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Can Lease-Purchase Program Raise Homeownership Rate?

Terner Center for Housing Innovation at University of California at Berkeley
 

The Terner Center for Housing Innovation at University of California at Berkeley recently released a brief that noted last year, the U.S. homeownership rate dropped to 62%, a level it had not reached in 50 years. Researchers estimate that this rate could decline to as low as 50% if conditions do not change (e.g., reductions in housing prices).

In response to these trends, the Terner Center recently launched a series that will explore innovative models used to increase homeownership among traditionally underserved groups. The first brief explored the lease-purchase model, which provides renters with the option to purchase a home after a predetermined amount of time.

One example highlighted in the brief is operated by the Cleveland Housing Network (CHN). After 15 years, low-income tenants earning 60% of the area median income (AMI) are offered the opportunity to purchase their unit. The vast majority of tenants chose to purchase their home (almost 900 homes have been sold since 2003). As owners, they typically pay the same monthly costs they did as renters. 

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