Over the last few months, much attention has been given to foreclosed homes and the large financial institutions that are purchasing them. Warren Buffett even said on CNBC that he would buy up a couple hundred thousand houses if it was practical to do so.
The logic is simple; purchase a quality asset at a severely discounted price and then sell it for a profit when it appreciates. However, houses are proving to be very complicated beasts for the financial industry to fully understand. The concept and money is there, but the wherewithal to preserve each homes value is lagging. Bloomberg reported that of the over $6 billion in institutional capital that has been raised to purchase single family REO’s, less than $2 billion has been spent. This is a result of the financially led teams’ inability to acquire and reposition so many properties in a way that effectively protects the long-term value of their investments.
The center of the struggle with re-commissioning single family homes on a large scale is that the construction industry is extremely fragmented and every single home is individual, especially in markets with older housing stock. Every single home of the 6 million show foreclosures in the U.S. has to be valued, analyzed for rental potential, estimated for rehabilitation, analyzed for life cycle costs, maintained and preserved.
A big question being asked is whether the banks and hedge funds are essentially becoming slumlords by purchasing these foreclosed properties, renting them, and selling long. A valid argument is that it is not in the investors best interest to do this. The better upside in this investment scenario is to preserve the value of the asset and produce income through single family rental. This means that these foreclosed properties need to become quality and marketable rental properties.
This is a fantastic opportunity for any architect who has a passion for housing, and especially for universal housing. The massive re-positioning of these millions of homes is also an important piece of the puzzle of solving the housing crisis. Being involved in making these homes quality places to dwell is right up most architects’ alleys.
This blog is subtitled ‘Architecture Controlled by Architects’, and this foreclosure crisis is one of those rare opportunities that architects have to control architecture on a massive scale. If every one of the architects in the U.S. bought and repositioned 3 single family homes, architects would make a dent in about 5% of the foreclosure shadow inventory. That’s a start. The American Institute of Architects says, “working with an architect member of the AIA can save time and money by making your new spaces more functional, comfortable, efficient, and environmentally responsible.” If we really do contribute value to housing in these ways, now is the time architects to put their money where their mouth is and become involved in this opportunity!