In San Jose, California, the average teacher makes slightly more than $70,000. But the median home sells for nearly $1 million—and even the most basic of condos can sell for as much as $400,000. The real estate website Redfin, which published a report last year examining housing affordability for teachers, says that only 0.2% of homes in San Jose are affordable on the average teacher salary. As in some other expensive cities, many teachers who want homes for their own families are deciding to move away. But one Bay Area-based startup, called Landed, is designed to help teachers buy homes by investing in part of the down payment.
“We’re on a mission to help ‘essential professionals’ build financial security close to where they work,” says Alex Lofton, cofounder and head of growth at Landed. Because of the high cost of housing, he says, “people who have key roles in society are finding it really hard to stick around, and they are either moving to cheaper places, or new professions, in order to build a life for themselves and their families.” Growing up outside Seattle, Lofton watched as his own parents—an elementary teacher and a social worker—were able to transform their financial lives when they inherited a home from his grandmother. He wanted to find a way to help those who didn’t have access to intergenerational wealth or a loan from the so-called bank of mom and dad.
The basic process is simple. If a teacher lives in the Bay Area or the other high-cost markets where Landed operates and is struggling to save up for a full down payment of 20% of the cost of the house but has 10%, the startup will match the other 10%. Teachers can avoid the extra expense of private mortgage insurance on a low down payment, and because they are borrowing less money, their monthly payments will be more reasonable. In most cases, teachers who use the program have a partner with a second income and are already paying exorbitant rent, making the monthly mortgage payment on a Bay Area house theoretically feasible. “If you can afford rent in an area on a month-to-month basis, you can usually afford a mortgage,” says Lofton. “But the reality is saving that 20% while paying for rent and everything else here is what’s so hard.”
Landed helps evaluate any issues in a prospective house—offering home buyers guidance along with financial support—and then puts the money into escrow, drawing from a fund provided by the Chan Zuckerberg Initiative and other foundations. After someone buys a home, Landed will share the mortgage for 30 years, at which point the family has to pay them back; if they decide to move, they’ll have to return the down-payment support to the original fund, along with 25% of the change in value. If the house goes up in value, some of those proceeds will go back to the fund, and if the house loses value, the homeowner will subtract some of that loss from what they owe. “It’s totally dependent on the market,” Lofton says. “And that’s why it is shared equity instead of debt. You really are sharing in the value of the home rather than borrowing money.”
Some cities offer similar programs; San Francisco, for example, also has a down-payment assistance program for teachers. In some cases, there might be challenges in using those programs, since a city program might be limited to people living within city limits (and a teacher in San Francisco, for example, might want to live in a somewhat lower-cost city like Oakland, or might live in another suburb because of their spouse). City programs also tend to take more time for approval on a property, and in a hot market, that might mean that losing out on a house. The startup doesn’t rely on its down-payment investments as a business model—instead, it takes a cut of the commission from the buyer’s agent in exchange for bringing in a new home buyer.
The company is now working directly with school districts, which are desperate to find ways to keep teachers in place; some districts, including San Jose, are also exploring using old schools and other district property to building new housing themselves. In one survey of teachers in Berkeley, around 50% of staff were considering leaving because of the cost of housing.
To date, the startup has helped 250 educators purchase houses, working in the Bay Area, Southern California, Portland, Seattle, Denver, and Hawaii. Around 30% of buyers are from underrepresented groups, including black and Latinx home buyers, who historically haven’t been able to build wealth through housing (racist “redlining” of neighborhoods meant that it was difficult to get a home loan in a minority neighborhood, and redlining also meant that the houses people did own didn’t appreciate in value as much as they could have.) Even now, in the areas where Landed works, only 12% of the home buyer population is from underrepresented groups, possibly because they have fewer family resources for a major purchase like a house.
Though the startup has been working with foundations to supply money to the housing fund, it now also hopes to work with others, including teacher pension funds, since scaling up to reach more teachers across the country will require significant funding. “They’ve already got their money invested in all sorts of things, including real estate,” Lofton says. “It’d be great if this was one of the options—helping educators buy a home now and helping grow their venture money over time.”
We’ve updated this article to clarify that families can own the house they buy through Landed for more than 30 years; 30 years is just the period of the Landed partnership.