The median price for a detached single-family home in D.C. approached $800,000 in August, while a rowhouse went for $735,000. That can be far out of reach for most public school teachers.
Real estate in D.C. is expensive, and government employees can be some of the first people who are forced to live miles away from where they work. But a new privately funded program promises to lend teachers in D.C. public and charter schools money for half their down payment on a house or condo — up to $120,000.
The money comes from Landed, a San Francisco-based financial services company that aims to increase homeownership among public employees, primarily teachers. Landed works in San Francisco, Seattle and Denver, and D.C. is its first location on the East Coast.
"Landed tries to be an alternative to that bank of mom and dad that a lot of people have to rely on to access homeownership," said Alex Lofton, the company's co-founder. "A lot of folks, including those who work at [D.C. Public Schools], may make enough to afford rent on a month to month basis, but doing that and saving up to get to the 20% down payment is just too challenging."
But in hewing to the adage that there's no such thing as free money, there is a catch to what Landed is offering: if a teacher decides to sell their house, Landed gets their share of the down payment plus 25% of the home's appreciation. For a house sold at $500,000 that appreciates by $100,000, Landed would get $75,000 — the sum of its $50,000 down payment and $25,000 from the home's appreciation.
But the opposite also applies. "If you end up having to sell in a down market, we'll take that loss," Lofton said, referring to what Landed does as "risk-sharing" and "co-investment."
The cost of home buying in D.C. has increased dramatically since the end of the recession, so much so that in August the median price of a freestanding house was $792,000, an attached single-family house was $735,800 and a condo was $461,000, according to data compiled by the D.C. Chief Financial Officer. Of the city's 37,000 employees, fewer than half live in the city, and the rate is higher for teachers: 65% live in D.C. (There is no comparable data available for charter school teachers.)
On average, DCPS teachers make $86,644 a year. But according to a study published by real estate firm Zillow in August, teachers in the city pay between 32% and 54% of their salary toward rent, depending on how many years of experience they have, and between 22% and 37% on a mortgage. That's slightly lower than cities like San Francisco, San Jose, Denver, Seattle and Boston, but still in the nation's top 10 most expensive cities for teachers.
D.C. already offers its workers help buying homes through the Employer Assisted Housing Program, which can provide up to $5,000 in matched funds for a down payment and a deferred loan of up to $20,000. And earlier this year, the District announced a partnership with EagleBank on new mortgage options for employees looking to buy.
As part of her 2020 budget, Mayor Muriel Bowser also tried to create a $20 million fund to build housing for nurses, police, firefighters and teachers, but the D.C. Council instead converted it to a $14 million package that gives developers who build housing for middle-income workers a break on property taxes.
Other cities have gone further: in Newark, New Jersey, there's a residential development built specifically with teachers in mind. And in San Francisco, the city offers a number of home-buying assistance programs for educators, including a down-payment loan program known as Teacher Next Door.
Bowser said Tuesday that Landed's program will give city workers one more way to cover the cost of a down payment — one of the toughest obstacles in purchasing a home. She also said that there's significant value in keeping teachers, and all government employees, in the city.
"We love people to live closer to work and the people they serve, so that they have better context for the work that they do," she said. "We want them to live closer to work for themselves, too, because we don't want them to spend so many minutes and hours of their lives in a car. Being closer to work is good for the District, it's good for them, it's good for the environment, it's good for a whole host of reasons."
Landed said it has helped 250 teachers across the country buy houses and hopes to grow that number in D.C. Andrew Katz-Moses, a former D.C. teacher who now does financial consulting for educators, said Landed's program could be valuable for many teachers who struggle to save for a down payment. But he said giving up a share of future appreciation gives him pause, and he would advise teachers to consider all their options.
"What could we expect would happen if you just put 10% down and paid private mortgage insurance until you hit 20% equity and you were able to get rid of the PMI?" he said. "We'd want to look really closely at all of those details."