How Investor-Owned Homes Will Change Lighting Demand

While the number of homes purchased by investors has shrunk in the most recent quarters, the percentage of homes owned by investors remain high, at a national average of 18.4% (2022 – Redfin.) The percentage of homes also varies widely based on location, with highs of over 30% in Miami, FL and lows of 9% in Warren, MI. These are higher numbers than the real estate industry has seen in the past and this new type of ownership is going to change the way America spend money on durable aspects of the home, such as lighting.

I live in a historic part of suburban Cleveland, an “inner-ring” or very old suburb. Moneyed and “white-collar” Clevelanders in the early part of the1900s wanted to escape the industrial dirt and grim that made the city home of vast amounts of wealth. The solution was to “head for the Heights” literally located at a higher elevation than the steel mills, factories and foundries centered on the river lowlands. Homes in my portion of the city (a slightly newer area) are all architect designed and built between 1929 and the post-war late 1940s and 50s. They are graced with excellent quality materials including roofs primarily of slate, with some tile and shake.

Because of its proximity to the highly regarded cultural and healthcare industries in Cleveland, investors have started to buy homes in the area. Cleveland also enjoys some of the lowest home prices in the nation, primarily due to the outmigration of young people. Investors have determined they can easily buy low, sell (reasonably) high here with minimal amounts of money.

Slate roofs last a lifetime, but they do require regular “tune-ups” to avoid water ingression. Rather than replacing my roof every twenty or thirty years, I need to spend a few buck every other year. Investors view this differently. Rather than spend, say $6000 to bring a neglected slate or tile roof back to par, they are electing to tear off a lifetime roof and replacing it with a $4000, 10-year warranted asphalt shingle. From an investor’s perspective, he has saved $2000. From the point of view of the neighborhood, the investor has markedly altered the timbre of the community.

Now, take that logic and multiply it to all other aspects of the interior and exterior rehab. Good recessed lighting is not used. The cheap “10-pack” found at the big box stores are instead employed. A builder-grade chandelier is hung and ferrous exterior lanterns are slapped on the porches, sure to last long enough to see just one winter. The initial reaction to the completed home is a buyer who doesn’t have to change anything. They falsely believe, no money will be spent beyond the celebratory bottle of champagne.

When a downtrodden house is purchase by people who hope to live in the home “forever” they will be more inclined to choose products of higher quality. They may opt for the more impressive island pendants, a show stopping chandelier for the dining room and even a ceiling fan that is correctly sized to the room. They will enjoy the benefits of “better” rather than rolling it over to a new buyer in a few months.

This is a problem with no easy solution. Folks in my neighborhood were successful in getting the permit application for roof replacement changed to include a viability assessment of the existing historic roofs after dozens were removed for investors, by unreputable contractors working weekend hours. The illegal removals are now being forwarded to the city’s Law Department for prosecution. Lighting doesn’t have that quick fix. Mr. & Mrs. Buyer won’t know they have substandard recessed cans until they die an early death. At that point, it’s too late. No one will go to jail because they bought a cheap chandelier.

From the opinion of a lighting guy, perhaps the prospect of incarceration might get people to think more carefully about this very important aspect of a home interior. I do however live in the real world (at least some of the time!) People have been using bad lighting since Thomas Edison suggested an alternative to natural gas. Perhaps the emerging push for a more sustainable world will magically instill some sense of duty in investors. The more likely scenario is investor’s failure to find customers for poorly conceived rehabs. When money is the driver, only a lack of return will change their direction. As customers we should reject homes when historic roofs have been removed, cheap appliances have been installed and bad lighting has been used.

We can always dream, can’t we?