Freeman lease-to-purchase bill would expand affordable home ownership

HARRISBURG, Jan. 3 – To assist families with less wealth in accessing sustainable home ownership, state Rep. Robert Freeman has introduced legislation to establish the Pennsylvania Lease Guaranteed Purchase Option Home Ownership Program, modeled after a lease-to-purchase concept.

Home ownership in the United States has dropped significantly since 2000, decreasing from 68% in 2003 to 63% in 2016, its lowest level since 1965. Although the overall homeownership rate has increased slightly in recent years, the homeownership rate among young adults (25-34-year-olds) has declined from 45% in 1990 to 41.6% as of 2021. Access to credit has become increasingly limited, especially for first-time homebuyers. In fact, the number of first-time homebuyers declined to just 26% in 2022, which is the lowest level since the National Association of Realtors began tracking data. 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 sustainable homeownership. One such model, the lease-to-purchase mortgage, allows a household to rent a home for a period before taking on the mortgage and ownership of the property with a portion of each month’s rent set aside in an escrow account and 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 effects associated with a lack of owner-occupied properties.”

Under Freeman’s legislation, the Pennsylvania Housing Finance Agency would administer the program which would specify the dates within which the option to purchase may be exercised, the amount of the purchase price, estimated closing costs, and the percentage of the purchase price needed for downpayment. The bill also includes 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. To be eligible for the program, the applicant’s household income would have to be at or below 100% of the area median income. 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 80% 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 1922 was referred to the House Housing and Community Development Committee.