Mold refugees discover high housing costs

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Mold refugees discover high housing costs

3-bedroom home can rent for about $4,000 a month

By Elder Caller-Times

May 19, 2002

When Terry and Darla White fled their moldy Brighton Village home 13 months

ago, they went in search of temporary shelter. What they got was sticker

shock.

The Whites said they never dreamed that a three-bedroom home in their

typical American subdivision would rent for $4,250 a month.

" I was shocked, " Terry White said. " But when your back is against the wall,

you don't have a lot of options. I also looked at other houses I was sent to

by the insurance company that were renting for $2,500 to $3,000, but they

were in bad condition. "

For months, insurance companies have been bemoaning the rising costs of mold

claims. Nueces County has captured the attention of state regulators because

mold claims here far exceeded the rest of the state. The Whites and other

mold refugees can't help but wonder: Wouldn't insurers come out ahead if

they didn't drag out claims?

The Whites' insurance company, USF & G Specialty, ended up paying $60,000 to

cover the couple's additional living expenses for one year, with the bulk

going to rental costs. That $60,000 is on top of the $98,000 that the

insurer has offered to settle the claim. The Whites wish insurers would

apply more money to mold cleanup and less to paying what they say are

exorbitant rental rates.

In Texas, policyholders can get additional living expenses up to 20 percent

of what the policy is worth, per claim. Additional living expenses include

rental rates, and in some cases clothing expenses, along with food costs for

clients forced to stay in hotels.

Though the insurance industry concedes that rental rates are a big factor in

the high cost of mold claims, none have publicly accused local property

owners of price-gouging. And they say they have no choice but to pay what

the market demands. They also say that it's the policyholders' money, and

it's up to the policyholder to find reasonable accommodations.

" The decision about where a person moves is up to the policyholder and

depends on how much coverage they have for temporary housing, " said

Androff, a spokesman for State Farm Insurance in Dallas. " It would not

surprise me at all that there are vendors, or contractors or owners trying

to take advantage of a situation people find themselves in and charge more

than is reasonable. "

Leaving in droves

Unlike plumbing reroutes that drove insurance claims higher in previous

years, mold's status as a potential health hazard has caused local

homeowners to leave their homes in droves and their possessions behind for

fear of contamination. With a shortage of rentals and an intense demand,

local entrepreneurs are taking a rare opportunity to charge California

prices in a market once known for its inexpensive housing.

Dan Lambe, executive director of Texas Watch, a statewide consumer research

and advocacy group, said he has heard rumors of landlords price-gouging in

Corpus Christi. Lambe doesn't worry about what the costs of rental rates are

doing to insurance companies. He worries about what it's doing to

policyholders.

" It's not a blank check and it's not like these homeowners are living

large, " Lambe said. " That money belongs to the families who pay insurance.

What's sad is when businesses choose to take advantage of Texas families by

price-gouging, and that's flat-out what's going on. "

Lambe, who never has seen the Whites' rental home, said the price sounds

steep. Officials with Jubilee Development, which is renting to the Whites,

did not return phone calls.

April Magnuson, president of Coldwell Banker Pacesetter Steel Realtors, said

even with utilities and furniture included, a monthly price of $4,000 is

high.

Average of $1,021

After surveying 21 single-home rental properties in Corpus Christi this

year, Pacesetter found an average monthly cost of $1,021. In 1999, the

average monthly cost here was $1,053, indicating a drop.

Some of those high prices, Magnuson said, can be attributed both to an

extreme shortage of single-family houses for rent and to short-term leases,

which usually fetch higher rental rates than year leases.

Part of the price problem is that insurers must find comparable homes for

large families, leaving companies scrambling to find furnished

accommodations in the Corpus Christi area, said Tim Teas broker/owner of

Re-Max Metro Properties.

In some cases, families want a rental property in the same neighborhood as

their mold-contaminated homes so their children can attend the same schools.

The city's southern area is particularly hard hit, he said.

Not only do landlords have to provide furnishings for rental properties used

by mold refugees, they also get what may be a short-term tenant, Teas said.

Higher rates help rental companies and landlords hedge against the early

departure of tenants and also help protect landlords if a tenant damages

their furniture or causes regular wear and tear.

" They (insurance companies) are paying a premium for short-term rentals that

are furnished, " Teas said. No one is tracking the number of houses available

for short-term leases or the rate increases. But Teas notes that the number

of available homes for sale is down 400 from a year ago as people who might

have sold their homes seize an opportunity to rent to mold refugees for

top-of-the-market prices.

98 percent occupancy

The Corpus Christi Apartment Association is reporting a 98 percent occupancy

rate for the rental market on the city's south side. A 95 percent rate is

considered very high, Teas said.

Risk is factored into the price. But if a mold refugee ends up staying a

year or more while the insurance company pays $4,000 or more in monthly

rent, then the gamble more than pays off for the landlord.

Some homeowners are seeing an investment opportunity in a market driven by

mold.

" We had a house for sale on Thundersee in The Lakes and this guy decided to

lease it for $4,000 a month, furnished, " Teas said. Under normal

circumstance, the four-bedroom home without furniture would probably rent

for about $2,200 a month. About eight months ago, when the number of mold

refugees in need of temporary housing was at its height, the Thundersee home

would have easily rented for $5,000 to $6,000, Teas said.

While the Thundersee home is still for sale, three mold refugees have

called, expressing interest in leasing the property at $4,000 a month.

While brokers such as Teas can advise insurance companies what a house is

worth, they aren't quite sure what furniture is worth, Teas said.

Demand peaked

Both Magnuson and Teas said the demand for short-term rentals peaked a few

months ago and is settling down.

Angie AbuNuwar, an associate with Steve Realty Associates, said she

has heard of investors looking to buy homes to put on the market for mold

refugees.

" They see a need and say, 'maybe we ought to invest in larger homes and

insurance companies will probably pay top dollar for them,' " AbuNuwar said.

Insurance companies say it isn't necessarily just disputed claims that drag

out the process. Overextended mold removal companies and contractors, who

scarcely can keep up with demand, are a big part of the waiting game that

drains mold refugees emotionally and insurers financially, said

Schmitt, an Allstate Insurance Co. spokesman.

But some mold refugees say insurance companies could avoid shelling out

thousands of dollars on additional living expenses if they didn't drag out

the process.

Dee DeShetler was convinced that toxic mold was causing her flu-like

symptoms and other mysterious illnesses. When she awoke one morning in

January 2000 to find half her face numb, she abandoned her four-bedroom

Stonegate home of 17 years with only the clothes on her back.

Like most of the city's swelling ranks of mold refugees, DeShetler became a

reluctant nomad, starting out in hotel rooms, then moving to a

$2,300-a-month furnished apartment. When her insurance company, State Farm,

informed her it would cut off her additional living expenses, she found a

$1,100 unfurnished rental, as she battled State Farm over her mold claim.

'It costs us all'

After two years in rental properties, DeShetler racked up $63,000 in living

expenses, a bill that State Farm had to pay. After mold investigators hired

by State Farm twice said she didn't have toxic mold, she hired an

arbitrator. Eventually, the company settled. That $63,000 in living expenses

is on top of the $95,000 for her home and $54,000 to replace the contents.

DeShetler can't help but wonder why State Farm was willing to spend so much

money on her living expenses while the insurer fought her ruthlessly about

her claim.

" They can give us thousands in additional living expense money and they can

give us that money all day long, but they refuse to help us in our

situations with our homes, " DeShetler said. " It costs us all money and now

they're squawking that we're ripping them off. "

Before the Whites decided to move out, they had talked to a man who had a

home in more upscale Buckingham Estates for $2,000 a month. That home, Darla

White said, had five bedrooms and a swimming pool. The Whites said that

because their insurance company was slow to act, they missed the opportunity

to find less expensive accommodations. And their insurance adjuster's

attempts to get the lowest bid from contractors to clean their home forced

them to stay in their rental home for more than a year.

" We would have been back in our home, " Darla White said. " We've been out for

too long for nothing. "

Contact Elder at 886-3678 or elderl@...