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New rent-to-own program offers 'bridge' for families pursuing home ownership

New rent-to-own program offers 'bridge' for families pursuing home ownership

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All that stood between Michael Haggins and homeownership was a mortgage pre-approval.

But after falling short of attaining it earlier this year, his dream seemed in jeopardy. Five points on his credit score separated him from buying a home where he could raise his two sons. To come so close and fall short stung.

“That was the one that knocked the wind out of my sails,” said Haggins, a 38-year-old who grew up in Richmond. “I said, ‘OK, maybe I need to let this go.’ I was even considering moving to an apartment for a while.”

Prospective homebuyers in Richmond who make less than the region’s median income of $89,400 are hard-pressed to become homeowners in a city with rapidly rising real estate prices. Even if they can find a house they can afford, qualifying for financing or saving enough for a down payment and closing costs can stymie their plans.

A new pilot program the Maggie Walker Community Land Trust launched this year aims to help families like Haggins’ prepare financially and buy a home. After resolving to move past his setback, he became the first to sign on to the program.

“There are families or households that would be awesome homeowners, they just need a longer runway to prepare for that,” said Laura Lafayette, chair of the land trust’s board. Formed in 2016, the nonprofit named for Maggie L. Walker, a pioneering Black businesswoman and Richmonder, redevelops vacant and blighted properties and sells them to homebuyers for below market value.

The rent-to-own arrangement, called the Homeownership Bridge program, targets families who have not yet qualified for a mortgage and earn between 50% and 60% of the region’s area median income. For a family of four, that’s between $44,700 and $53,640 annually. The range includes roughly 19,200 households in Richmond, Henrico County and Chesterfield County, according to figures the land trust provided.

In September, Haggins moved into a newly built, three-bedroom home in Church Hill with his sons, ages 11 and 5. It was a special moment for Haggins, who is sole provider for his family.

“It’s not easy for any single parent to be afforded privileges like this,” Haggins said.

For 12 months, he will rent the house for just under $1,000 a month. Under his agreement with the land trust, half of the sum will be deposited into escrow. Next fall, when he seeks to buy the home, he will have $6,000 to put toward a down payment or closing costs.

In the meantime, the arrangement gives him an affordable home to live in and routine check-ins with the land trust’s staff to make sure he is on track financially.

His monthly rent is based on his projected mortgage at the sales prices he agreed to with the land trust: $165,000.

That sales price is well-below the $304,000 the city assessed the home at this year. Blocks from Chimborazo Park and near the neighborhood’s highly touted restaurants, the house would likely command even higher offers than the assessment if put on the market in what is one of the fastest growing and rapidly gentrifying neighborhoods in the city.

While Haggins will purchase the home itself, the land trust will maintain ownership of the land on which the house is built. That reduces the price and ensures the home, if sold in the future, will always be priced lower than those in the surrounding area, Lafayette said.

It’s a model the land trust brought to the region in 2016, targeting buyers who make 80% percent of the region’s median income. With the pilot, it is testing a model for even more deeply affordable home ownership.

The land trust received a $242,000 grant from the city’s Affordable Housing Trust Fund to launch the program this year. That supplemented private dollars raised to cover costs, Lafayette said.

Earlier this fall, Richmond Mayor Levar Stoney’s administration proposed selling 32 city-owned properties to the land trust for the sake of expanding its affordable homeownership efforts.

“The intent is to offer affordable homeownership on those particular lots,” said Sharon Ebert, the city’s deputy chief administrative officer who oversees housing initiatives.

The council must sign off on the transfers, but it could bolster efforts in neighborhoods where new investment has fueled gentrification and displacement.

Since 2000, the number of Black homeowners in Church Hill and Jackson Ward have decreased by about 30%, according to the Partnership for Housing Affordability’s regional housing framework. During the same period, the number of white homeowners increased by more than 150%.

That demographic shift has unfolded as Richmond home prices have surged faster than anywhere else in the region. They increased by 56% between 2009 and 2018, the analysis published earlier this year found.

The surge is fueling racial disparities in homeownership and wealth, the report found. In 2017, 26 homes were bought by white households per day on average. That same year, an average of six homes per day were purchased by Black buyers. For Latino buyers, the daily average was two.

Promoting homeownership for buyers of color was a guiding principle of the pilot program, said Lafayette, who also is chief executive officer of the Richmond Association of Realtors.

“We know that we live in a community, historically, where people of color have been marginalized and not had homeownership opportunities,” Lafayette said. “We really want to be intentional about how Maggie Walker [Community Land Trust] does its work, and we want to make sure buyers of color have an opportunity to enroll in this program and become homeowners.”

If all goes according to plan, Haggins will have purchased his home outright by this time next year, joining 51 others who have bought a home through the land trust.

“At this point, I consider them extended family,” he said of the land trust’s staff. “I really couldn’t have done it without them.”

(804) 649-6734

Twitter: @__MarkRobinson


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