Thursday, June 24, 2010

LOCAL HOUSING NEWS: Triple-decker territory

As prices rise, some worry a new crop of speculators is looking for a profit without investing in the neighborhood. Three-family homes have offered generations of Massachusetts families the opportunity to own property in a housing market that might otherwise be out of reach.

Robertson, who is renovating homes on Navillus Terrace (above), says he is a responsible investor. “We don’t just clean up in front of our own yard,’’ he said. (Erik Jacobs for The Boston Globe)

Traditionally, middle-income families who bought triple-deckers — the mainstay of many urban neighborhoods — lived in one apartment while renting out the others to offset mortgage payments.

But triple-deckers also have been a hotbed for speculators, making their values especially volatile. In recent years, their prices climbed faster and then fell more steeply than prices for other types of property in the state, according to a study to be released today by the public nonprofit Massachusetts Housing Partnership.

Now, prices and sales of triple-deckers are once again heading up. Some public officials and housing advocates worry that’s because a new crop of investors is buying multifamily homes in hopes of turning quick profits. That could spark another pattern of boom-and-bust in vulnerable neighborhoods.

“The cycle of neglect is continuing,’’ said Tamar Kotelchuck, director of policy and neighborhood planning for Lawrence CommunityWorks, a nonprofit community development corporation who worries some investors are purchasing neglected properties without plans for improvements. “They are being occupied with little and no work.’’

At the height of the housing market in 2005, investors were purchasing three-deckers at a rapid pace. The median price of three-family homes skyrocketed to $540,000 in 2005, a 300 percent increase from the 1997 median price of $135,000, according to the study.

In contrast, the price of other residential properties swelled 175 percent to $390,000 from $142,000 during the same period, the housing group found.

When prices began to fall in 2005, some homeowners abandoned their homes, leaving behind hefty mortgages and boarded up buildings in some of the state’s most depressed neighborhoods. While three- and four-family homes make up about 10 percent of the state’s total housing stock, units in three-family buildings accounted for 17 percent of distressed properties in April this year, the study said.

Between 2005 and last year, median prices for triple-deckers dropped a staggering 50 percent to $268,000, while prices for other properties sagged 16 percent, the study said.

But a rebound is underway. In Dorchester, for example, the median price of a triple-decker during the first five months of the year rose 13.5 percent to $261,000, compared with the same period last year, according to Warren Group, a Boston company that tracks real estate.

Concerned about who is buying such properties, the Codman Square Neighborhood Development Corp. in Dorchester found that 42 percent of foreclosed properties purchased in the area last year were bought by investors who spent half as much money on repairs as individual buyers. The group is organizing to pressure investors to keep up their homes.

“Many of these people are stripping values out of our community and looking for the biggest bang for the buck without adding any value,’’ said Gail Latimore, executive director of the nonprofit organization.

Tim Davis, author of the partnership study, said policy makers should try to make sure the triple-deckers are transferred to responsible owners by encouraging owner-occupants and nonprofits as buyers.

Government also could make it more difficult to convert triple-deckers into condominiums, which have been harder to sell in struggling neighborhoods.

State and local officials already are working with nonprofits to purchase foreclosed or troubled properties — with the help of federal stimulus dollars — to renovate and sell or rent them at affordable prices.

About 120 units have been purchased with the help of a state clearinghouse meant to ease the process, said Aaron Gornstein, executive director of the Citizens’ Housing and Planning Association, a nonprofit group charged with coordinating the effort.

But nonprofits frequently have trouble outbidding investors armed with cash, Gornstein said.

“Once the property gets on the market, it is very tough to compete,’’ he said. “They are selling fairly quickly.’’

Housing advocates acknowledge there are responsible private investors who make improvements in run-down neighborhoods.

Jim Robertson, a Boston real estate developer, says he is one of them. He bought 10 triple-deckers in Boston over the last year, making repairs and renting them out.

Among them are a triple-decker and two condominiums on Navillus Terrace in Dorchester, in an area hard hit by foreclosures.

“We don’t just clean up in front of our own yard, but we clean the street,’’ said Robertson. “We like to think of ourselves as an agent of change for a neighborhood.’’

Low prices and interest rates have made triple-deckers especially attractive to investors, Robertson said. He goes to multiple auctions each week attended by five to 10 investors.

“A bunch of them are flippers,’’ he added, referring to investors who plan to quickly resell the properties at a profit. “The banks and nonprofits hate that.’’

Michael Stella, another local developer, is one of a small group of investors purchasing condominiums in a Boston building to convert them to three-decker status under one owner, which can be easier to sell and cheaper to maintain.

He said he is seeing more investors at auctions who are interested in long-term investments or in fixing up properties to sell to owner occupants.

“The age-old model of the three-family works again at those price levels,’’ Stella said. “The scrutiny of the lenders is where it always should be.’’

Jenifer B. McKim Boston Globe June 17, 2010

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