Predatory Land Contracts and Rent-to-Own Schemes May be More about Affordable Housing than Home Ownership

Detroit   We had hit the front door a couple of times without success. The house was a single-story white brick facade set back from the street. If we had not been anywhere other than the west side of Detroit, we might have been able to blink our eyes and believe we were in a working-class suburb. We would have had to clear our minds of the vision of driving only minutes before in street after street of neighborhoods where the grass was already knee-high across acres and acres speckled with the occasional occupied house along with some deteriorating ghost structures.

The local public radio reporter rolling with us on assignment from Reveal, the well-regarded national investigative pod-cast operation on the West Coast, offered a weak apology earlier, saying something about hoping this wasn’t all we would see of Detroit. I had replied that I had been here before, and Dine’ Butler, an organizer with me, reminded her that we were from New Orleans, where we had post-Katrina neighborhoods like this as well.

We knew someone was home because the back end of the small SUV was wide open. Dine’ went around the side to the fence, and we quickly met the master of this castle. We knew he was on a land contract purchase agreement with Harbour Portfolio. He had been in the house 2-years, and had looked at a lot of Harbour houses before seeing this one and believing he could make a “go” of it. He had paid about $1500 down payment on a $42,000 purchase price with a 30-year contract at between 12 and 13% interest with monthly payments between $400 and $500. His family had been there for 2 years. He had put in about $7000 cash having to install a new furnace, roof, and wiring, which was still a work in progress. I asked him how he “felt about it,” and he said, “it’s all right for now until something better comes up.” Could he have applied for a conventional mortgage, I asked, and he answered, “not at that time.” He would be glad to come to a meeting and share his experiences and talk to others in the same situation.

The more visits we log, the more that it seems to me we aren’t hearing the responses we might expect from typical home buyers or home owners. Too often when we peel back the layers of these predatory contracts with people, there reaction isn’t surprise and in fact often seems more flight, than it is fight. People are often shocked by how bad their contracts are, but seem to have their eyes wide open to the fact that their housing is substandard. With the average rent in Detroit for a two-bedroom apartment reportedly $1300, many of them seem to almost be doing the math in their heads that even with a down payment and making repairs with sweat equity and cash on hand, they may be in better financial shape in these houses, even if they are at best “works in progress,” and at worse uninhabitable.

We haven’t hit enough doors and talked to enough people yet on the Home Savers Campaign, but listening to people and hearing what they are really saying, there’s no question that these land contract and rent-to-own or lease purchase schemes are predatory, but the crisis we are facing may be less about home ownership in the classic sense, and speaking a lot more to the crisis in available, decent affordable housing. With decreasing public housing units and section 8 vouchers and long waiting lists for both, with rising rents that are taking 50% or more of many household incomes on one hand, and an unforgiving post-2008 credit desert on the other with higher down payments, higher credit scores, and higher bank lending requirements, a lower income, working family may find themselves caught in the middle where a bigger place in rougher condition for lower monthly rent and pay-as-you-go repairs comes to look like a deal worth taking, everything being unequal. Heck, they may figure, there’s a slim chance, like playing the lottery, that they might even own the house some day…a carrot later, while being beaten by the sticks now.

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