Friday, 13 April 2012 00:00They are here, right now. Many of us who grew up in Nassau County were taught to be scared of them, instructed in many ways subtle and not-so-subtle that their very presence in our neighborhoods would bring down property values and lead to blight and degradation. Now they’ve quietly been let in. There aren’t as many on Long Island as other suburbs, but more are coming.
And it turns out that it’s not so bad. In fact, whatever Long Island is going to be next, whatever backbone the next Nassau County will have, they are going to be part of it. They. Them. The other.
A significant change in suburban home ownership is underway, backed by big money betting that the change is permanent. Investment groups are buying thousands of foreclosed and mortgage-distressed homes in the suburbs, converting them into rental properties and making a lot of money doing it. Single-family home rentals in the suburbs are no longer mom-and-pop businesses or market afterthoughts.
One company buys and converts properties in the most prestigious suburbs near Phoenix. Founded only in August 2010, their pitch to investors says that they have “ taken possession of over 600 distressed homes,” “collectively transacted in excess of $45 million,” and now have “hands-on experience” in 20 different counties. It takes no time to find similar firms in and around Denver, Baltimore, Austin, Orlando, San Francisco, Las Vegas. All over. The total property value of the home rental market now exceeds $3 trillion.
Large institutional investors like universities, foundations and pension funds are investing in these new companies. Earlier this year, a coalition of state pension funds invested $400 million in a California company that owns over 1,100 houses, buys an average of five more every day and will now greatly expand their high-profit operation. Last year, Morgan Stanley issued a series of reports that urged their largest clients into this huge new market: “We believe this change is only beginning, and is moving the country towards becoming a Rentership Society.”
Bank of America is now testing a “Mortgage to Lease” pilot program in three states, including New York. Selected owners at least two months behind on underwater mortgages can turn in their deeds in return for a rental agreement.
There were 2 million foreclosures last year, and another 10 million homeowners will be at risk unless the housing market stabilizes. Only 324,000 new homes were purchased in 2011, the lowest number since 1963. Officially, the homeownership rate is slightly over 66 percent, but if you exclude delinquent borrowers, the real number is 59.7 percent and falling.
A combination of foreclosures, housing price declines, labor uncertainty that forces families to be more mobile, and more onerous mortgage requirements are driving much of this. But also, tens of millions of Americans no longer see buying a house or making a permanent life in the suburbs as strong long-term investments.
We can make this work, but we have to be willing to think about Nassau County in new ways.
Stop thinking of Nassau County as merely a “suburb,” as if that word alone sums everything up. To remain a desirable destination for a variety of families and individuals, we need to offer more choices. There is a place, a big one, for single-family detached houses, but even many raised in suburbia have stopped being afraid of a little density in centralized areas. Having places where people are close together brings shops, restaurants and interesting places to go and to be. Many people desire places where they can sometimes walk or bicycle to where they are going. They don’t want to live their lives in a car, waiting for a space to open up. They want choices in the kind of housing that is available to them.
Places that don’t offer these things even as an option are going to struggle and maybe fail, especially in an era of $5 a gallon gasoline.
Too many politicians and civic leaders demand that we stand still in some misguided effort to preserve memories and priorities from another time. We have to reinvent at least parts of this place to preserve most of it.
Michael Miller is a freelance writer, designer and strategic consultant who has worked in state and local government. Email: firstname.lastname@example.org