Terner Center Blog: No Limits

Opening Doors to Homeownership Series Part 1: Lease-Purchase

Posted on by Carol Galante, Carolina Reid, Rocio Sanchez-Moyano

A number of recent studies suggest that the American Dream, with its promise of upward mobility, is diminishing for current and future generations as the racial wealth gap grows and access to opportunity shrinks. This troubling trend is most evident in one of the dream’s most potent symbols: homeownership. In recent years, alongside widening inequality, rates of homeownership among young adults and minority families have declined precipitously and, in 2016, the national homeownership rate fell to its lowest level in more than 50 years. 

What explains this trend? Working families (and especially lower-income and minority households) seeking to buy their first home face a myriad of barriers, including a housing market where prices are rising faster than incomes, an inadequate inventory of affordable homes, high levels of student loan debt, and the continued challenge of post-crisis credit standards. To overcome these barriers and restore a key pillar of a vibrant middle class, new solutions are urgently needed to help bridge the gaps and clear the pathways to homeownership.  

Today, the Terner Center is launching the Opening Doors to Homeownership series, exploring several innovative models that hold the promise to do exactly that. 

The ideas we will examine are varied, but have in common the potential to better meet the needs of today’s aspiring homebuyers and foster a more inclusive housing market.  Expanding access to homeownership, especially to those who have been traditionally “locked out,” is a critical component of increasing financial stability for families, narrowing the wealth gap in communities, and creating a more vibrant economy nationwide. 

The first idea: a responsible, scalable lease-purchase mortgage product. The lease-purchase model is specifically intended to help bridge the financial and credit gaps many young families face when seeking to buy a home. In a lease-purchase arrangement, a household rents for a period of time before taking on the mortgage and ownership of the property.  This rental period allows households to build a positive credit history and increase their savings before taking on the responsibility of a mortgage, while at the same time “locking in” lower interest rates and house prices.  Lease-purchase programs can also contribute to neighborhood stabilization, bringing the investment associated with homeownership to communities facing disinvestment or still suffering from the lingering impacts of the foreclosure crisis. 

Our policy brief, Expanding Access to Homeownership through Lease Purchase, explores lessons learned from existing lease-purchase models (both those managed by nonprofit and private sector entities), and in doing so, identifies the current challenges to broader implementation. That analysis serves as the basis for the proposal of a new mortgage product, the LEAP (Lease Equitably and Purchase) mortgage, that would be offered by the Federal Housing Administration, Fannie Mae, or Freddie Mac. The mortgage would be available to nonprofits and other entities seeking to use a lease-purchase program, and would help to lower theirs cost and increasing their ability to reach more families.

As we proceed with the Opening Doors to Homeownership series, we welcome responses and reactions from practitioners, policymakers, citizens and advocates who are engaged with this important issue. Please stay in touch with us at ternercenter@berkeley.edu.


Balancing the Burden: Proposing a FAIR Tax Credit for Renters Facing Affordability Challenges

Posted on by Carol Galante, Carolina Reid, and Nathaniel Decker

By most accounts, rents have never been higher. In the United States, over 21 million people see more than 30 percent of what they earn go to rent each month. And over 11 million Americans are paying more than 50 percent of their income to rent their home, leaving little left over for other essentials like healthcare and food, and leaving too many facing a precarious stretch of days until their next paycheck. And this is not just a problem of poverty: because rents have risen faster than incomes, even renters who are working full-time and earning modest wages are…


Housing Highlights from the 2015 American Community Survey

Posted on by Jed Kolko
Filed under: Demographic Trends,

The Census Bureau has just released the 2015 American Community Survey (ACS), the most detailed and comprehensive regular source of housing data for the U.S. and local areas. The housing market continues to ease back toward normal, with a drop in vacancies, an increase in single-family owner-occupied units, and a decline in cost burdens. However, homeownership fell yet again, household formation remains below normal, and more young adults are living with parents (2016 Current Population Survey data). Here are the housing highlights from the 2015 ACS, with more detail available in this slide deck: Homeownership and household formation (slides 3-10): The…


A Golden Rule for the Golden State? How State Action Could Help Solve California’s Housing Crisis

Posted on by Carol Galante, Carolina Reid

In the United States today, over 20 million households are spending more than 30 percent of what they earn just to pay the rent or mortgage on their home. Both locally and nationally, the repercussions of this affordability crisis are taking center stage. In recent weeks, the resignation of one local leader over housing costs and frustration with chronic political inaction in her community set off a flurry of media coverage and social media conversation. Meanwhile, recent poll results have elevated the issue of housing affordability onto the national stage as well. Underlying these recent events is the reality that the…


Small Houses, Big Impact: Accessory Dwelling Units in Underutilized Neighborhoods

Posted on by Rocio Sanchez-Moyano and Carol Galante

As NIMBY’s (Not in My Backyard) continue to oppose new housing development, a new group of homeowners are saying yes, by literally building new homes in their own backyards.  Accessory dwelling units (ADUs), also referred to as in-law suites or granny flats, are smaller, independent units on the same lot as a single family home (sometimes even an extension or a reworking of the home itself). ADUs were common in the early twentieth century, but went out of favor post-World War II as single-family, suburban style development characterized by large lots and an emphasis on the nuclear family became the…


State Policy Solutions to the Short Supply of Housing

When it comes to a lack of affordability in housing, it’s no secret that California is outpacing the nation. Average home prices are about two and half times more expensive than the rest of the country, and rents are about 50 percent higher. A shortage in supply is a key contributing factor, and we need both public policy and private sector solutions that will help expand housing production to better meet demand. This week, the Terner Center is sharing an analysis of one important avenue to meeting this challenge in California: improvements to state land use regulations to promote an…


Putting the Tool to Work: Takeaways from the Housing Development Dashboard

Posted on by Carol Galante

The Terner Center’s recent release of the Housing Development Dashboard was met with enthusiasm from media outlets, practitioners, and policymakers, all commenting on its important contribution to our understanding of local housing production and related policies. I want to share some of my biggest takeaways from the Dashboard, to illustrate why and how I think it can provide critical insight into these issues, and help to pave a way forward in addressing our housing challenges in the Bay Area and eventually, nationwide. In many ways, the Dashboard validates, and provides evidence for, much of my intuition (honed from a career in…


Launching the Housing Development Dashboard

Posted on by Carol Galante

In the short time since we launched the Terner Center for Housing Innovation, I have been inundated with requests to weigh-in on the issue of how to best address the housing affordability crisis- not just at its epicenter in the San Francisco Bay Area- but in similarly situated high job growth regions from Boston to San Diego. While there are multiple contributing factors to the crisis, I keep coming back to one simple premise: supply matters, and we need to expand housing supply in equitable and environmentally sustainable ways.  This statement rarely makes anyone happy.  Most want to hear answers…


Why By-Right Affordable Housing in California is the Right Thing to do

Posted on by Carol Galante

The following piece was originally drafted as a letter of support for Governor Jerry Brown’s proposed legislation to streamline local housing approvals. The original letter, with citations, can be found here.   The Permit Streamlining Act. On May 13, 2016, Governor Jerry Brown proposed a change to state law that would streamline affordable housing proposals and spur much needed housing production. Introduced as a part of the administration’s May Revision to the 2016-17 Budget, the by-right bill would effectively change the way local jurisdictions approve housing projects. In doing so, Brown has acknowledged that in order to facilitate more building throughout…


Has The Expansion of American Cities Slowed Down?

Posted on by Issi Romem
Filed under: Informing the Dialogue,

This piece originally appeared on the BuildZoom blog. The original post can be found here. Key takeaways: As a whole, U.S. cities maintained a constant pace of outward expansion into rural territory since the 1950s, but behind the facade two groups of thriving cities are behaving very differently. The first group of cities substantially reduced the pace of outward expansion beginning in the 1970s, channeling its economic strength into higher property values. This group includes San Francisco, Boston, New York, Los Angeles, Seattle, San Diego, Washington, Philadelphia, Portland and Miami. In contrast, the second group of cities accelerated its outward expansion,…