Are Rent-to-Own Homes Predatory?

Alexandra Stevenson and Matthew Goldstein take a deeply critical look at the rising phenomenon of "rent-to-own" deals, where landlords foist repair costs off on their tenants in exchange for a promise of eventual ownership. These deals tend to place all the risk on renters, saving none at all for the landlord. 

This is predictably problematic, especially for lower-income tenants. "Most tenants walk away with nothing, having sunk money for rent and repairs into homes they had once hoped to own. Others faced surprise evictions, having signed a contract that did not disclose what repairs were needed, yet set a deadline for making sure the home was up to local housing code."

In many cases, these fair-on-the-face deals conceal legal untidiness and hidden costs that bring the mortgage crisis to mind. "Unlike most typical home purchases, rent-to-own contracts have no requirement to obtain an independent home inspection. The customers contend they were not informed of outstanding issues with Vision homes, many of which the company had bought for $10,000 or less."

Failing to properly fix up these properties carries the risk of eviction. "Tenants who are evicted during the tenure of these seven-year contracts walk away empty-handed, receiving no credit for money spent on repairs or renovations."

What's driving rent-to-own? The same "dream" that drove the mortgage crisis. As one rent-to-own executive argued, "[rent-to-own] is bringing the dream of homeownership to Americans who lack good credit or are too poor to qualify for mortgages."