A San Francisco company that helps teachers and other educators buy homes in expensive cities is coming to Portland.
Landed Inc., founded in 2015, announced its expansion into Portland on Thursday. Its arrival makes Portland a member of an inauspicious group that includes the Bay Area, Los Angeles, Denver, Seattle and Hawaii, where teachers have struggled to buy homes in the communities they serve.
The company offers home-purchase coaching and advice, but its main selling point is a down-payment assistance fund, which will put up half of a 20% down payment toward a conventional mortgage from a separate lender. The metro area’s median home price is more than $400,000, which means a 20% down payment amounts to more than $80,000.
There’s a catch, of course: Eventually, when the house is sold or the loan refinanced, the buyer must pay back the fund — not only the share of the down payment but 25% of any home-value appreciation. That share would go back into the fund. If the home loses value, then that loss would also be split.
The Portland expansion was announced in partnership with the Multnomah Education Service District and several school districts that fall under the district’s umbrella, including Portland Public Schools. The company will hold information sessions at several local high schools and district offices.
The fund was seeded by philanthropic groups including an initiative founded by Facebook founder Mark Zuckerberg and physician Priscilla Chan, who are married. The for-profit Landed, meanwhile, makes its money through a referral fee paid as part of the home sale.
The business model points to a growing problem in Portland and elsewhere: that teachers, as well as other professionals, can no longer afford to live in the places where they work.
In Portland, according to a 2017 analysis by the National Council on Teacher Quality, it would take teachers with five years of experience and master’s degrees more than 12 years to save up a 20% down payment on a median-priced home — if they managed to sock away 10% of their $55,000 in pay each year.
That kind of savings might be unlikely, because rent for a one-bedroom apartment would eat up more than 30% of teachers’ pay each month.
“These are people who are essential to running our communities and are an important part of safe and strong communities, but they’re being swept out,” said Alex Lofton, the company’s co-founder.
“School districts are hemorrhaging talent. Right now, one of the reasons people talk about not being able to stay in the profession is the cost of housing.”
While the down-payment assistance is funded by philanthropy today, Lofton said the funders’ goal is to prove a viable investment model that could be taken over and grown by private investors in the future.
Shared-equity second mortgages to help come up with down payments aren’t new, but nor are they common, said Evan Swanson, a Portland mortgage broker. And they might not be the best deal for everyone.
The primary benefit of a 20% down payment is eliminating the need for mortgage insurance, but it isn’t the boon it once was. Personalized rates determined by creditworthiness are more common today than five years ago, so the added monthly payment for buyers with good credit might not be that high.
Meanwhile, a second mortgage will mean most lenders will offer a higher rate, Swanson said. That, combined with losing out on a quarter of appreciation, could cost the homeowner more in the long run.
“Is it going to be the best option for every consumer in that situation? No,” he said. “But it’s certainly going to help a lot of consumers who otherwise aren’t going to be homebuyers, or maybe increase their purchasing power without increasing their monthly payment.”