The law of unintended consequences never fails to spring into action. No one would argue that, in cities like Chicago and Detroit, abandoned houses are a blight on neighborhoods. Windows and doors are covered with sheets of plywood, but the homeless and drug addicts have no problem gaining entry. Local real estate values plummet.
Helping Distressed Neighborhoods
Clear polycarbonate sheets can be used instead of plywood to cover windows and doors. Polycarbonate is an incredibly strong plastic. One use of polycarbonates is bulletproof windows in banks. One company, SecureView, established a business selling polycarbonate windows to be used on vacant properties. Their ad says that even a fireman with an ax can’t break through one of their windows.
So covering the windows with clear polycarbonate seems like a great idea, but polycarbonate windows and doors are considerably more expensive than a sheet of plywood. Some vacant homes receive the polycarbonate treatment, but most don’t.
Fannie Mae’s Regulation
Enter Fannie Mae. In November of 2016, Fannie Mae announced that they will reimburse banks, mortgage companies or others who use polycarbonate instead of plywood to secure pre- or post-foreclosure properties. All is good in the world and neighborhoods will improve just from one small new regulation.
Polycarbonate is a plastic. Plastics are made from organic products, primarily crude oil and natural gas. In fact, large plastic resin manufacturers are often located in the same areas as oil refineries. Fannie Mae’s proclamation that they would now pay for polycarbonate doors and windows didn’t magically increase the supply of polycarbonate. What did happen is that by January of 2017, plastic brokers discovered benzene was in short supply.
Benzene is a common industrial chemical essential for manufacturing plastics of all types, including polycarbonate. Did Fannie Mae cause a benzene shortage? Probably not, but an increased demand for any plastic will impact the prices of manufacturing chemicals. No one knows yet the full impact of this regulation. The point is that something as simple as an attempt to shore up property values in distressed neighborhoods can impact supply chains in unexpected ways. Energy investors may want to keep an eye on related industries.
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