Updated May 18 at 2:24 p.m.
Christine Thompson lived in a cozy three-bedroom, single-family house on a quiet residential street in Springfield for more than 50 years.
But in January, the 72-year-old widow was forced to move out after the unexpected death of her husband left her in financial ruin, leading to a foreclosure auction.
Now the house is owned by a limited liability company called Ruby Realty, LLC, whose owners manage hundreds of rental units in western Massachusetts. Thompson lives about 20 miles away in a rental unit, still hurt over how she was treated by new owners.
“I know people are out to make money. I understand that,” she told GBH News. “The worst thing was how I felt and how I was treated. We are human.”
The change of ownership from a local resident to a group of investors is increasingly common across Massachusetts — from the cash-strapped neighborhoods of Springfield to tony neighborhoods in Newton and Nantucket, the GBH News Center for Investigative Reporting has found.
In 2021, business entities purchased nearly 6,600 single-family homes across the state, more than 9 percent of all single-family homes sold. That’s nearly double the rate of such purchases a decade ago, according to a GBH News analysis of data provided by the Warren Group, a real estate data analysis firm.
Investors and other businesses — the majority of them limited liability companies — spent more than $5.6 billion last year in Massachusetts purchasing these properties, the majority in cash, to rent or flip as the state’s housing market rises. Rates of investor purchases in two and three-family homes are even higher.
Business entities purchasing single- to three-family homes in Massachusetts, 2016-2021
Investors — whether buying with cash or backed with bank loans — are playing an increasingly large role in Massachusetts’ housing market. Data courtesy of The Warren Group.
“It’s becoming more prevalent in Massachusetts and everywhere,” said Adam Travis, a Harvard doctoral candidate studying rental housing and the private market. “More and more rental properties are coming to be owned not by individuals, but by companies, by business entities.’’
Investors are spurred by high demand for housing, rising rents and soaring home values, making it a lucrative business. But housing advocates say the trend is making it harder for individual homeowners to buy, and driving up rents so renters get priced out.
Further issues arise with the model of using LLCs to buy homes. The shell companies tend to be worse landlords than individual owners, research shows. And the business structure obscures and protects its individual owners, a corporate veil that creates additional headaches for housing advocates and government officials seeking accountability from landlords.
“It’s crazy the amount of time that we would spend trying to unravel, find someone to serve,” said Lisa C. deSousa, deputy city solicitor for the City of Springfield Law Department, recalling cases where there’s a problem with a rental property. “We can clearly see who’s protected by it, but who is harmed by it? It’s poor tenants in poor cities.”
Seeing profit
In sheer numbers, no Massachusetts city has seen a bigger proliferation of investor owners in single-family homes over the last several years than Springfield, where business entities purchased more than 1,200 properties between 2016 and 2021, the Warren Group data shows. The true figures are even higher since the data provided to GBH News doesn’t include investor purchases of foreclosed properties.
Speculators from nearby towns and far-flung states are attracted by profits they see in the western Massachusetts city, where property values are still significantly lower than those closer to Boston. Last year, the cost of a median single-family home in downtown Boston rose to almost $3.5 million while Springfield homes hovered around $225,000, the Warren Group data shows.
Rose Webster-Smith, executive director of the housing nonprofit Springfield No One Leaves, says investors also buy in the hopes that home prices will be driven up by the recently opened MGM casino and talks of a possible new passenger rail connecting eastern and western Mass. Speculators are increasingly purchasing foreclosed homes, she said, and pushing out homeowners, inflating property values and rents in a city where about a quarter of people live in poverty.
While a $225,000 price tag for a house may appear to be a steal compared with other cities in Massachusetts, it’s more than double the median cost of a single-family house in Springfield a decade ago.
When investors buy up foreclosed homes, lower-income dwellers frequently get pushed out with few options to afford rising rents.
“They're buying these properties, sight unseen, on an online platform, knowing full well that they're occupied,’’ Webster-Smith said. “Then they bully these people out of their homes and people don't know their rights.”
Investor-driven speculation also is robust in higher-income communities. In Nantucket, business entities purchased 193 single-family homes last year, making up more than half of all such sales in the island community where the median price is more than $2.2 million, according to Warren Group data.
The increase in investor purchases has created controversy on the island, known for its surge of vacationers during the warmer months. Earlier this month, town meeting members decided to implement a new registration and permitting system for short-term rentals after community members raised concerns over the influx of corporate investors.
“I don’t think any of us saw this coming that our neighborhoods, some neighborhoods, maybe starting to look like Duval Street in the summertime,’’ said former Select Board member Michael Kopko at the meeting, referring to a popular main street in Florida's Key West.
"You want your hardworking families to own housing, and they are competing with all-cash investors."Sheharyar Bokhari, Redfin senior economist
Town meeting members tabled two other proposals at the meeting that could have created more restrictions or opened the island up to more investors. Anne Kuszpa, executive director of the nonprofit Housing Nantucket, said she hopes the discussion will lead to solutions that more islanders can agree upon in the future.
“The community still hasn't figured out a way to counteract how corporate [short-term rentals] drive up rents as well as make home prices inaccessible for year-round residents,” she said.
In Newton, business entities last year purchased 168 single-family homes, about 20 percent of the sales, records show. Melvin A. Vieira Jr., president of the Greater Boston Association of Realtors and an agent with RE/Max Destiny, says investors are seeing profits in renovating older homes. It's a double-edged sword, he says, helping to improve housing stock while pushing out local buyers. “It is eating up the inventory, which is creating pressure for prices to go up,” he said.
Statewide, about two-thirds of all business purchases of residential real estate were single-family homes. It’s part of a national trend where such homes made up 75 percent of all real-estate investor purchases in the third quarter of last year, a record high, according to the real estate tracker Redfin.
Redfin Senior Economist Sheharyar Bokhari told GBH News that speculators make it increasingly hard for families to compete.
“You want your hardworking families to own housing, and they are competing with all-cash investors,” he said.
Widespread use, growing concern
The increase in sales of residential homes by limited liability companies has brought attention to the business structure itself. Many buyers use LLCs because they are relatively easy to set up, provide tax benefits and protect owners from personal liability. Nonprofits and for-profits alike use them to develop homes.
But the lack of transparency in ownership has become a growing problem in real estate, linkedto money laundering and neglectful landlords who can't be pinned down.
Companies are required to file paperwork with the state identifying the name and address of a “resident agent.” They may — but are not required to — include names of members or managers authorized to file documents.
Massachusetts housing advocates say they spend hours trying to extract ownership information from state filings. “The public records do not in any way reveal who are the actual owners,’’ said Matthew Thall, president of the Massachusetts Association of Housing Cooperatives.
To address concerns about the lack of information aiding illegal activity, Congress in 2020 passed the Corporate Transparency Act, which requires LLCs and other business entities to report certain ownership information to the U.S. Treasury Department's Financial Crimes Enforcement Network. While regulations are still being implemented, currently there are no plans to make this information public, which would grant housing activists the ability to track down bad landlords.
Some states like New York are considering implementing their own laws to boost transparency. Lawmakers filed a bill in March that would require LLCs to disclose owners’ names to the state. “Money laundering, tax avoidance, evasion of sanctions, and systemic code violations have been protected for too long in New York by the veil of LLC anonymity,’’ N.Y. Assemblymember Emily Gallagher said in a press release. “Sometimes tenants don't even know who their landlord actually is.”
Travis, the Harvard Ph.D. candidate, said LLCs also are linked to higher rates of disrepair and more evictions in rental homes, especially in low-income Black and brown communities. He found evidence of the trend in Milwaukee in a 2019 report he authored.
He recently released new research showing LLC ownership of rental housing is most prevalent in poorer communities, like Springfield, across the country.
“These entities tend to be associated with not-so-positive housing outcomes for tenants, whether that is housing quality or higher rates of eviction,” he said. “That should be really concerning.”
Moving out
Christine Thompson says her housing troubles started in 2012 after her husband died and she realized her name wasn’t on the mortgage. Following some bad legal advice, she says, she declared bankruptcy three times, actions that led to a foreclosure auction in late 2019, two days before Christmas.
New owners — representatives of Ruby Red Realty LLC — offered to sell her back her home for more than twice the $94,000 they purchased it for, she said. When she couldn’t afford it, she said they blamed her for costing them money -- required to maintain the house, even paying the water bill -- as she tried to find a new place to live.
In January, Thompson packed up and moved out with her family, their dog and two cats, relocating to an old farm house in a neighboring town that she rents.
She’s still recovering from the move separating her from everything she knows. “They kick you when you’re down,’’ she said in late April. “They make you feel like you are nonexistent.”
Co-owners of Ruby Realty, Matthew Tortoriello and Kevin Shippee, say they did everything possible to help Thompson resolve her housing issues. When they couldn’t help her repurchase the home, they said they tried to help her find a new place.
“She was taking advantage financially of us by living — you could openly call it squatting — in a property that we didn't give her any consent to be remaining in,’’ Shippee said.
The two businessmen are the main investors in more than a dozen real-estate LLCs that work mainly in Springfield, many of them named after themes in the “Wizard of Oz” franchise, including Wicked Good Homes, Flying Monkey and Yellowbrick Property, their first business that they launched in 2008.
More Housing
They say they started purchasing homes in Springfield because of low housing prices and the high return on investment. They also made money on improving homes through the city’s receivership program meant to fix up abandoned and vacant homes. The program allows for private companies to fix up homes when homeowners and banks are unable or unwilling to do so. But GBH News reported in March about growing concern that the program is pushing some low-income homeowners out in the process.
They say they recently bought out a third investor who helped them when they were starting out. They say they have nothing to hide. The LLC structure helps them protect their investments by separating real estate deals, currently involving some 250 rental units, and allowing for collaborations with other investors. They are proud of the work they do in a community plagued by abandoned and vacant homes.
“As people were putting boards up on houses,” Shippee said, “we were trying to take the boards down and get the house back on track.’’
But their social media presence has irked some housing activists. The partners run accounts under the name “Two Guys Take on Real Estate,” with nearly 900,000 followers on TikTok. Among videos are posts about how much money they've made, what they describe as “bad” and “dirty” tenants and a walkthrough of a foreclosed home, filled with trash, children’s toys and clothes, that had been occupied when they purchased it.
Tortoriello and Shippee said they admit some of their videos are kind of “cringy,” but they want to help other investors to avoid their own mistakes. They also have 17 employees and work with some 50 contractors. “There’s a lot of good we are also doing in providing jobs,’’ Tortoriello said.
But housing activists like Webster-Smith say the company stands out for its disdain for renters and homeowners. She says she has tracked their purchases for years, concerned about their business practices. Tenants tell her Yellowbrick managers don’t maintain their properties until tenants threaten to take legal action, and they will attempt to evict residents without giving them proper legal notice.
Tortoriello and Shippee say they take pride in maintaining their properties, but can’t fix what residents don’t tell them. They say homeowners often think they can stay in their homes longer than expected.
Webster-Smith says many tenants are too afraid to speak out about the problems that come with their new owners, worried about rent increases or other retaliation. “They are not good actors here,” she said.
Meanwhile, as federal pandemic aid dries up, Webster-Smith says her office is further being inundated with homeowners and tenants facing eviction with nowhere to go — because many of their homes are being turned into business investments.
“As they push that speculative market up here in Springfield,” she said, “they're pushing our people who built these communities out.”
Boston University journalism students Grace Ferguson, Eliot Hay, William Holmes, Sebastian Jaramillo, Mia Khatib, Christian Metzger, Avanti Nambiar, Ryan Noel, James Paleologopoulos, Jamison Sapp and Luwa Yin contributed to this report.
Lead image: Christine Thompson stands in front of her home in Springfield, Mass. Thompson lived there for more than 50 years, but in January, the 72-year-old widow was forced to move out after the unexpected death of her husband left her in financial ruin, leading to a foreclosure auction. (Luwa Yin/GBH News)
Clarification: This story has been updated to clarify that the Warren Group data for Boston home prices refers only to the city’s downtown neighborhoods, including Fenway, the South End, the North End and the financial and theater districts.
