- Posted July 06, 2016
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Real Estate When the neighborhood is owned by billion-dollar companies Financial firms recognized an investment opportunity after housing bust
By Mike Schneider
Associated Press
APOPKA, Florida (AP) - Many of the single-family homes in the Piedmont Park neighborhood of Apopka, Florida, used to be owned by families - the Vargases and the Townes, the Pierces and the Riddles. Now, they're owned by Blackstone, American Homes 4 Rent and Colony Starwood Homes, companies associated with big real estate investment firms.
And the occupants are tenants, not owners.
In the decade since the housing boom deflated into a bust, financial firms recognized an investment opportunity in hard-hit areas like this Orlando suburb. Single-family homes lost to foreclosure could be bought cheaply and transformed into rent-generating income streams.
The corporate purchases have spread through Piedmont Park and surrounding neighborhoods, where the percentage of renters rose from a bit over 10 percent to more than 35 percent within a decade. Piedmont Park homeowners complain that the result is more transient neighbors, less engagement at homeowners' meetings and difficulties reaching absentee corporate landlords.
Apopka Mayor Joe Kilsheimer regards the surge of renters in houses throughout central Florida as an unfortunate consequence of the damage this region absorbed from the Great Recession and housing bust.
"Having an owner-occupied house is better for a neighborhood and better for a community than a house occupied by renters," Kilsheimer said. "They are invested in their children's school. They're invested the quality of life in their community."
Claudette Guerrier, one of the original homeowners in Piedmont Park from its development in 1988, feels disheartened by the transformation. She said her four-bedroom, two-story house has been broken into twice recently
"It was better in the beginning; now it's not so good," Guerrier said.
In the aftermath of a housing crisis, metro Orlando suffered one of the highest foreclosure rates in the nation. A few homes in Piedmont Park sat empty for months, attracting squatters who moved in and were hard to evict, said Karin Settle, president of the local homeowners association. One house of college-age renters, she said, threw fraternity-like parties with 20 or so cars parked outside and drunk men hanging out on the porch - something the neighborhood didn't see in years past.
Several homeowners have said they're considering selling their homes because there are so many renters now, she said.
"If these people come in and they're out-of-state investors - some place in Canada or Arizona - you don't really have a physical office or people to contact about when there is something going on with the home," Settle said. "On the good side, they come in, renovate the house, typically gut it. They paint it, fix the fence and it looks nice from the curb. But then these companies don't take a lot of pains in terms of who they rent to."
Laura Smith, a resident for 17 years, was close friends with her neighbors in the house behind hers until they moved a couple of years ago. Since then, she said, it's been one renter after another.
"They just come and go; you just see different cars," Smith said. "I say to myself, 'I should make a better effort to get to know them.' But by the time I get around to it, they're gone."
The three-bedroom, two-bath home next door to Michelle Harner's house was sold in March. She was hoping that owner-occupants would move in. But the telltale signs of a corporate landlord appeared within days.
"Somebody doesn't buy a house like that and turn around and rip everything out and completely remodel the whole thing and put a new roof on it five days after buying the house," she said.
Property records show that the house was bought at the end of March by Freo Florida LLC for $145,000. Freo Florida, part of Progress Residential Trust, which owns over 3,000 homes around the nation, listed the house on Zillow as a rental for $1,325 a month.
Some renters do show pride in tending to their homes, Harner said, but it's often easy to pick out which homes are rentals. Yards tend to be untended, cars are parked all over the street, "and you see one family a year come and go."
The transient nature brings other challenges. At a recent homeowners' association meeting to discuss installing a new playground, only nine homeowners showed up from a neighborhood with more than 400 residents. A decade ago, dozens would likely have attended.
"When you have a high percentage of renters, you end up having a low turnout at things like homeowners' association meetings, when you do a community yard sale," Harner said. "That collaboration sort of declines.
Ask the renters themselves, and some will say that very sense of community is what they value most about living there. Nicole Caverly, who began renting in the Piedmont Park neighborhood this year, doesn't consider herself a disengaged neighbor. After having lived for years in an apartment building where people kept to themselves, she loves living where she can chat with neighbors during walks.
The previous owners had lost the house to foreclosure in 2015, after which it was bought by Freo. Caverly, a store manager, says the management company her landlord uses has been pleasantly responsive. It quickly fixed troubled locks on the front door after she moved in with her daughter and boyfriend.
She is saving for a down payment to buy a home. But she doesn't yearn for the responsibilities of ownership - from having to fix appliances to dealing with insect infestations.
For now, Caverly observed, "It's a renters' market because nobody can afford a down payment."
There are few signs that the real estate investment companies plan to sell many of the homes they bought. But the temptation to do so will keep rising if home prices do. In the meantime, the companies have scaled back their purchases - from 9 percent of all sales nationwide in 2013 to about 2.5 percent early this year, said Daren Blomquist, a vice president at RealtyTrac, which tracks housing data and trends.
The industry has been consolidating as companies try to create efficiencies of scale. Colony American Homes and Starwood Waypoint Residential merged this year. And American Residential Properties merged with American Homes 4 Rent late last year.
"It seems like the players who are still around are pretty committed to a long-term strategy of holding these homes," Blomquist said. "You had a lot of investors jump on the bandwagon during the acquisition phase because honestly the easiest part of this strategy is acquiring these properties ... Efficiently and effectively managing these properties is just harder, so there are fewer players who want to do that."
Christine Anderson, a Blackstone spokeswoman, said in an email that the company has sharply reduced its acquisitions. It has bought nearly 50,000 homes nationwide.
Wynkoop, LLC, which owns about 1,000 homes in Arizona and Florida, including some in Piedmont Park, has been winding down its Phoenix acquisitions as the supply of low-priced homes has dwindled. But it plans to buy about 200 homes in central Florida this year to serve a still-growing population of newcomers who need homes to rent, said Brandon Jundt, who runs the Denver-based investment firm.
If builders start constructing many more homes, or if the homes become more profitable to sell than rent, it would create an incentive to sell off the portfolio, Jundt said.
Still, he added, the firm's investment in single-family homes is a matter of "years, but not for decades." As the number of home sales from the foreclosure crisis fades, limiting opportunities to buy homes at discount, and as rents peak, it will eventually be time to look elsewhere.
Published: Wed, Jul 06, 2016
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