Buying a House Feels Impossible These Days. Here Are 6 Innovative Paths to Homeownership

A dozen Grade-A eggs will run you about $0.40 more than they did a year ago, and you’ll have to fork over $0.66 more for a pound of ground beef. Unleaded now costs $1.23 per gallon at the pump, which is 1.23 less than it did in 2020. But few year-over-year price increases compare to what’s happened to the American housing market. The sale price of a median home in the U.S. has ballooned by more than $67,000 in the past year, according to the Federal Reserve Bank of St. Louis — surging from just under $338,000 to nearly $405,000.

There’s lots of reasons for this. The past year has seen a significant increase in this number. Low interest rates combined with COVID-19 which enabled tens to millions of people work remotely, drove the demand for homes. While long-term renters started looking to purchase larger homes, homeowners who already own homes began searching for second home options. Between January 2020 and February 2021, mortgage applications for second homes soared by 84%.
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That jump in demand was compounded by a nationwide slump in housing supply—the result of both nationwide labor shortages andThere have been disruptions in supply chains of critical building materials such as lumber and copper. According to A.A., these issues were exacerbated due to delays in housing construction for the last twenty years. National Association of Realtors June Report

This has resulted in millions of Americans being effectively denied homeownership across income ranges. Particularly young people, and people of colour are affected by this problem. The homeownership rate for millennials between 25 and 34 is eight percentage points lower that it was among both Gen Xers (both baby boomers) in the same age group. Black homeownership, meanwhile, remains at just 45%—30% lower than that of white families and nearly unchanged since 1968, when overt housing discrimination was outlawed.

It’s more than just a housing dilemma. Since home ownership remains the best way for an average family to accrue wealth over a lifetime, it’s a prosperity issue, too. According to the Federal Reserve’s September 2020 report, homeowners in America have on average forty times the wealth of renters.

Here are six innovative ways communities and businesses around the nation are helping Americans to buy homes.

1. Reparations for Black Families: A case study

Evanston, Illinois, like many other cities in America, has long had racist housing laws. Black residents lived in segregated neighborhoods for decades. Occupancy rates averaged 150%, and many units had no heating or other essential amenities. There were many vacant properties in the more desirable neighborhoods of the city, but landlords and agents of real estate prohibited Black families to rent them. Banks also stopped Black families financing. “Owners and agents of vacant property plan to prevent the negroes from spreading from their own quarters,” a 1918 Evanston News-Index article read. HousingWealth inequality was a result of egregation: On average, Evanston’s black families earn $46,000 more than their white counterparts.

Robin Rue Simmons, an Evanston Alderman sought to rectify that terrible past. In 2019, while in office, she established the first ever taxpayer-backed compensation fund in a U.S. municipality.. It sets aside $10 million in revenue, raised by the city’s tax on recreational marijuana, over a 10-year period. It will provide $400,000 to victims of discrimination in housing and their families. This money can then be split into $25,000 grants that could be used for renovations, down-payments, or mortgage payments.

It will not solve the problem with an initial outlay of $400,000. Evanston has more than 12,000 Black residents. This initial investment will fund just 16 homes. But, Simmons argues, “it’s better than zero”—and the program also sets a key precedent. Many other areas, including Detroit in Michigan, Amherst in Massachusetts and Detroit in Michigan have taken the initiative to create or expand similar programs since Evanston set up their reparations fund. “If you think of any significant, transformative national or federal legislation, it started with localities and grassroots efforts organizing and pushing their local leaders,” Simmons says. “This is no exception.”

2. Community Land Trusts – Buying the property but not its land

The most unique part of the two-story home in Winooski, Vermont that Sarah and husband Colin Robinson bought for $172,000 in 2008 wasn’t its quaint terrace garden or the funky bunk-room upstairs. It was the fact that the Robinsons didn’t own the land that it was built on. That’s because the house is part of what’s known as a community land trust (CLT)—a non-profit, community-controlled collection of properties.

Albany Georgia, in 1969 was the birthplace of America’s first CLT. There are now more than 220 CLTs in the country, with more than 12,000 available. Although the rules for each CLT may be slightly different, the basic idea remains the same. Aspiring homeowners split the costs of buying a home with the CLT which also owns the land where it is constructed. The homeowner receives a portion of the CLT’s appreciation when he/she sells.

Champlain Housing Trust—the CLT that helped the Robinsons become homeowners—is the largest in the country, with 636 properties in the Burlington area. Its rules govern: the purchase price of an average home is offset by about 30%, and upon selling, the homeowner keeps a quarter of the home’s appreciation price, plus the cost of any major renovations invested into the property. The average Champlain Housing Trust member keeps their home for 7.5 years and walks away $25,000 richer—money that they can then put toward purchasing more expensive homes on the regular market. The Urban Institute’s 2010 study of Champlain Housing Trust was able to determine that 68% had left CLT and went on the purchase of market-rate properties.

RobinsonsA model of how it’s supposed to work. They were able to walk away from their CLT house in 2014 with $40,000 equity. This was used for the purchase of the second home they purchased on the regular market. “We were able to bring that money with us, and that was really what made it possible,” says Sarah. “It really changed the trajectory of our lives.”

3. Zoning overhaul: Ending de-facto redlining

The racial gap in housing ownership is greater than Minneapolis, Minnesota. More than 70% of White families have their homes, while only 20% of Black families do. According to 2021 Urban Institute reports. A lack of affordable housing is the main reason behind this inequality, as Minnesota Housing Finance Agency estimates that there are 40,000 housing units less than demand. This shortage is made worse by restrictive zoning regulations that are based on discriminatory policies for decades.

After the federal government outlawed explicit racial housing discrimination in the 1960s, local lawmakers scrambled to bolster different regulations—namely single-family zoning ordinances that would maintain the homogeneousness of their neighborhoods. Under those rules, construction companies were banned from building anything other than standalone homes—including more affordable row homes, condominiums, duplexes, triplexes—in most upscale neighborhoods, which had the effect of pricing Black and brown families out of the market.

Lisa Bender, president of Minneapolis’ City Council, argues that changing those rules is “the very bare minimum first thing” that policymakers can do “to fix centuries of racial exclusion.” In 2018, she spearheaded a City Council effort to rescind regulations reserving 70% of the city’s residential land for single-family zoning—a move that could effectively triple the housing supply in some Minneapolis neighborhoods by prompting construction of new, more cost-efficient multi-family units. In 2020, the rule was changed. Portland, Oregon and California both have policies which effectively ban single-family zoned development.

4. 3D printing for construction: Efficiency and sustainability meet environmentalism

Jason Ballard grew up in a oil-soaked East Texas suburb and was interested in sustainability. But it wasn’t until college that he realized the best way he could explore environmentalism was not by becoming a biologist, but by becoming a builder. “Buildings are the number one user of energy. Construction is the number one producer of waste,” he says, adding that construction is also one of the top users of water behind agriculture. He co-founded ICON in 2017, which is a company that develops affordable and sustainable single-family homes through 3D printing. This method creates less waste than conventional building methods.

While the startup is just getting off the ground—its first four homes sold this year—its cost of construction appears to be 10-30% less than traditional builders, thanks largely to reductions in labor and supply needs. ICON, a 3D printing company, announced in October that it would use its technology in order to build 100 houses in Austin in 2022. This will create the largest 3D-printed community to date.

Ballard expects that costs will decrease further as ICON automates additional components of the construction process. It is a method that makes it easy to automate construction processes. Also, it can be astonishingly fast. It takes about five to six weeks to build an American house. Apis Cor, an American 3D printing company based in Boston, claims it can build a ready-to-move-in three-bedroom and two-bath house in 7.7 months according to a U.S Census Bureau 2018 survey.

Illustration by Wenjia Tan for TIME

5. Modular housing: Building houses the same way Henry Ford made cars

There’s no way that Sara and Jon Comiskey, both in their mid-20s, would have been able to afford a house in the Buena Vista area of Colorado, where median home prices hover around $515,000, if it wasn’t for a start-up called Fading West. In 2016, Fading West began buildingHomes that are constructed in-house in a factory can be as efficient as manufacturing cars. Workers complete most components of a house—house siding, flooring, and walls—at scale, then attach them to a foundation on site. Charlie Chupp, founder of Fading West, said that final features such as garages or porches are only added after the house is finished. “You wouldn’t build a Camry in someone’s driveway,” he says. You wouldn’t do that for your house.

Chupp says his company’s lean production model reduces waste by eliminating weather-related damage to materials like is typical during outdoor construction, requires fewer skilled laborers, and significantly reduces the time required to make a home. “With 100 people on a traditional system, you might be able to build between 100 and 150 homes a year,” he says. “We think we can do between 600 and 700 homes a year.”

However, there are also disadvantages. There are downsides. The house parts must be transported from the factory to the foundation. Homeowners have limited design options due to the standardization. Two cabinet options are available, as well as three different tile options and three sizes of windows. Customers also get one-color carpet. “We offer a standard quartz countertop in any color you want,” Chupp jokes, “as long as it’s white.”

But Chupp also offers something that many other real estate developers don’t: affordability. His houses that are produced on-site cost at least 25% less than similar models. For $240,000, the Comiskeys acquired a Buenavista townhouse measuring 900 square foot in Fading West.

6. Divvy: Rent-to own is a fresh approach

Adena Hefets grew up listening to her parents’ stories of how difficult it was for them to purchase a home in the early 1980s. As an immigrant from Israel, her dad didn’t have an established credit score and so couldn’t get a mortgage. Eventually, her family was able to buy a seller-financed home—a rare home-buying mechanism where a seller allows a buyer to pay for a home in increments, rather than making mortgage payments to a bank.

Hefets founded Divvy in 2017, a technology company that provides a similar service to potential homebuyers. In exchange, Divvy pays a monthly rental of approximately 10-15% more than they would for similar rentals. This differential is used to build equity in the property. Clients can either buy the house back with equity earned through rent payments or cash out equity after their lease ends.

It’s not a universal solution. Buyers need to have moderate credit ratings and renters must be capable of paying above-market rates. In the past five years, Divvy has formed partnerships with thousands families. About 47% end up buying their homes back from Divvy..

LaCresa Hooks, who works as an accountant, couldn’t find a traditional mortgage because she was working as a short-term contractor. In October 2020, she signed a lease with Divvy and less than a year later, she’d bought back her 3-bedroom, 2-bath Georgia home with bank financing thanks to the equity she accrued. Her mortgage payment is something she now looks forward too. “I’m building something now,” she says. “With rent, you aren’t building anything. You’re just paying your landlord and that’s it for the next 30 days.”


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