Profiles in Profiteering – Renaissance Homes


We worked really hard on the research in the hopes that it will open some eyes and that maybe someone with the kind of power and influence we lack will put an eyeball on it and step up with some sweeping changes that actually benefit those of us still sitting back here in coach.  For a link to just the study data without the commentary, click here

Background

Over the last 5 years, the average list price for single family homes has increased by over 90% – disproportionately affecting African-American and Latino families and fueling rapid gentrification.  The Portland area has seen some of the highest rent increases in the country and the lowest vacancy rates – the perfect shit-storm that led to this crisis of affordability.  As the economy recovered from the 2008 implosion, it gradually turned from a rebound into a gold rush for home builders.  At the same time, it became a nightmare for renters as no-cause evictions and astronomic rent increases became more common.  And at the foundation of that affordability crisis was an unprecedented demolition epidemic.  As the number of demolitions increased, so did the rents, the list prices, and the homeless population.   More affordable rental and starter homes were being purchased in bulk with cash and then immediately demolished and replaced by one or two luxury homes at double or triple the price.

A Loophole in the Midst of a Demolition Epidemic

An archaic loophole was resurrected and exploited as ‘lot-confirmations’ became more commonplace.. allowing a developer to circumvent residential zoning regulation if there were historic underlying lotlines from when the land was initially platted – in most cases over 100 years ago.  This resulted in even more demolitions as developers like Randy Sebastian, Vic Remmers, and others discovered they could gain exponential profits by building not 1 but 2, 3, and 4 replacement homes on lot without a land use review.   Not only was speculative demolition and replacement paying unprecedented returns for developers, but the lot-confirmation loophole was making the land beneath every home worth double or triple the value of the home itself.  And with that, the market became even more artificially inflated as more wealth was extracted by razing and replacing anything anywhere with historic lot-lines.

The HBA Kills the Demolition Tax

In reaction to the obvious negative effects and public outcry, there was then a proposal before the City Council to enact a demolition tax.  I’ve written elsewhere about that, but needless to say.. the Home Builders Association defeated the tax by employing a strategy of subterfuge, deceit, and a ‘divide and conquer’ approach.  Here… in their own words. 

Along Comes RIP

It wasn’t long before that kind of consumption made it slimmer pickings for developers – they had consumed much of the low-hanging fruit at a bargain, sold it for triple, and contributed to market inflation in so-doing.  About that time, there came a heavy and accelerated push for the Residential Infill Project (RIP).  Initially pitched as an agreeable remedy that would de-incentivize demolitions and relieve some of the pricing pressure, the RIP carried with it the promise of added affordable housing by virtue of  ADUs, granny flats, cottage clusters… smaller units that could fit in between the existing homes and create density without demolition.

With that proposal also came the caveat that it would require radical changes in most residential areas – they would need to be re-zoned to multi-family if Portland was to realize the images of this happy and cheerful affordable diverse inclusive sunny demolition-free utopia shown in the PowerPoint presentation.   In essence, they were pitching the concept of modeling growth after existing vibrant and complete Portland neighborhoods like Sunnyside, Buckman, Tabor, etc. and bringing that prosperity to other less dense communities that would certainly benefit from increased housing, services, and walkability.  After all, Portland was gaining newfound popularity and increasing tourism because of many of its complete, economically diverse, eclectic, and optimally dense communities.  It sounded fantastic to see that prosperity and livability extended to other areas that had been under-served and marginalized and they were using all the words that progressive Portland loves to hear… like “affordable” “diverse” “inclusive” and “for everyone”.  win-win, right?

The Zombies are Coming and They All Want Brai… er… I mean… Housing

But, added to that was a sudden unexpected imperative… the narrative quickly changed and suddenly citizens were being told that THERE WAS NO LAND LEFT AND NO TIME!!  Not only that, but there were hundreds of thousands of people flocking to Portland and we all needed to panic, we needed to hurry, no time to think about it, we have to green light this RIP proposal or else the crisis will just get worse.. it’s the only way!!!  In truth, the city’s own 2012 Buildable Lands Inventory specifically states:  “Zoned capacity in Portland is sufficient to meet projected housing need; that is, enough land in Portland is currently zoned to accommodate the projected number of new households.”  But in these post-truth times, just saying something doesn’t make it true but repeat it enough times and people will start to believe it anyway.

 It soon became clear,  that RIP was a RIP-off that would usher in the demise of Portland as we knew it.. it was a ruse, a betrayal of the public trust, by developers whose insatiable appetite for triple and quadruple profits needed feeding, and bigger portions.  The term “density” was repeatedly hammered into the narrative as being exclusively connected to “affordability” rather than to  “exponential profitability”.  And the rhetoric worked.  Demolitions  increased even more, and now that a precedent of compounded profit had been set with lot-confirmations and the market was sufficiently inflated, developers were even willing to pay 800,000 just to tear something down in a high-value location where they could build 2 replacements priced at $1 M each.  Those complete, already dense, communities that were pitched as the model for sustainable growth and livability were being razed instead of respected and their affordability and charm were quickly disappearing.  And those underserved and marginalized low-density communities east of 82nd continue to be ignored because developers continue to build only where it is most profitable – and affluent newcomers want to live close-in.

Only One Tool that Limits Demolitions? How Dare You Use It!

Areas that were once somewhat naturally immune to speculative “rip and replace” development because of long retention cycles, high quality craftsmanship,  and hi-value properties, like Eastmoreland and Laurelhurst, were suddenly scrambling to avail themselves of the ONLY regulatory tool which subjects demolition permits to review – National Register Historic Districts.  And some of the same people who were now clearly riding the   “drill baby, drill!” bandwagon were mangling those efforts at staving off demolitions by hurling accusations of racism and xenophobia in attempts to drown out residents’ desperate pleas for protections against the bulldozers that were everywhere – not just in their own backyards but in the entire city core.

Timing is Everything… Enter House Bill 2007

 Affordability, or lack thereof, is directly connected to demolitions – and not just by one metric but by many.  And now we have House Bill 2007 nearing a vote in  the Senate.  Coincidentally, it was introduced almost immediately after the Eastmoreland Historic District Neighborhood Association voted to submit the application for HD Status.  It also just so happens that one of Eastmoreland’s residents who is most vehemently opposed to the HD is also the Deputy Director of 1000 Friends of Oregon who, in collaboration with the Home Builders Association, authored the most controversial amendments to the bill.  If passed, those provisions would impose these same high-density Residential Infill zoning changes statewide – usurping city and county control of their own land-use planning decisions. Most significantly, those amendments would also allow unrestricted demolition and redevelopment in Historic Districts – removing the only remaining protection from demolition and turning every “coveted location” statewide over to developers to ransack without limitation as they have done everywhere else.  A bill that started as a laudable effort to expedite permitting of affordable housing projects was hijacked by the Home Builders Association amendments into a statewide gentrification scam.

Meet Randy Sebastian

One developer, Randy Sebastian, President of Renaissance Homes, has already gone toe-to-toe with Portland residents in the past over many high-profile demolitions.. replaced by his bulky ‘signature’ sameness at a sticker price that far outweighed the local average.  And he inserted his over-developed ego into the Historic District battle, engaging in those same ad homiem attacks against residents who keep repeating that it is because of speculative demolitions that people are being priced out of their own communities and millions of pounds of waste is being hauled to the landfill.  It is highly disingenuous for a developer with a vested interest in opposing the formation of Historic Districts to call proponents of HDs ‘entitled NIMBYs’ while he himself makes even more millions from selling actual pre-planned gated communities to the affluent as Exclusive Clubs

The Rise and Fall and Rise of a Profiteer

Before the housing market (and the global economy) crashed in 2008, Randy made his millions mass-producing $800,000+ McMansions in the freshly paved cul-de-sacs of affluent suburbia.  But when the crash came, Renaissance had about $85 Million in bank loans and only $25 Million in sales.  He also owed about $8 million to unsecured creditors – mainly subcontractors and vendors.  So he filed Bankruptcy, negotiated a tidy salary for himself, re-organized his company, and was back in business making millions again in little over a year.   Too bad for those subcontractors and vendors who never got paid – one of those people he owed over $540,000 to was a cabinet maker with Renaissance as their only customer.  Ouch.  But I digress…

Not only did he reorganize, but in the coming years Randy would also change his business practices dramatically – no longer building on vacant land in the suburbs, he then set his sites on Portland proper.  But since his entire business model was geared to assembly-line production on vacant lots to build quick and minimize cost, he brought the cul-de-sac to the city, one demolition at a time.   He has gained quite a reputation for many high-profile demolitions, cutting giant coastal cedars, and controversial lot-splittings.

How much damage can one strongman do to a local economy in just 5 years?

Let’s take a look, shall we?  We did an intensive study of ALL the real estate transaction data available for the last 5 years bought and sold by Renaissance Custom Homes.  We cross referenced each and every initial purchase with city permit records that showed whether lot was split or not.  We also cross referenced demolition permit data.  And then we correlated each and every subsequent sale, pending sale, or active listing for all of the replacement homes.  And then we made it pretty so that we could all look at it together.  Several things become painfully obvious.  Let’s discuss.

  • If there’s a house on the lot, Randy demolishes it 100% of the time, without exception.
  • The overwhelming majority of his business is in demolishing existing AFFORDABLY PRICED homes and replacing them with one or more at double, or triple the price
  • In just 5 years, this single developer is responsible for nearly 10% of the total residential demolitions in the city.
  • In just 5 years, this single developer has inflated the local single family housing market by over $1 Million dollars for every home he demolished.
  • In a city where affordably-priced housing is in short supply, and over 50% of single-family homes are rentals, this single developer has contributed to the displacement of untold number of persons and consumed precious affordable supply that could have otherwise been a pathway to financial stability for a first-time home buyer or maintained as an affordably-priced rental with existing tenants in place.

Where is all the supply of affordable rentals and opportunity for first-time home buyers  going?  This certainly is not helping.  In fact, it’s hurting … a lot.

This chart below shows the AVERAGE purchase price by month as well as the average selling price for replacement homes.  Note how just one parcel of land become exponentially more valuable to a developer the more homes he can build there.  Lot-splitting is why we are now seeing small modest homes that would have typically been reasonably-priced opportunities for a first time-buyer, but instead are purchased with cash in order to extract millions from just one lot.

[NOTE:  clicking on the chart will bring it full screen for easier viewing]

 

This chart shows all the purchases and subsequent sales for replacement home(s) on each INDIVIDUAL lot.  Once you are able to adjust your eyes, it starts to become clear that lack of regulation in this demolish and replace game is a root cause of the current crisis of affordability (in addition to an unregulated rental market).  All that green at the very bottom of the scale – the original properties that were affordably priced rental homes or opportunities for actual people to buy and live in generate a wide margin of profit even just for 1:1 replacement.  The more density that is built on the lot, the more inflated the market becomes and the less likely that the replacement home(s) will be priced affordably.  In fact, the data shows that THIS is precisely why the local housing market is so absurdly over-inflated.. you know we’re in trouble when a developer will pay $800,000 for a move-in ready heritage home that most of us only dream of living in someday JUST TO TEAR IT DOWN and send another 60,000 pounds of old growth timber to the landfill and more toxic plumes of pulverized heavy metals into neighbor’s gardens.

[NOTE:  clicking on the chart will bring it full screen for easier viewing]

Here is ALL 172 of Randy’s real estate transactions included in this study data mapped out.  if you click the square bracket icon in the upper right, you can view the map full screen.  Clicking on any drip-pin will bring up the address, initial purchase price, demolition permit data, and subsequent sale price of the replacement home(s).  As the legend indicates, those in yellow represent infill building, those with a red ‘X’ are 1:1 demolitions, and those with a red ‘+’ are 1 to many demolitions (lot splits).

Aaaaaand, here is the entire detail if you want to look at it that way and scroll through the looooooong list of demolitions and replacements.  One thing is very very clear in all of this… demolitions are extremely profitable.  And those profits are DIRECTLY tied to the suffering of those who are being displaced and squeezed by the ravages of this speculative for-profit development gold rush that we are living in.  Tell me again about how all this inflation is just simply a lack of supply?  What was that you were saying about how making it even easier for developers to demolish and add density would eventually trickle down to affordability in, like, 30 years?  And what becomes of us in the meantime with developers like Randy Sebastian (and others) actively DEMOLISHING the supply of affordable housing instead of building it?   As you scroll through this list, it’s also important to remember that each of those houses that was demolished existed in a complete neighborhood already and that there is a very real human cost paid for in suffering for every dollar of profit made from juicing up this real estate market.  And, it should be quite sobering when you realize that he is not alone – this is a story of how just one of the many profiteers are paying for their boats and expensive vacations with money made from acts of economic violence and environmental injury.

NOTE:  Click on this graphic to bring up the entire list of transactions included in this study.

Please join us in imploring our legislators to push back against developers like this, tighten the screws instead of loosening them.  Click here for contact list and template for urging lawmakers to fix House Bill 2007 to restrict demolitions, prioritize, preserve and protect existing affordable housing before it’s too late.  It’s time we DEMAND that the Randy Sebastians of the world stop demolishing our communities and that we tell our representatives the we DEMAND AFFORDABILITY, not more opportunistic profiteering!

Thank you for listening and reading, and making it all the way to the end of this long post!  THANK YOU!