On the heels of its fifth year in existence, and its third providing houses for lower-income residents, a homegrown nonprofit is marking the occasion with a new program aimed at broadening its reach for facilitating homeownership.
The Maggie Walker Community Land Trust has launched a new rent-to-own program that’s aimed at helping renters prepare to become homebuyers.
Called the Homeownership Bridge program, it uses grant funds awarded through the City of Richmond’s Affordable Housing Trust Fund to set aside homes specifically for would-be buyers who do not currently qualify for a mortgage, be it due to a low credit score or an inability to afford a down payment or pay closing costs.
Participants who qualify can lease a home in the land trust’s portfolio for 12 months, during which time the nonprofit and other groups help the resident become “mortgage-ready.” Monthly rent is on par with the mortgage payments to be made, and more than half of that amount is put into a fund to be used to make a down payment on the house.
After 12 months with at least $500 set aside each month, the buyer would theoretically be able to make a $6,000 down payment.
The program launched last fall with the land trust moving its first two families into houses it built in Church Hill. The homes — two of four that the nonprofit has designated for the program so far — are valued at over $300,000 but will be sold to the families for $165,000, with each household building up their mortgage-readiness through the lease term.
The program is targeted to households earning 50 to 60 percent of the area median income (AMI), which was $89,400 in fiscal year 2020 for the Richmond Metropolitan Statistical Area. Fifty percent of that, described as “very low” income, equates to $44,700 for a family of four, according to the U.S. Department of Housing & Urban Development.
Homeownership Bridge is considered the only program of its kind in Central Virginia, said Laura Lafayette, CEO of the Richmond Association of Realtors and Central Virginia Regional Multiple Listing Service, who chairs the MWCLT board.
Lafayette said the idea for the program came about from seeing applicants complete paperwork for a MWCLT house, only to learn that they were six to 18 months away from being able to afford a down payment or restore their credit. The nonprofit typically works with income-qualified buyers at 50 to 115 percent AMI.
“We didn’t want folks to get discouraged,” Lafayette said. “We felt like if we were going to keep these folks in our buyer pipeline, we needed to provide them with an opportunity to prepare themselves for homeownership.”
Noting some rent-to-own programs can be predatory in structure, Lafayette said, “We wanted to make sure that they were in a safe rent-to-own model. It’s their house, they are technically tenants. But they have full responsibility for the house as if they were the owners. So it should be a very seamless transition for them.”
‘It’s about inclusive homeownership’
Under the community land trust model, MWCLT provides permanent affordable housing through a “pay-it-forward” approach, in which the trust leases the land to an income-qualified homebuyer for little to no lease payments, and the buyer then only has to purchase the house.
In exchange for the reduced price, the buyer agrees to keep only half the proceeds when the house is later sold, while the remaining equity stays with the house to keep it affordable for the next qualified buyer.
Where most of the land trust’s homebuyers are making over 90 percent of AMI, Lafayette said the rent-to-own program allows the nonprofit to work with potential buyers it would not normally reach.
“This program allows us to help people who are not necessarily earning towards the top of our income limit, so we’re excited to be able to expand the number of folks that we can serve,” she said.
Lafayette said the program also helps the nonprofit reach specific populations.
“It’s about inclusive homeownership opportunities,” she said. “We had a strategic planning session before the pandemic, before everything we experienced this past summer, where we took a hard look at ourselves and said, ‘We say we want to provide homeownership opportunities to people who have been historically marginalized; we need to be more aggressive, more intentional in that regard.
“When we talked about what were the impediments often for people of color for homeownership, one of the great impediments was the ability to save for a down payment,” she said. “A number of homeowners, maybe they receive a gift donation from their parents toward homeownership. Not all folks have those kinds of resources in their family.”
With the first two applicants served last fall — one a mother-of-three and director of a local nonprofit; the other a father-of-two who works at a tech firm — the land trust closed out 2020 with two more homes for the program and is aiming to have six to eight houses set aside for it any given time. Lafayette said it has 45 homes in the pipeline right now, with 50 homes built so far.
“If we can grow the portfolio, we would grow this program,” she said. “For now, we’re at 50 homes. We hope to grow that by another 25 in 2021.”
50 homes in 5 years
After becoming a nonprofit in late 2015, MWCLT started delivering homes two years later when it built and sold its first house in Church Hill. Today, its 50-home portfolio reaches throughout the metro region, with plans this year to build a 10-home subdivision in Chesterfield’s Ettrick area.
The nonprofit also is involved in the Highland Grove mixed-income development that’s filling the former Dove Court public housing community in the city. And it’s building a duplex behind Peter Paul Development Center in the East End, in partnership with fellow housing nonprofit Urban Hope and RE:work Richmond, an employment group that would recommend rent-to-own candidates for the duplex, which Urban Hope would manage.
“The only limit to us is money,” Lafayette said. “There are all kinds of amazing things going on, really creative and innovative work. We just need more resources. We continue to be very lean.
“My goal is for us to create revenue streams where we can cover our operational costs and then go to the philanthropic community and ask for money for acquisitions, because it’s all about getting land.”
Noting efforts by the city, such as its draft equitable housing plan that calls for transferring vacant city-owned land and tax-delinquent parcels directly to the land trust, Lafayette added, “The vacant land, tax-delinquent parcels, surplus parcels that local governments own, all of that can help fuel our growth.”