Houston Speculators Make a Fast Buck From Storm’s Misery

Houston Speculators Make a Fast Buck From Storm’s Misery

Luring Fortune Seekers

Houston has always drawn fortune seekers looking to make a quick buck. The city was founded in 1836 by two brothers from New York, John and Augustus Allen, who had immigrated to what was then northeast Mexico only to side with the pro-slavery separatists who led the Texas Revolution. Within a few months of the war’s conclusion, they began to develop a patch of land on the Buffalo Bayou. They made a fortune in the murky trade of land certificates, promising would-be settlers that their mud-bogged, landlocked new city idyllically offered “the sea breeze in all its freshness.”

Houston rose to prominence as the Gulf Coast’s premier trading metropolis only after a hurricane laid waste to nearby Galveston, in 1900. But Houston, which is projected in about a decade to edge past Chicago as the third largest city in the United States, has endured its own share of weather misfortune. The reservoir in which Canyon Gate persists owes its existence to yet another calamity, the Great Houston Flood of 1935. Rains that year turned the streets of downtown Houston into choppy rivers, killing several people and shutting down the Port of Houston for eight months. The solution? Authorities built flood-control reservoirs in the 1940s, in effect creating new flood zones to protect the old ones.

Canyon Gate is designed to flood, but it is not part of the 100-year floodplain defined by the Federal Emergency Management Agency, so it is not covered by FEMA rules that require mortgage seekers in flood zones to buy flood insurance. Some residents say little effort has been made to inform buyers of the risks they face.

Interactive Graphic

How One Houston Suburb Ended Up in a Reservoir

Most residents whose homes flooded during Hurricane Harvey had no clue that their gated community was built in an area prone to such damage in extreme storms.

OPEN Interactive Graphic

In the beginning, it seemed like there was no need. “Back in the 1940s, when the reservoirs were built, this place was way out of town, and they thought that the cows would just get out of the way if there was some overflow,” said Judge Robert E. Hebert, a top elected official in Fort Bend County, a once sparsely-populated expanse that now has more than 700,000 residents, including those in Canyon Gate.

But in the late 1990s, bolstered by Houston’s rapid expansion and the construction of new roads nearby, a residential development company called Land Tejas unveiled plans for Canyon Gate. County officials insisted that the developer warn prospective buyers that the homes lay in a flood reservoir, and Land Tejas agreed to do so, but only by way of an obscure filing. “This subdivision is adjacent to the Barker Reservoir and is subject to extended controlled inundation under the management of the U.S. Army Corps of Engineers,” the developer stated in 1997 in the fine print of the plat, the county’s document approving the Canyon Gate subdivision.

“This is a man-made disaster we’re dealing with, make no mistake,” Judge Hebert said. “All these houses shouldn’t have been built in the first place, and now the speculators are moving in. The last thing I’d want to do is buy a house flooded in a reservoir.”

And yet the neighborhood is attractive in many ways. Canyon Gate, as its name suggests, offers a coveted sense of safety. It is also a remarkably cheap place to buy a home, and getting even cheaper. Spacious three-bedroom homes sold for about $230,000 before the storm, drawing some buyers from costlier real estate markets elsewhere in the United States. Now, homes in Canyon Gate go for about $130,000, and investors are scrambling to bet on Houston’s recovery.

Before the storm and after, Canyon Gate stood out for its capacity for welcoming people from around the world, its cul-de-sacs home to Nigerians, Indians, Venezuelans and Canadians, along with people from dozens of other countries. Fort Bend County ranks among the most ethnically diverse places in the world. Scholars at Rice University’s Kinder Institute for Urban Research recently found that Fort Bend rivaled the diversity of New York and Los Angeles, with 35 percent of its population Anglo, 24 percent Latino, 21 percent African-American, and 19 percent Asian. Metropolitan Houston already has a population of 6.6 million and it is projected to reach 14.2 million by 2050, according to the Texas Demographic Center.


How a Community Was Sacrificed to Save Houston

Cinco Ranch was designed to be flooded. So after Hurricane Harvey hit, the Texas suburb was sacrificed to save the city of Houston. We followed homeowners as they decided whether to cut their losses or rebuild, knowing it could happen again.

By LESLYE DAVIS, RAY WHITEHOUSE and ERIC MAIERSON on Publish Date March 19, 2018.

Photo by Todd Heisler/The New York Times.

Watch in Times Video »

As Houston sprawls over the prairies, its residents are reckoning with the likelihood that the city will flood time and again in the decades ahead. And if Canyon Gate is a harbinger, that means homeowners will face dizzying choices with each big storm: rebuild on the same spot, pull up stakes and move on — or effectively trade on their neighbors’ misfortune.

The Disaster Economy

Mr. Pelletiere, for his part, sees nothing wrong with buying flooded homes. He said he did not expect everyone to approve of what he was doing, but said that investing in such real estate depended on acquiring local knowledge and accurately measuring the value of a property. Even now, he said he refrained from informing buyers of his damaged homes of the flood risks, explaining that the law did not require him to do so.

“Yeah, people call me a vulture when they learn what I do,” said Mr. Pelletiere, his sturdy frame clad in home-office attire of jeans, T-shirt and stocking feet on a typical work day in February. He was darting around his home, barking instructions to construction workers fixing the first floor.

“In reality I’m offering homeowners solutions,” Mr. Pelletiere said. “I was flooded, too, I get it, but this hurricane is a monstrous opportunity.”

Born and raised in Chicago, Mr. Pelletiere grew up washing dishes for $1 an hour in his father’s Italian restaurant. He dropped out of community college, he said, after realizing that higher education was not for him.

Seeking opportunity, he lit out west for Southern California, where he met his wife, who works in the aviation software industry. Undaunted by his lack of a college degree, Mr. Pelletiere worked in corporate sales jobs, founded his cadaver-transport venture, and dabbled in real estate in San Diego, embracing the chance to use those skills when his wife was transferred to Houston.

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