of whom are occupant-owners) faced the highest foreclosure risk when house prices fell.3

Foreclosures, Investors, and Uneven Development during the Great Recession in the Los Angeles Metropolitan Area

“…Investors employ a diverse set of strategies to generate profit, and while some strategies can contribute to neighborhood housing recovery, others can be extraordinarily harmful to communities. In general, however, owner‐occupants and local investors maintain their properties better than larger institutional investors (Fisher & Lambie‐Hanson, ; Galster, ). Hwang () recently found that REOs purchased by investors in Boston had a higher likelihood of poor maintenance, with higher levels of housing violations and 911 calls associated with properties purchased by corporate investors.…”

One and the Same? A Systematic Literature Review of Residential Property Investor Types

“…A case study of foreclosures in Chelsea, Massachusetts, that studied ownership of residential properties between 1998 and 2010, also found no differences in foreclosure risks between owner-occupiers and “nonlocal investors” following the 2008 economic downturn. However, local investors were more likely to invest and sell more quickly in relation to price fluctuations and hence “experienced approximately 1.8 times the mortgage foreclosure risk of occupant-owners” (Fisher and Lambie-Hanson 2012, 351).…”

Housing Disinvestment and Crime in a Phoenix Suburb: Exploring the Differential Effects of Investors and Owner-Occupants

“…As a consequence of disinvestment, FOIs may deteriorate quicker than FOOs (Fisher and Lambie-Hanson 2012), resulting in faster increases in neighborhood disorder. Investors are both physically and emotionally detached from their properties and neighborhoods; they tend to be less socially integrated into their neighborhood, and therefore less susceptible to social pressure from neighbors to keep up maintenance (Galster 1983).…”

“…Determining individual or family trust investors was more problematic. Drawing upon prior research, we used three criteria to identify investors: (1) purchasing multiple properties on the same date, (2) purchasing more than three properties between 2004 and 2010, or (3) purchasing no more than three properties, with at least two of those being purchased within two years of one another (Ellen, Lacoe, and Sharygin 2013;Fisher and Lambie-Hanson 2012;Fitch Ratings 2007;Haughwout et al 2011;Immergluck 2012Immergluck , 2013. Property owners who did not exhibit these behaviors, or those using Federal Housing Administration or Veterans Affairs loans, were not classified as investors.…”