Landed’s Story

As wealth continues to concentrate in our cities and their surrounding suburbs, real estate prices are rising at unprecedented rates—and educators are struggling to keep up financially. The cost of housing in many communities has become a significant problem for our schools. Teachers, administrators, and other school staff are integral members of their communities, but ever-increasing rents are placing a huge financial strain on their lives. At a time when we are already facing teacher shortages, many of them are finding it more and more difficult to live close enough to their schools.

                  Michelle Park, 29, is a guidance counselor at an elementary school in Oakland, CA. She and her partner rent a one-bedroom apartment a mile away from her school. “We love our community and we’re comfortable paying $2,100 a month in rent, but we really want to own our home. We feel like we’re throwing that money down the drain when we could be putting it towards paying down a mortgage.” Owning property provides many people with a sense of financial security and an opportunity to build wealth (not to mention large tax breaks along the way). Educators, in particular, make excellent homeowners: they have stable incomes that allow them to afford monthly payments, and they are active and engaged in their communities. But the trouble is that, in this day and age, a huge amount of savings is required to buy a house—the average down payment used to be roughly equivalent to one or two years’ worth of rent; now, it’s closer to three or even four. Many educators would love to buy a home in the same zip code as their school, but find themselves in a trap: they can afford monthly rent—and therefore could afford monthly mortgage payments—but they can’t manage to build significant savings.

Park and her partner found themselves in this exact predicament. “When we got engaged, we started thinking seriously about buying an apartment or a house as an investment in our future together. But after our rent check, our car insurance payment, and expenses like groceries, we couldn’t put more than a few hundred dollars into our savings account each month, max.” And as they were trying to save, the rents and property prices around them were only going up. “We love where we live, and we love our jobs here, but we had to think about how financially sustainable it really was to keep renting. We started considering uprooting our lives and moving to some place where we could actually afford to own.”

The best solution that many educators can find to build savings is to move to a nearby area with more reasonable rents, but increasing demand for housing means that they are finding fewer and fewer affordable options within commuting distance. Teachers already work long days that tend to start very early in the morning. When you add a long-distance commute, they arrive at school unable to function to the best of their ability. Commuting teachers are also more likely to opt out of extracurricular activities at their school, and less likely to integrate with the community. And eventually, any number of factors—the decision to start a family, for instance—can force them to leave their schools in favor of a new job in a place where they can actually afford the cost of living. “Teacher turnover is a enormous problem in schools located in or near expensive cities,” says Brewster Ely, former head of the Town School for Boys in San Francisco. “It’s been proven that student achievement is affected when the teachers have less professional experience, or even less experience at that particular school. It’s also an issue of stability for the administration: how do we attract and retain talent in a way that doesn’t require making large budgetary sacrifices?”

                  For people who are lucky enough to receive assistance from their family or employer, making a down payment and becoming a homeowner is much more achievable. Those who aren’t might be tempted to turn to other low down payment options that would make up for the gap. But according to Carol Galante, former head of the Federal Housing Administration, buyers should be wary of those like down payment loans. “Most first time homebuyers don’t have 20% to put towards a down payment. Getting to that 20% by incurring additional debt is not always the best option—it adds more risk for the buyer and makes them very vulnerable to small changes in the housing market.”

                  Many schools have determined that down payment support programs to help teachers buy homes are one of the best solutions to turnover issues, but they run into trouble when it comes to the question of how to implement them. Jon Jaffe, a Partner at Mayer Brown, has established several such programs. “School administrations are not usually set up to offer programs that help teachers buy homes. Without outside support, offering a down payment program is expensive, time consuming, and can involve a series of legal risks.” Brewster Eli adds: “When the schools themselves are managing these programs, it can drastically complicate the relationship between employer and employee.” 

And that’s where Landed comes in. Landed provides down payment support that makes homeownership possible for educators, so schools don’t have to. 

Landed creates and manages funds that serve as co-investors for teachers and other school staff who want to buy a home, but lack the outside support that other buyers are receiving from their families. One advantage that schools in high housing cost areas often have is an active network of donors within the community. Landed provides an opportunity for these donors to invest in a home alongside a local educator. If the homebuyer can save 10% of the down payment, a Landed fund will match that amount so the buyer is able to obtain an 80% mortgage loan, a far less risky and expensive option than a 90% mortgage. In exchange for the initial investment, the Landed fund receives a share of the appreciation of the value of the home when it is sold or refinanced. It’s a true investment partnership: if the home goes up in value, investors and homeowners both win; if it goes down, they both lose.

It’s also a very attractive investment for more than monetary reasons, says David Hood, director of real asset strategies at Sonen Capital. “Today, many investors are looking for more than just financial returns. Enlightened investors want to generate competitive returns while positively impacting their community. Few investments are built from the ground up to deliver this kind of double bottom line. Landed offers an exciting way for investors to support local education with a real estate allocation.”

That’s exactly why Sangeeth Peruri was so excited to encounter Landed at a housing conference in June 2016. Sangeeth is on the board of the Los Altos School District at the south end of the San Francisco Bay, and instantly saw a place for Landed in their schools. “Landed is an exciting way for me to support educators in my community beyond an annual donation. I recognize that having teachers live in our community provides a great benefit to my children, and Landed helps make that possible.” He reached out to like-minded members of his community, and was able to secure enough commitments from other investors for Landed to start a fund for LASD within two weeks.

The superintendent, Jeff Baier, was surprised to find how easy it was to bring Landed to LASD. “It’s a far less complex process than people would assume, since it isn’t a school-provided benefit. We didn’t have many approvals to worry about because the school isn’t technically involved. It’s a partnership directly between the investors and the teachers. We found that there was such a broad base of support for the program from the district, the union, and the community that everyone worked collaboratively. Everything came together very quickly, and our staff is thrilled to have this option available to them.” John Doe was quick to sign up for a partnership. “I was so excited when our school first introduced the Landed program to us. The idea of saving 20% for a down payment always felt like a pipe dream. But 10%? It was far from easy, but it was a lot more manageable.” Once they had all their financial paperwork in order, they got to house hunting right away. “Landed was a huge help, not just with the matching fund but in how much support and guidance they provided throughout the buying process. After a couple of weeks of searching, we placed an offer on a home and it was accepted. We just closed on our dream house—and it’s only a fifteen minute drive from work.”

Anyone can set up a Landed program. If you’re interested in bringing Landed to your school, please contact hi@landed.com.