Today’s Wall Street Journal has a story about how former homeowners in the exurbs are becoming renters.
The piece looks at the saga of one family (the Disciannos) in Plano, Illinois, a town about 50 miles west of Chicago:
Now, as the housing bust and recession has turned the exurbs from engines of growth to economic laggards, many of these families have the worst of both worlds. They are still on the fringes but have no equity. In many cases the amenities they hoped would follow — new shopping centers, movie theatres — have ceased construction or opened with only a few stores. Government projects like new schools and parks have also been delayed as budgets get cut and population growth has slowed.
In the Lakewood Springs development here where the Disciannos live, “For Sale” and “For Rent” signs are everywhere. A few have driveways littered with abandoned couches and stereos, and in some cases homeowners are living next to tenants paying half the cost of a mortgage.
Couples like the Disciannos mirror the economic arc of the exurbs. With a no-money-down mortgage, the couple bought a $235,000 three-bedroom house in Plano, doubling Ms. Discianno’s round-trip commute to more than four hours.
Ms. Discianno, an IT project manager for a Chicago law firm, says at first the trade-offs were worth it. At the family’s apartment complex back in Aurora, Ms. Discianno says she often felt guilty about raising her two children in cramped quarters. On a few occasions, the neighbors complained when her daughter played hopscotch on a common walkway, and Ms. Discianno had to limit sleepovers to one friend for lack of space.
As land values rose, the couple’s combined mortgage and property tax payment soared, to $2,900 from $1,500. Rather than struggle with the bills, the family abandoned their home to the bank, moved out, and found a new home to rent. They didn’t have to look far: The Disciannos found a smaller home in the same development for $1,500. That home was owned by investors who had hoped to sell it — but settled on renting it instead. The new home is about the same size as the apartment they used to rent, and sleepovers are again limited to one friend per night. [...]
While she still owned a home, Ms. Discianno opposed renters and voiced concerns about them at a homeowners’ association meeting. “I was very against it too,” she says. “It doesn’t do much for property values.”
Quoted in the piece (although not in the excerpt, obviously) is Christopher Leinberger, who spoke with us last month in a good deal of depth about this very phenomenon.
A point that Leinberger made in his Infrastructurist interview is that this dynamic amounts to a death sentence for these communities. Home values plummet and ultimately fall below replacement value. At that point, there ceases to be any economic incentive for repairing or improving buildings or infrastructure. So things fall apart and the community becomes a slum (Leinberger’s term). More and more people become renters and single-family residences being turned into functional boarding houses are very clear signs that Plano, Illinois, is on this path.
(Photo: WSJ)
