Renowned journalist and scholar Nikole Hannah-Jones has called a rent-to-own housing startup backed by Jay-Z and Will Smith predatory, saying it is anything but helpful to the poor people it targets as customers.
“Credit counseling is not what will take low-income renters to homeowners, wealth will,” Hannah-Jones tweeted on Sunday, Aug. 1, along with a link to an article highlighting housing startup Landis Technologies. “All this program does is charge struggling people additional fees for being poor, which is what every other predatory lender does.”
Landis Technologies raised $165 million in its most recent fundraising round. This included investments from the billionaire rapper’s entertainment company, Roc Nation, and the Hollywood superstar’s venture capital Fund, Dreamers VC, according to Bloomberg.
Founded by Cyril Berdugo and Tom Petit, Landis purchases “dream homes” for “would-be homeowners” who can’t yet afford to buy them. Clients can rent the homes for up to two years, during which they are supposed to save enough money for a down payment to purchase the home from the company.
“Financial inclusion is really important to us,” Berdugo told Bloomberg. “An aspect of Landis that we’re very proud to be a part of is wealth creation for low-income Americans.”
The company’s website prominently features a happy Black couple on its homepage and its slogan, “Make your way home.” The company said it differentiates from traditional rent-to-own companies by offering financial and credit counseling to participants to help them save successfully.
Hannah-Jones, however, has called foul on the play, noting the flaw in the business model that she said could leave homeowners out on the street if they can’t purchase the home within two years.
“How are they helping people buy the homes? If they can’t come up with down payment, etc, in that two years, they get booted and the company can rent to someone else or sell the homes,” Hannah-Jones tweeted in response to someone who said the company would help low-income buyers. “How is this helpful?”
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ADOS co-founder Antonio Moore also criticized the company, tweeting, “This article fails the story the Rent to Own model is awful. Is the JAY-Z & Will Smith Investment in Rent to Own Homes just the next targeted exploitation of Black America?” Moore wrote.
According to Landis’ policy as reported by Bloomberg, “If a client isn’t ready to buy the home after two years, Landis may offer them more time, or sell the property.” The company also charges a fee to participate in the program.
Hannah-Jones and Moore’s criticism is seeped in history considering how often Black Americans have been victims of predatory rent-to-own schemes. Since the 1950s, these kinds of deals, also known as contract-for-deed agreements, have been pervasive in Black communities. They have only become worse over the years, according to experts.
“These arrangements are in some ways even more predatory than the ones of half a century ago, even after decades of laws and regulations enacted to prevent racial discrimination in the housing market,” a 2018 article in The Atlantic states.
“It was bad in the mid-20th century, but it is even worse now,” said Beryl Satter, a Rutgers University–Newark history professor and author of a book about predatory lending. “The housing is in way worse shape, the markups are grotesque, and these people have been through multiple forms of credit exploitation, which is partially why they’re in this market.”
Property developer Les Brown echoed Satter’s words in an article entitled “Predatory Practices of Rent-to-Own Home Ownership” in 2019. “On the surface, these contracts appear to be a win-win situation,” Brown wrote. “Too often, the downsides of these contracts are never discussed or disclosed, and it is usually the tenant (prospective purchaser) that loses big time.”
Other Twitter users chimed in and agreed with Nikole Hannah-Jones about the Jay-Z and Will Smith-backed venture. “Rent-to-own housing is never ‘done right.’ Worst-case scenario you can’t secure a mortgage when the rental period is up and you either get kicked out or locked into the deal for another 2-3 years,” @DanMoffTarkin tweeted. “Best-case scenario you wind up paying way above market value for the property.”
“I couldn’t agree more. Predatory,” actor Wendell Pierce responded. “Housing policy in America are subsidies for landlords NOT those in poverty. Section 8 is welfare for the wealthy. Solution: take expropriated property, use housing funding for low interest loans for ownership of that property by low income.”