Teacher home-buying fund gains traction

Local investor pools help teachers with big down payments

A local startup built on the idea that community members can rally together to help teachers buy homes is finally making some headway. Co-founders of the company Landed say they've successfully put together a pool of funds that teachers in two Mountain View school districts can tap into for a down payment that would otherwise be out of reach.

And while no teachers have closed on a home quite yet, a few are already shopping around for the right place to put down roots.

Last year, Jonathan Asmis and Alex Lofton, the co-founders of Landed, began making presentations to school districts in Mountain View and Los Altos to get early buy-in on a teacher home-buyer model that's been in the works for years. The specific details and fine print of the plan get complicated quickly, but the framework is relatively simple: residents in a school community put money into an investor fund, and prospective home buyers living on teacher salaries can tap into that pool in order to make a 20 percent down payment on a house. Investors have a stake in the equity of the home, and share in the future profits, or losses, when the home is sold or refinanced.

The company's model is based on the idea that teachers on the Peninsula and the South Bay make enough money to handle mortgage payments, but have difficulty building up enough money for a sizable down payment. The Los Altos School District was the first local district to sign onto the idea, and community investors were able to pull together $500,000 in just six weeks. The Mountain View-Los Altos High School District followed suit, and recently built up a similar funding pool for its teachers. Checks from residents typically range from $25,000 to $100,000.

Lofton said progress has been great so far, and that the initial investor money should be enough to support the "lowest hanging fruit" in terms of teachers who are ready to purchase a home. None of the dozens of interested teachers have actually bought a house yet, but Landed has been careful to let teachers move at their own pace, Lofton said.

"We have a few people who are looking at homes right now, but the reality of this is that home buying is a very personal process," he said. "Even with our help, it's difficult to buy a home."

With a healthy supply of investor capital, what's the demand look like? In the case of Mountain View-Los Altos, Landed has been in touch with 40 or so prospective staff members who are interested in getting help on a down payment. Most of the informational sessions hosted by Landed have been less about how the company works, and more about what it means to buy a home and take on a mortgage. Any teacher who decides to use investor money to buy a home needs to be fully aware of what they're getting themselves into, Lofton said.

School districts throughout the Bay Area have struggled for years to find ways to support teachers in a region where the cost of living has fast outpaced teacher salaries. The problem is only made worse by California's statewide teacher shortage, which makes attracting new teachers a protracted and painful process. A survey by the Mountain View Whisman School District found that most teachers and staff rent or lease their homes, and just shy of 60 percent had a desire to buy a home in the next five years.

Whether Mountain View Whisman will jump on the opportunity to create its own Landed investor fund is still up in the air. The company only presented its model to the school board last week, and district staff are still having an "ongoing conversation" with Landed about whether to follow its neighboring districts, Lofton said.

At the May 18 meeting, board members asked pointed questions about what kind of risk teacher home buyers, as well as the investors, put themselves in when they participate in Landed's model, particularly when there's a risk the housing market could tank. Board member Tamara Wilson wondered why, for example, home buyers are asked to pay Landed back within 10 years by either refinancing, selling their home, or paying off the investment with cash.

Lofton said the 10-year time period is an important mechanism in order to make sure investors have the option to get their money back in a timely manner and see a return on their investments.

Most people are likely to pay the money back within four to seven years, he said, and once teachers are able to pay off Landed's investors, they have 100 percent of the home's equity. What's more, he said, property values historically climb over a 10-year period even with dips in the economy and the local real estate market.

Over the last few years, Lofton told the Voice that Landed has taken plenty of time to consider all of the things that could conceivably go wrong with its model, and build a structure that hedges against those pitfalls. He said it can be a little frustrating that it's taken so long for the company to finally get up and running, but that it's understandable. Unlike Silicon Valley consumer tech products, if Landed has a critical flaw, it means they've potentially ruined someone's entire life savings.

"It can get frustrating, but you have to remember that if you do it right from the beginning, then you've got a better shot at the long game," he said.

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24 people like this
Posted by m2grs
a resident of another community
on May 30, 2017 at 5:23 pm

This is such dimwitted idea. How many teachers the fund can support? What if the teacher changes career and do something else?

The right solution is to issue rent vouchers. Far more teachers will benefit from vouchers. It is also tied to their career in the district. If they don't teach anymore, or move to teach in another school district, they won't get vouchers.

Vouchers provide immediate and fair housing relief to a large number of teachers. A home-buying fund won't go anywhere beyond just a few lucky ones.

23 people like this
Posted by Observer
a resident of Castro City
on May 30, 2017 at 9:53 pm

Hey, looks like the district is trying new ways to address an issue that is not easily solved. This is another good attempt of trying to make a difference in the school district. Keep it up!

8 people like this
Posted by YIMBY
a resident of Another Mountain View Neighborhood
on May 31, 2017 at 10:44 am

This is essentially subsidizing a service-class to live in with the locals and better serve them. It's one step removed from feudalism. It's a bandaid over the real problem, which is lack of housing supply overall.

9 people like this
Posted by IVG
a resident of Rex Manor
on May 31, 2017 at 12:40 pm

Unlike a rent voucher, this scheme is totally self-funded.

12 people like this
Posted by Joe
a resident of Rex Manor
on May 31, 2017 at 2:50 pm

Why not a fund for Caregivers, waiters, dry cleaning staff, landscapers... where does it end? Let's just become socialists and get it over please.

6 people like this
Posted by Anke
a resident of North Whisman
on May 31, 2017 at 3:06 pm

@m2grs, you very reasonably ask "What if the teacher changes career and do something else?"

The article didn't address this particular point, but it did mention that co-founder Lofton explained that his company has put a lot of effort into identifying and addressing relevant issues. I imagine the loan contracts cover this topic, perhaps requiring earlier payback if they leave the profession.

Notice that this plan is investor funded, not tax-payer funded. It's essentially a way for investors to choose to invest by lending money to a particular group, in this case teachers.

10 people like this
Posted by James Thurber
a resident of Shoreline West
on May 31, 2017 at 3:44 pm

I found the comment interesting that teachers make enough to pay a mortgage. A mortgage on a $500,000 house. But houses in this area cost well in excess of one million, frequently two or even three times that.

Starting salaries for teachers are in the $50,000 to $60,000 range. Top end just above $100,000 and that's after fifteen or twenty years.

Sorry folks, you can't make a mortgage payment on that salary.

24 people like this
Posted by 500K fund, huh...
a resident of Rengstorff Park
on May 31, 2017 at 4:36 pm

Supposing a teacher wants to buy a typical Mountain View "starter home," a small and fairly crappy 3BR/2Bath in a decent but not fancy neighborhood like say, Monta Loma where houses are selling for $1.8M.

Assuming that this teacher is somehow able to beat out the multiple cash offers said home will receive, this teacher will need to come up with a down payment of at least 20%, or 360,000.

Congratulations, Landed, your $500K fund has helped one teacher buy one house, which will soon be foreclosed upon because there is *no possible way* a teacher can afford the nearly $9000 a month in mortgage payments PLUS pay back that down payment.

This may be another well-intentioned startup organization that just wants to make the world a better place and make a bit of money off the backs of teachers but it makes no sense at all. None. I hope our school board wastes no more time on it.

10 people like this
Posted by Fee structure...?
a resident of Rex Manor
on May 31, 2017 at 4:53 pm

The Voice article does not provide some basic information, such as how "Landed" makes money on this.

Do they charge teachers a percentage of the downpayment secured? The school district? Do they put advertising on the teacher's house? Pop-up ads on their Chrome Books? Do they take a cut of the apples and Amazon gift cards students give them on Teacher Appreciation Day?

8 people like this
Posted by m2grs
a resident of another community
on May 31, 2017 at 4:55 pm

@Anke, thanks for the acknowledgement. However as several comments pointed out the math simply does not add up. There is no way to gather enough private funds to make a real difference.

By the way, teachers in private schools, such as San Francis and Harker, on average make less money than public school teachers, without guaranteed pensions, without union. But they still teach well, as demonstrated by their outstanding outcomes. Their challenge of survival in this area is even harder.

3 people like this
Posted by Juan
a resident of Rengstorff Park
on May 31, 2017 at 7:26 pm

This seems like a good idea on the surface, but how is dual ownership going to work legally? In the event of default, the bank is surely going to get paid first (they won't write the loan otherwise), which leaves the down-payment-provider second in line, fighting for scraps? Doesn't sound like a very safe investment. You're probably better off investing in a REIT.

Also banks want lenders to have skin in the game -- they usually require borrowers to source all funds. I predict most banks won't be happy with a benefactor / investor providing the down payment. It means the borrower has no skin in the game, and thus no incentive to not walk away at the first sign of downturn.

10 people like this
Posted by Teacher
a resident of another community
on May 31, 2017 at 7:29 pm

As a MVWSD teacher who bought a house two years ago, over 20 miles away from where I work, this new plan doesn't make sense, even with a 20% down payment, my husband and I are barely making ends meet on a fixer upper house that cost under $700,000. We have no debt besides our mortgage. Many teachers still are paying off their college tuitions, or enrolling in costly masters programs, that make marginal differences to our salaries.

As others have mentioned no teacher can afford a mortgage on a property in excess of 1 million dollars. The fund will possibly help a handful of teachers, with high earning partners, but It won't really address the issue on the scale that it needs to. Given the burn out and turn over rate of teachers, the potential for a young teacher to quit soon after being helped by this fund is relatively high, especially in MVWSD, where there is enormous staff turn over every year.

3 people like this
Posted by andonandon
a resident of Castro City
on May 31, 2017 at 7:33 pm

So what about grocery workers? They make half what teachers do. Without them you have no food

Posted by Name hidden
a resident of Rex Manor

on May 31, 2017 at 9:26 pm

Due to repeated violations of our Terms of Use, comments from this poster are automatically removed. Why?

6 people like this
Posted by timetrip
a resident of Old Mountain View
on May 31, 2017 at 9:59 pm

@Joe: We already are socialists.

9 people like this
Posted by Thoughts
a resident of Castro City
on May 31, 2017 at 10:19 pm

Geez, you all sound like a bunch of people who have just realized that the issue of affordable housing is indeed in crisis mode. Welcome to the reality of the new Mtn. View, where regardless if you are a teacher, firefighter, or middle class the odds are stacked against you for buying a condo, townhouse, let alone a free standing home.

If you think BMR units are making a difference, think again. If you believe affordable housing for East Bayshore will help, . . . you'll have to wait another 10 to 15 years to see if it does, because at this rate nothing is being built over there at such high volume without realistic transportation issues being cleared first. For gripes sake, even the city council got it wrong when they thought with such potential building there would be no increase in kids attending our public schools.

Instead of harping on potential problem solving, come up with a better way to address these issues, roll up your sleeves to figure out how the future can best be handled. Hold on, wait . . . did you hear that? the mic just dropped.

10 people like this
Posted by m2grs
a resident of another community
on May 31, 2017 at 10:32 pm

@Thoughts, the real problem is not housing crisis, it is transportation crisis.

Consider Manhattan. Housing prices there is beyond most workers who work there, including teachers, firefighters, and most office workers. But Manhattan has the most efficient public transportation in this country. People can live far away and still manage to come to work within reasonable and predictable commute time.

Silicon Valley has a transportation crisis. If we solve it we solve the housing crisis.

Any other attempts to build "affordable housing" in hot areas are just futile and waste of public resources.

6 people like this
Posted by Christopher Chiang
a resident of North Bayshore
on May 31, 2017 at 11:02 pm

MVWSD owns property that isn't be used for schools (Cooper Park) and it should strongly explore the potential of adding housing for teachers there. It's been a full year since the district first discussed this, and subsequently tabled because of the controversy of a past trustee's approach to this issue. By the district's own estimates, a modest development could house 1/3 of the district's teachers. Web Link

That's a percent that would have a real impact. And any public housing for teachers should be income based, teachers can make over $40,000 difference based on which local districts they work for, so any housing assistance should be tied to true need.

The state legislature last year did its part to ease the way towards teacher housing. Web Link Other communities are making serious progress. They involve bold coordination and vision by both the city and school district. Schools retaining high quality teachers) play a critical role in a community beyond preparing the youth (a role sufficient in its civic importance), but great schools also play a critical role in determining the home values of a city.

If not Cooper, why not envision BMR designed for public schools teachers as a central public element to housing in North Bayshore?

San Francisco Mayor Commits $44 Million To Teacher Housing Project:
Web Link

SMUHSD Workforce Housing Community Exploration (Supt. Dr. Kevin Skelly):
Web Link

7 people like this
Posted by Parent
a resident of Castro City
on May 31, 2017 at 11:59 pm

I thought the district was already deficit spending? How the heck would the district come up with more cash to build at Cooper? They already have a 40 million COP. I bet the reason this was tabled wasn't because of a past trustee's action, that's giving that person too much credit. Reality is simple, they don't have the funds to do this. Partnerships with city, meh. Unless I missed something, BMR for teachers is already part of development proposals and teachers are high up on the priority lists. I applaud the vision of some suggestions from the links, but the reality for the district is much different.

14 people like this
Posted by Tough Crowd
a resident of Cuernavaca
on Jun 1, 2017 at 3:22 pm

Sad to see so many negative reactions to a creative idea. The alternative is? Oh right, build more housing...that's happening in MV. How's that going in terms of getting teachers (or other mid-income) into home ownership?

I applaud Landed for this effort. A few points for the naysayers:

- It's my understanding Landed covers a 10% down payment, with the homeowner covering 10%.

- The home doesn't need to be in Mtn. View or Los Altos. A starter "home", which could also be a condo or townhome, can be purchased for $750K - $1.5M (or maybe even less...I haven't fully scanned Sunnyvale, Santa Clara, San Jose).

- 10% of that amount would be $75k - $150K (or less).

- The mortgage might not be much different than rent (someone else can do the math). But the down payment is generally the obstacle. And ownership builds equity.

- Landed is just beginning with funding its investor pool. Investors are not investing in teachers. They're investing in local real estate (in a "feel-good" way).

- I don't believe investors need to be individuals; I presume a company like Google would also be welcome.

- Avg teacher salaries in MVLA are not 50-60K.

- Career changes amongst teachers are not frequent. Especially when not done for the purpose of wanting to buy a home.

- I believe teachers are proven to be reliable with paying rents and mortgages.

- This is outside the arm of the school district. No public funds.

- There's no reason other groups couldn't do this as well. But there's probably a limited number of investors...

The Landed folks vetted this very carefully with SEC folks, etc. Sure, they're probably hoping to expand this model and make some $. But I applaud a creative new idea...sure beats griping via keyboard.

Sorry, but further commenting on this topic has been closed.

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