After Harvey, speculators seek quick buck
HOUSTON — The yard signs appeared almost immediately. Canyon Gate was still in ruins, its streets strewn with moldy furniture, the stench of rot everywhere. But somehow, someone had managed to plant dozens, maybe hundreds of them across the tiny Houston suburb. One proclaimed “Dump Your Home!” Another, stuck into the dirt, read “Flood Damage? We Can Help.”
Bernadette Leaney, 67, one of the thousands of Houston residents whose homes were swamped in the aftermath of Hurricane Harvey, hated them. She and her neighbors were just beginning their grim reckoning with the damage. Who could be looking to make a buck this soon? She tried to ignore the come-ons. “But then I realized I just couldn’t stand looking at them anymore,” she said. “They were adding to our despondency.”
She tore down every sign she came across — 114 by her count — until another resident told her it was one of their own neighbors who had posted many of them. His name was Nick Pelletiere, she learned. He ran a company that transported cadavers for funeral homes, but recently he had expanded into another lightly regulated trade: buying and selling flooded homes. People in Canyon Gate called him Shady Nick.
Pelletiere is one of the many speculators driving a new — and somewhat confounding — economy in neighborhoods across post-Harvey Houston, one that is especially notable in Canyon Gate, a subdivision built in the 1990s where rice fields once stretched to the horizon. Many parts of the city were hit hard by the hurricane, but Canyon Gate has the extraordinary distinction of being built within the confines of a reservoir specifically designed by the Army Corps of Engineers to protect central Houston from calamitous flooding. Nearly every one of the 721 homes there is destined to flood again, yet the local trade in storm-damaged real estate is flourishing.
Canyon Gate’s dilemma lays bare a defining feature of coastal life in a time of climate change: Many of the neighborhoods where we already live should never have been built in the first place, and doubling down on reconstruction could make the consequences of the next disaster much more severe. But doubling down is what speculators do, and — at least in the short term — they are profiting from their efforts.
“I’m the guy who put up the bandit signs around town,” Pelletiere said one morning in February in his own flooded home, where he and his family were living on the second floor as contractors slowly repaired the first. He said that, like most of his neighbors, he had no idea that he was living inside a reservoir until the hurricane unleashed nearly 50 inches of rain and the reservoir — just as its designers intended — flooded the land all around him.
But where some saw calamity, Pelletiere, a 47-year-old Chicagoan who followed his star to Houston two years ago, saw opportunity. Even as a volunteer boat team was evacuating him, his wife, their two children and the family dog, he was growing obsessed with a single thought: It’s time to buy.
And buy he did. Within weeks, Pelletiere snapped up seven properties in areas hit by Harvey, all at a steep discount from their pre-storm values, pocketing sizable gains while some of his neighbors were grappling with financial ruin. In one deal, Pelletiere bought a flooded four-bedroom home, valued at $280,000 before the storm, for $135,000. He sold it the same day to another investor for $165,000. After accounting for closing costs and the interest he paid on a short-term loan to complete the transaction (Pelletiere rarely uses his own money for such deals) he walked away with about $27,000, all in the space of just a few hours.