Saviors Or Profiteers? The Business Of Hurricane Recovery
Cleaning up after natural disasters has become a lucrative business, but raises questions for victims and governments alike.
HOUSTON — Frank Jones's cell phone chimes: He's landed another job. If he's lucky, it could net him a cool million. "We got a monster house," says Jones, driving through Houston in his Range Rover. His aptly named Cavalry Construction Co. is part of a legion of contractors and other entrepreneurs fanning out across Texas and Florida in the wake of hurricanes Harvey and Irma.
Don't call him a storm chaser. Jones bristles at the term. Saviors to some, opportunists to others, these businesses clean up, in every sense, after hurricanes, tornadoes, and other catastrophes. Disaster is fueling a growth industry as more frequent and powerful storms lash coastal regions teeming with new homes and offices.
Many of these rebuilding outfits are mom and pop shops. Some are midsize enterprises such as Cavalry, which is based in Houston and operates throughout the South. Jones expects $30 million in revenue this year; he says his sales averaged from $5 million to $10 million before 2008.
A handful of these companies are major operations, such as Birmingham, Mich.-based Belfor Holdings Inc., which this year expects to surpass $1.7 billion in revenue. It will have more than 500 employees in Florida for Hurricane Irma's aftermath. Others are outright scammers — the real storm chasers, in Jones's view. "There's a lot of competition," says Sheldon Yellen, Belfor's chief executive officer. "It's an industry because there's a need." Belfor has handled reconstruction after natural disasters around the world, including sending teams to rebuild after the recent storm damage in the Caribbean.
Reconstruction runs in his blood
The reason is clear: On rapidly developing coastlines, storms are becoming more common and costly to homeowners, according to the Insurance Information Institute industry group. Scientists blame global warming, which would suggest the reconstruction boom is just beginning.
Even before Harvey and Irma made landfall, the first quarter of 2017 had shaped up as the most expensive since 1994, the year of the devastating Northridge, Calif., earthquake, according to Verisk Analytics, an insurance industry research firm. Thirteen storms, including hail and tornadoes, delivered $7.3 billion in insured catastrophe losses nationwide.
Cavalry's sales have been growing 10% annually because of everything from tornadoes in Tulsa to softball-size hail crashing through North Texas roofs and decks. Jones, who employs 38 workers and hundreds of subcontractors, plans to send some to Florida.
Reconstruction runs in his blood. He grew up in storm-prone Texas, and when he was a child, a house across the street got ripped apart. His father also made a living from disasters, owning a property and casualty insurance company in San Antonio.
A former sheet metal worker who still wears jeans and sneakers to jobs, the younger Jones started after-storm contracting in the 1970s before founding Cavalry in 1989. He's done well for himself in the aftermath of 10 hurricanes, including Ike, Ivan, and Katrina. Now 64, he owns two ranches in La Grange, Texas, and has two sons working in the family business. "My dad always told me there's only two entities that have money, the banks and the insurance companies," he says. "And the banks, you have to pay "em back."
The homes he's worked on range in value from $200,000 to $20 million, Jones says. He favors clients with insurance who can also afford to pay a chunk of it upfront and tries to be flexible when they can't, but he's in no position to finance millions in repairs. (About 14% of Houston-area homeowners have flood insurance.) He charges $6 to $8 per square foot — $24,000 for a 3,000-square-foot house — for the basics: Workers rip out water-soaked wood, walls, and insulation, drag in fans and dehumidifiers to dry out the dwelling, then treat the space for mold. Reconstruction for a house of that size costs about $150,000; pricier homes get more expensive finishes.
In the case of a 13,000-square-foot mansion owned by a prominent lawyer, Jones expects the basic part of his service to run $150,000. If he wins the entire reconstruction gig, he stands to make more than $1 million. Supersize contracts are so common that the company mounted a brass bell on the wall of its Houston headquarters. "Big Sale," it reads. Staffers ring it each time they win a contract worth more than $100,000.
Loot and I shoot
Jones heard about the lawyer in need when he was driving through his own neighborhood past rows of waterlogged couches, stoves, and chairs. Like other established companies, Cavalry gets referrals from insurers; Jones doesn't knock on doors. He charges more after a storm — in part because materials costs rise, and so do wages for workers and subcontractors. The price of drywall, for example, is already up more than 40% since Harvey, he says.
Jones gets worked up at the mention of aggressive, unscrupulous competitors, ones that he says give his field a bad name. Potential customers can get cranky because they're overwhelmed by shady offers, not to mention thieves. This being Texas, they aren't shy about protecting themselves. In northeast Houston, residents put up a giant spray-painted sign in front of their Texas flag and pile of couches, cabinets, and bed frames: "U Loot I Shoot," it read.
Nearby, Jamie Reneau is tired of the men in pickup trucks hawking power washing or construction, or stealing from front yards. Some have even waltzed through her front door without knocking. Reneau, another lawyer client, signed up with Jones to rebuild her red-brick colonial in northeast Houston. She evacuated on her 11-year-old son's birthday.
She shows a visitor a line on her living room couch. It marks the height of the flooding, more than 2 feet. The hurricane also totaled both the family's cars, including a 2016 Cadillac her husband gave her for Christmas. Cavalry tore out so much of the room where she's standing that it's recognizable as the kitchen only because of a fridge sitting alone at its center. "We now have an open floor plan," Reneau jokes, standing in borrowed flip-flops. "It's funny to say that the company that rips your house to shreds and puts everything on the front lawn did a great job, but they did."
Reneau declines to reveal the cost of rebuilding. But she gives a ballpark. "Financially devastating," she says.