Affordable homeownership remains difficult to achieve for many families and renters facing barriers such as high home prices, rising rents and tight credit requirements. In a move to make homeownership more accessible, developers are finding creative ways to help renters become homeowners. As reported in The Baltimore Sun:
At least three developers of affordable housing in Maryland are building homes with tax credit financing typically used to create low-income rental communities, with a plan to sell the units to tenants 15 years later, when the tax credits expire.
Howard County is considering a program in which the Housing Commission would buy homes for pre-approved tenants, then lease back the house for about three years until the tenant can build the credit to take on the mortgage.
And, at the upper end of the market, Bethesda-based Bozzuto Group offers an incentive worth up to $10,000 for tenants of at least one year who go on to purchase a Bozzuto home.
In a market typically divided between buyers and renters, rent-to-own incentives can offer a viable alternative.
“It’s an important thing to have on a menu of options,” said Miriam Axel-Lute, editor for Shelterforce magazine and associate director of the National Housing Institute. “It takes a while to put a good program together, but they are out there.”
Historically, the rent-to-own, or lease-purchase, model has been a tiny part of the housing market, and industry members predicted it will remain that way. For developers, acting as builder, property manager, credit counselor and seller all at once can be tough to pull off, while the complicated nature of a potential deal can lead to misunderstandings, or even shady dealing, especially in the private market.
“It’s fraught with potential fraud and risk for the consumer,” said Ascala Sisk, director of community stabilization at the Neighborworks, a national network of more than 240 community development and affordable-housing organizations. It is “really important that consumers are informed about what they’re getting into,” she said.
The article goes on to explain the differences between the highlighted programs and other lease-to-own programs, including the impact of low-income housing tax credits on the arrangements.
For more information read the full article in The Baltimore Sun.