Herman Watson and Rhonda King live on the same Columbus street, in houses with nearly identical layouts in the Northaven Woods neighborhood. Both moved there as soon as the houses were built in 2017.
Watson bought his house after renting it for about a year. King hasn’t bought hers, and she said she doesn’t know if she ever will.
“We’re ready to buy a home, but we’re not sure about this particular home,” she said.
King initially planned to buy the house after renting for a year like Watson did, but several factors have deterred her, including uncertainty about the current owners of the development.
Rent-to-own housing is marketed as a path to homeownership for low-income individuals and families, who can rent a home for a certain amount of time while a portion of the rent contributes to a down payment for the eventual purchase of the home.
“Lease-to-own is really common in Mississippi, and it’s because there are so many people who, because of credit issues and low income, can’t obtain conventional lending,” said Desiree Hensley, director for the Low-Income Housing Clinic at the University of Mississippi School of Law.
In her experience as a housing lawyer, Hensley said, she has not seen rent-to-own deals work out as well in practice as they do in theory. One issue is the developer or owner of the property continues to own it on paper throughout the rental period, so land records do not show anyone else’s investment in the property. As a result, agreements regularly turn into court battles if a tenant misses a payment, she said.
However, no such thing has happened at Northaven Woods, and Hensley said rent-to-own can work out in renters’ favor, especially if they have no other path toward buying a home.
“In a state where there are such high levels of poverty, (rent-to-own) can be the only way people can purchase,” Hensley said. “I’ve seen the conflicts, but I’m sure there are instances where the owner truly does stick to the bargain.”
Types and availability of rent-to-own housing
One version of rent-to-own housing is subject to federal regulation and has a presence in both Columbus and Starkville. Section 42 of the Internal Revenue Tax Code provides tax credits to investors who build affordable housing.
Section 42 housing developments are not always rent-to-own, but this is “an allowable use” of the program, Mississippi Home Corporation executive director Scott Spivey said.
Residents of Section 42 housing are eligible to purchase their homes after 15 years of renting, and MHC keeps track of all tax-credit-funded housing in the state.
Lowndes County has five Section 42 developments: Hargrove Estates, Lowndes Properties III, two developments at Providence Place and, most recently, Fountain Square. Oktibbeha County has two of these developments, both part of the Reed Place housing complex. All seven developments have been in place for less than 15 years, according to MHC, so none of the residents have been eligible to buy their homes yet.
Oxford-based developer Stewart Rutledge completed Fountain Square in 2017 and is building Oktibbeha County’s third Section 42 development in Starkville, called Clark Grove and expected to be complete next year.
Clark Grove’s target residents are “the general population” but with a focus on veterans, firefighters, single parents and other members of the “workforce,” Rutledge previously told The Dispatch.
The Northaven Woods rent-to-own units were aimed at residents of public housing and resulted from a business deal between two private entities. No tax credits or other government subsidies were involved in the program.
Neither MHC nor any other state entity monitors any rent-to-own housing that is not sponsored by federal tax credits, said Will Bedwell, a housing attorney with the Mississippi Center for Justice, a nonprofit law firm focused on racial and economic justice.
Like Hensley, Bedwell said rent-to-own programs often don’t work out for renters.
“Anecdotally, I can’t send you to one person who has successfully (completed) rent-to-own for their home,” he said.
Hensley said rent-to-own homes often are not likely to be well constructed or to increase in value over time.
“If someone gave me the opportunity to buy at a lower-than-market rate, in consideration of my income and the fact that I’d been renting, I’d be skeptical because I’d be worried about the quality of the construction and the costs of maintaining it going forward, and the likelihood that it’s not going to appreciate over time,” Hensley said.
‘A marathon, not a sprint’
Facing more demand than supply for public housing a few years ago, the Columbus Community Housing Development Organization (CCHDO) sought to house some of its residents in single-family homes they could eventually buy. CCHDO, a private nonprofit, community-based service organization that has the capacity to develop affordable housing and supportive services, serves under the umbrella of the Columbus Housing Authority (CHA).
BH Properties, owned by local businessman Jabari Edwards, started building the houses in Northaven Woods in January 2016 and completed them about a year later. The houses are worth about $120,000 each and $1.5 million as a total development.
CCHDO handpicked residents who seemed likely to be in a financial position to purchase the homes about a year after moving in, said both CHA Director Debra Taylor and Antwann Richardson, president of Edwards’ Columbus-based construction company J5 GBL.
Residents pay $750 per month, with $650 as rent and $100 contributing to the down payment for the home, according to documents Richardson provided to The Dispatch. The down payment varies based on the potential buyer’s credit and financial institution.
Taylor and Richardson said residents were informed before they moved into the houses of what they needed for homeownership — including a sufficient budget, a high enough credit score and taking classes or meeting with a mortgage specialist.
“If they followed these directions, we felt like they could buy within 12 months,” Richardson said.
So far only two of the 13 homes have owners: Watson, who is a CHA employee, and his next-door neighbor, James Watkins.
BH sold the homes to CCHDO within a year of completing construction, and this was both organizations’ plan from the start, Richardson said.
Taylor told The Dispatch residents “were advised to contact BH about their concerns and any agreements that they had with them.”
Some residents of those homes, including King, said they were not aware of this part of the plan. King said she could not reach anyone at BH Properties, and she initially believed BH would be the only entity responsible for the development.
“I was under the assumption that the housing authority didn’t have anything to do with it,” she said.
Another resident, Daviana Jones, said she never took or was aware of any credit counseling or homeownership classes, and King said the few classes she attended were not as helpful as she has hoped.
“It was just showing you the house-buying process and what they look at on your credit,” King said. “It wasn’t showing you what to do, the steps to take.”
Richardson and Taylor both said the key for renters is to take initiative and work in partnership with CCHDO.
“Homeownership, going from rent to own, is a marathon, not a sprint,” Richardson said. “You have to take your time, work the process and be committed to that process.”
He added that any of the residents can buy their houses at any time as long as they can get a mortgage, and they do not need permission from CCHDO.
Taylor said CCHDO has “no written documentation of what the initial terms were with BH Properties,” and Hensley said this might contribute to the confusion on the tenants’ side. It is unclear whether the extra $100 per month residents paid when BH owned the houses is still part of the accumulating down payments now that CCHDO owns them.
“It sounds to me like this was never as formalized as you would want it to be to reassure the people who moved out of public housing that they would actually be getting this long-term benefit of purchasing (a home),” Hensley said.
A 15-year wait
People who make 60 percent or less of the median area income are eligible for Section 42 housing. As with public housing, Rutledge said demand for Section 42 housing is constant regardless of the state of the economy.
“The discrepancy between demand and the supply for workforce and affordable housing is so enormous at all times,” he said.
MHC contributes 80 percent of the money for the construction of Section 42 housing, and the developer contributes the remaining 20 percent. Rutledge previously told The Dispatch that MHC will provide credit counseling for Clark Grove residents.
Section 42 developers receive federal on-site inspections and have to keep strict records and submit them to HUD every year, Rutledge said.
Two residents of Fountain Square, Rutledge’s Lowndes County development, said they know they would have the option of buying their homes after 15 years but do not plan to. Latedra Williams and Itisha Colister are both raising children and said they would like to buy houses sooner than later.
“I’m in the process (of buying), maybe within the next year or two, and I’ll be here until I find something,” Williams said.
However, residents of HUD-sponsored housing often do not always know that their housing is federally regulated, Hensley said.
Lucy Brown and Janet Wells, two residents of Providence Place just outside Columbus, said they were under the impression they could buy their houses after 10 years of renting. They have lived in those houses for 13 years.
However, Tennessee-based developer Michael Hedges told The Dispatch that Providence Place is a Section 42 development, which MHC confirmed. Hedges said he has built 28 affordable housing complexes in multiple states.
Hensley said 10 years is “a relevant number” to Section 42 because that’s when HUD stops providing tax credits to maintain the development, but 15 years is the minimum eligibility point for purchasing.
Providence Place changed management companies a few years ago, and some residents like Brown and Wells interpreted it as a change in ownership, but Hedges said he has always owned the homes since they were built in 2007.
Brown said she would still like to buy the house she lives in but would be open to buying one elsewhere. Wells said she will buy elsewhere regardless after property management did not follow through with repairs and maintenance in her house or on the roads in the neighborhood.
“I’ve put so much money into buying bricks and trying to fix things up, trying to make it my home, and I’m just not going to do it anymore,” Wells said.
CCHDO is primarily responsible for maintenance at Northaven Woods, Taylor said, but CHA employees sometimes complete maintenance requests “depending on who’s on call.”
King said CCHDO and CHA “sometimes” follow through with maintenance requests, but Jones said she was dissatisfied with the construction of her house in the first place.
“I feel like they rushed a lot of things inside this house, because a lot of stuff was breaking within a month of us staying here,” said Jones, who had lived in the house with her family for about three years as of July but planned to move out.
King said she has “always had questions” about her housing arrangement, from the initial lease agreement to the possibility of ownership someday.
“Just a lot of stuff didn’t make sense,” she said.
Tess Vrbin was previously a reporter for The Dispatch.
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