In the wake of the Great Recession, America’s homeownership rate stands at its lowest point in two decades. Even as housing in some areas has become more affordable than ever, many aspiring homeowners have not been able to secure a mortgage in order to take advantage of this affordability because access to mortgage credit is so limited. Mortgage availability is tight not just compared to the housing-bubble years, but also according to broader historic standards. Yet studies show that many renters still aspire to become homeowners.
With potential homebuyers on the sidelines, both large and small investors have been buying enormous numbers of properties for cash. Cash buyers, who tend to be investors, comprised nearly 43 percent of all home sales in the first quarter of 2014. Instead of flipping homes, as many investors have traditionally done after a housing bust, many of these investors have converted formerly owner-occupied homes into rental units. Between 2007 and 2011, more than 3 million single-family homes were converted into rental homes. At least 150,000 of these homes have gone to larger companies that are establishing sizable rental portfolios on a multistate or even national basis.
The confluence of these factors is fueling a new discussion about putting families on a path to purchase their rental homes. The lease-to-own approach could potentially benefit both landlords and tenants.
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