"settler who occupies land without legal title," 1788, agent noun from squat (v.); in reference to paupers or homeless people in uninhabited buildings, it is recorded from 1880.
Entries linking to squatter
squat v.
mid-14c., "to crush;" early 15c., "crouch on the heels," from Old French esquatir, escatir "compress, press down, lay flat, crush," from es- "out" (see ex-) + Old French quatir "press down, flatten," from Vulgar Latin *coactire "press together, force," from Latin coactus, past participle of cogere "to compel, curdle, collect" (see cogent). Meaning "to settle on land without any title or right" is from 1800. Related: Squatted; squatting.