The San Francisco based company Landed was created to help teachers working in high-cost areas achieve homeownership. The company has been meeting with teachers across Hawaii this week ahead of its planned expansion into the state.
Landed is already operating in other expensive metropolitan areas on the mainland, including Seattle, Los Angeles, Denver, and the San Francisco Bay area.
The cost of housing in Hawaii is on par or in excess of those cities. In April, the average sale price of a single family home in Hawaii was $800,000, which puts a 20% down payment around $160,000. Comapre that with the starting pay for public teachers; less than $50,000.
The basic premise is that Landed will cover half the cost of a 20% down payment for teachers and other education professionals, up to $120,000 per family. In return, the company will take 25 percent of the increase in the property’s value over the term of the mortgage.
If the property loses value, Landed will also absorb 25 percent of the loss.
Ian Magruder, Landed’s Director of Partnerships, describes this arrangement as an investment in teachers, rather than a loan.
But not everyone agrees with that sentiment. The president of the Hawaii State Teachers’ Association, Corey Rosenlee, sees Landed as being far more expensive than a conventional loan.
“Unfortunately, we actually believe that Landed is not a good deal for our teachers,” Rosenlee told HPR.
He described a scenario in which a Landed participant purchases a $500,000 condo. Landed would contribute $50,000 toward a down payment and claim 25% of the future change in the condo’s value.
Rosenlee says that in 15 years, it is not unreasonable to expect the value of such a condo to double in some Hawaii markets. That would result in the owner owing Landed $175,000 on the original $50,000 loan; a rate he says is far higher than taking out mortgage insurance on a traditional loan.
Magruder says that route often isn’t an option for many Landed participants, who either wouldn’t be able to meet the 20 percent down payment alone or would not be able to qualify for mortgage insurance.
“This is a way of getting access to homeownership and getting into the market, without having to pay more on a monthly basis,” Magruder said.
He also said that Landed encourages participants to refinance their home as soon as possible to minimize their liability under the 25 percent agreement.
Union president Rosenlee pushed back against that, saying it would take many Hawaii teachers years before they can afford to buy landed out.
Despite the union’s concerns, many teachers seemed open to the Landed program. At an evening information session at Mililani High School, about 30 educators and their spouses heard the Landed pitch. All that spoke with HPR afterward said they thought it was a good option for those who needed help with a down payment, despite the 25 percent obligation to Landed.
The company hopes to begin operating in Hawaii as soon as early June.