--- title: Lease-to-own agreements are blowing up - The Hustle description: The model offers an alternative to traditional homeownership, but it has some downsides. image: https://hs-sbup.thehustle.co/hubfs/The%20Hustle%20News/Assets/Images/193061351-HS-News-Brief_2022-07-01T031223.789Z.webp --- # Lease-to-own agreements are blowing up ![Mia Sullivan](https://thehustle.co/wp-content/uploads/2020/04/0-4.jpeg?width=48&height=48&name=0-4.jpeg) [Mia Sullivan](https://hs-sbup.thehustle.co/author/mia-sullivan) Published: July 01, 2022 Updated: October 11, 2023 In the next *Mission: Impossible* movie, Ethan Hunt should try buying a house. ![Lease-to-own agreements are blowing up](https://hs-sbup.thehustle.co/hs-fs/hubfs/The%20Hustle%20News/Assets/Images/193061351-HS-News-Brief_2022-07-01T031223.789Z.webp?width=595&height=400&name=193061351-HS-News-Brief_2022-07-01T031223.789Z.webp) Home [prices](https://www.npr.org/2022/01/20/1074377076/home-prices-rose-faster-than-ever-in-2021-the-typical-home-gained-50-000-in-valu) rose faster than ever in 2021, mortgage [rates](https://www.nytimes.com/2022/06/29/business/economy/mortgage-rates-housing-market.html) are the highest they’ve been since 2008, and limited supply means buyers are scrambling for whatever they can get. But an [alternative option](https://www.protocol.com/fintech/lease-to-own) that gives buyers another path to homeownership is gaining steam, per *Protocol*. #### **Lease-to-own…** … is a model that allows customers to make a monthly lease payment, with a portion of it going toward owning the property. - After a certain time period, they can either buy the property outright, or continue with monthly payments. The movement is powered by fintech startups like [Divvy](https://www.divvyhomes.com/), [Verbhouse](https://www.verbhouse.com/), and [ZeroDown](https://zerodown.com/), which buy homes in cash and rent them to customers using lease-to-own agreements. #### **Here’s how it works** With Divvy, a typical agreement: - **Requires** 1%-2% of the home price upfront, which goes toward the down payment if the renters decide to buy - **Charges** a monthly rental fee, plus a home savings fee (i.e. your down payment savings account) - **Locks** **in** a future purchase price; however, renters can pass on buying and walk away with home savings funds Divvy’s program is designed for renters to become “mortgage-eligible in three years,” according to the company’s website. #### **But rent-to-own agreements are controversial** They have a [history](https://www.theatlantic.com/business/archive/2018/04/rent-to-own-redlining/557588/) of being predatory and targeting low-income Black and brown homebuyers. Critics point out other downsides as well: - Rent-to-own encourages companies to shell out cash and compete with humans for limited housing stock - Locked-in home prices could be bad for buyers if the market drops - There’s no guarantee renters will qualify for a mortgage once their lease term is up For its part, Divvy [says](https://money.com/rent-to-own-homes/) roughly half of its customers are able to buy their homes. But the market likely wouldn’t be as competitive if these companies weren’t scooping up homes in the first place. 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