When the Great Recession hit, Pierce County got slammed. A lot of homeowners went underwater on their mortgages. When they lost their jobs, they could no longer make their monthly payments.
Almost every part of the county has its share of vacant, foreclosed-on homes, properties that often aren’t kept up and are a drag on the neighborhood’s property values. So what’s not to like about giant investment funds coming in and snapping up many of these bank-owned homes at auction, plus buying directly from people eager to sell?
The investors — most notably The Blackstone Group — tend to overpay, then spend about 10 percent of the home’s value in renovation, employing scores of local construction tradespeople who need the work. The homes then are rented out, helping meet the heavy demand for single-family rentals driven by Joint Base Lewis-McChord and all those former homeowners who no longer can afford to buy.
Because the recession drove home prices so low in Pierce County, the area is particularly attractive to the investment funds, according to Kathleen Cooper’s report on the trend Sunday. The funds’ plan is to sell bonds backed by the lease payments on homes they rent out. About 10 percent of the homes sold in Pierce County within the past year were bought by three big, private investment funds. That amounts to almost 1,000 homes — all going into the rental market.
Making a dent in the county’s backlog of foreclosures is good for overall property values. But what happens if a big investor — who may be buying homes on credit — goes belly up and walks away from the properties? Or what happens when so many previously owner-occupied homes become rentals, with absentee landlords to boot?
As the saying goes, no one ever washed a rented car. Compared to owners, renters tend to invest less time and effort in their homes. They have no long-term investment in the home. So the lawn might get a little too deep between mowings, and the roof might not get demossed as often as it should be.
Landlords, not renters, are theoretically responsible for upkeep. Will a big absentee owner do this? Will it recognize its responsibility as a neighbor to check renters’ backgrounds and keep its properties in good repair? One renter told Cooper that she had made repeated requests for repairs to the owner — an investment fund (FREO) that has bought up almost an entire neighborhood in the unincorporated county. The repairs were made only after Cooper contacted the owner.
That’s only one example, but it speaks to the possible problems that might arise when large, out-of-state owners buy up a lot of homes with the goal of fast rental turnarounds.
City and county officials would be wise to check their code ordinances to be sure there’s sufficient language for dealing with absentee owners. Many communities do little to enforce codes against landlords. But with so many more single-family homes being rented out — and the accompanying impact that can have on neighborhoods — local governments should anticipate potential problems and have a game plan for addressing them.