Toward a Scalable Capital Markets Funded Lease–Purchase Strategy for Low- and Moderate-Income Families

Abstract

The Great Recession inflicted enormous financial damage to household balance sheets, and while the ongoing economic and housing market recovery has been restorative, a residual effect is a near-record-low national homeownership rate, lagging credit scores that disqualify tens of thousands of individuals from securing a mortgage and the rapid growth of institutionally managed single family rentals (SFRs). Heightened political and policy interests in SFRs has followed Fannie Mae and Freddie Mac’s recent decisions to provide liquidity to private equity-backed operators. This article illustrates how working together, the GSEs and socially motivated investors could work with private equity-backed SFR operators to create scalable, capital markets-funded lease-purchase business strategies that could bring homeownership opportunities within reach of low- and moderate-income households—without the need for deep public subsidies.

TOPICS: MBS and residential mortgage loans, financial crises and financial market history