Freeman’s lease to purchase bill would expand affordable home ownership

HARRISBURG, June 23 – To assist families of lesser means in accessing affordable and sustainable home ownership, state Rep. Robert Freeman has introduced legislation to establish the Pennsylvania Lease-Purchase Home Ownership Program.

In 2016, the U.S. home ownership rate dropped below 63%, its lowest level since 1965. Access to credit has become increasingly limited, especially for first-time homebuyers. Combined with the impacts of rent and housing prices rising faster than incomes, an inadequate inventory of affordable housing, high levels of student loan debt, and demographic shifts, many people are increasingly locked out of the homeownership market. 

“Alternate models are especially needed to ensure that lower-income households have access to affordable and sustainable homeownership. One such model, the lease to purchase mortgage, allows a household to rent a home for a period before taking on a mortgage and ownership of the property with a portion of each month’s rent set aside in an escrow account to be used to cover the down payment and closing costs. This rental period allows households to build a positive credit history and increase their savings before taking on the responsibility of a mortgage, while at the same time ‘locking in’ lower interest rates and house prices,” Freeman said.

“Lease to purchase programs can also contribute to neighborhood stabilization, providing a means for low-income families to build wealth through equity in their house and bringing the stability and investment associated with home ownership to neighborhoods experiencing the potential negative side effects associated with a lack of owner-occupied properties.”

Under Freeman’s legislation, the Pennsylvania Housing Finance Agency would administer a program that would require lease to purchase agreements to allow the lessee to acquire ownership after 50% of all lease payments have been made. The bill also would include protections for lessor liability, prohibited contract provisions designed to protect the lessee, and a process for reinstating the agreement should default occur at some point. Further, at least 30% of program funds would be allocated for lease to purchase housing projects that benefit households with incomes that are less than 50% of the median area income.

“This critical measure would help to expand access to affordable home ownership and assist local governments with revitalizing neighborhoods throughout the commonwealth,” Freeman said.

House Bill 2701 was referred to the House Urban Affairs Committee.