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Image of Evelyn Zwiebach

Evelyn Zwiebach

Enterprise Community Partners

Detroit, Michigan

LinkedIn: Evelyn Zwiebach

Reimagining Land Contracts

Starting Date: 2019-08-01

Innovation Summary

Advancing good-faith land contracts through policy reforms and programs that protect buyers, but retain the flexibility and efficiency that make the tool a powerful, alternative path to homeownership.

Land contracts—a tool that has been used to devalue homes in Black communities—can and must be reformed to create value and deliver on the central promises of homeownership: stability, wealth, and community. Historically, predatory land contracts have been used primarily in Black communities due in large part to the racist mortgage lending policies in place for much of the 20th century.

Yet land contracts are not inherently predatory; rather certain features and a weak regulatory landscape make them ripe for abuse. This roadmap for reform includes policy and programmatic interventions that protect buyers and retain much of the flexibility and efficiency that make land contracts a powerful alternate pathway to homeownership. Land contract reform would advance racial equity and increase the value of homes in all three dimensions. Good-faith land contracts make homeownership accessible, allowing credit-constrained households to circumvent barriers to mortgage financing, such as large down payments, credit requirements and appraisal issues.

questions & answers

What is the geographic reach of your work to date?

Regional

Which metropolitan areas (if any) does your work focus on?

Michigan

What is the core idea of your innovation? How does it increase the value of homes in Black communities?

We believe land contracts—a tool that has been used to devalue Black communities—can and must be reformed to create value and deliver on the central promises of homeownership: stability, wealth, and community. Our roadmap for reform includes policy and programmatic interventions that protect buyers and retain much of the flexibility and efficiency that make land contracts a powerful alternate pathway to homeownership.

A form of seller financing, a land contract is a legal agreement in which a buyer purchases a home through installment payments made directly to a seller, gaining legal title once all payments have been made. Land contracts are notorious as tools for exploitation and wealth extraction. Historically, predatory land contracts have been used primarily in Black communities due in large part to the racist mortgage lending policies in place for much of the 20th century. In Chicago in the 1950s, an estimated 85% of properties purchased by Black individuals were sold on land contracts (Satter, 2013). A 2019 report by Duke University finds that between 1950 and 1970 land contract sales expropriated between $3.2 and $4 billion from Chicago’s Black community. While data on the prevalence of land contracts is incomplete, existing data indicate a surge of land contracts following the foreclosure crisis, again concentrated in Black neighborhoods.

Yet land contracts are not inherently predatory; rather certain features and a weak regulatory landscape make them ripe for abuse. Our research finds that good-faith land contracts offer a viable path to homeownership and an important alternative to mortgages. Land contracts can even be structured to promote positive outcomes for buyers, as mission-driven organizations in Detroit have demonstrated. These sellers’ practices showcase land contracts’ positive potential and point the way for reform.

Land contract reform would advance racial equity and increase the value of homes in all three dimensions. Good-faith land contracts make homeownership accessible, allowing credit-constrained households to circumvent barriers to mortgage financing, such as large down payments, credit requirements and appraisal issues. Because land contracts terms are often shorter than traditional mortgages, buyers can more quickly attain homeownership and its accompanying benefits, including wealth, housing stability and social capital.

How is your idea new or different from current approaches?

Given the dark history of predatory land contract use across the nation, many advocates and lawmakers have focused on eliminating their usage to the greatest extent possible and/or substantially transforming them in ways that establish much needed protections for buyers, but also eliminate land contracts’ unique efficiency and flexibility.

Our approach brings a new perspective to land contract reform. Our research provides evidence that land contracts are not inherently predatory, and further, that they can play a key role in making homeownership possible in communities disproportionately excluded and undervalued by traditional lending. We therefore focus on land contracts as a tool, which, like all tools, can produce positive or negative outcomes, depending on how it is used.

We also bring into focus mission-driven sellers, whose participation in the land contract market and unique approach to land contracts have previously been overlooked. To our knowledge, our research is one of the first to delve into how mission-driven organizations use land contracts to enable homeownership for buyers locked out of the mortgage market and to promote neighborhood stability.

With these focuses in mind, we are developing a legislative policy framework that codifies the best practices of mission-driven sellers and builds on precedents set by other states that regulate land contracts. The changes we seek would make land contracts a safer and more reliable homeownership tool, while still preserving much of their flexibility and ease of use.

Finally, our approach recognizes that both policies and practices will need to change to achieve our vision; enacting new laws is not sufficient to achieve reform. Resources for education and enforcement are critical to successful implementation, as are supports for innovative practitioners. What is more, even the most carefully crafted policies can have negative unintended consequences. We are therefore pursuing a suite of programmatic actions that will complement and help implement our policy agenda. We are also continuing to work hand-in-hand with Detroit’s mission-driven land contract sellers and other practitioners to ensure reforms are compatible with their needs as well as those of the residents they serve. Together with our partners, we will continue iterating on our approach as needed to achieve our goals.

What are the primary circumstances that devalue homes in Black communities that you are addressing? What is the impact?

In the wake of the Great Recession, Detroit and numerous other cities experienced a wave of mortgage and tax foreclosure. Property values plummeted while vacancy and blight surged. In the following years, Detroit became a majority renter city for the first time since 1950 and Black homeownership in the city and state plunged. There has also been an increased reliance on land contracts as a form of home purchase financing, due to a combination of factors including low incomes, damaged credit, discriminatory and flawed appraisal processes, and a lack of mortgage lending. For some buyers, land contracts are the sole pathway for homeownership; conversely, some sellers cannot sell their homes except through a land contract because of barriers such as low home value and neighborhood disinvestment.

The rise in land contracts is a response to the devaluation of homes caused by a lack of mortgage lending, yet predatory land contracts also contribute to the devaluation of homes in Black communities. When wielded by bad-faith actors, land contracts strip buyers of wealth, displace families and upend their lives, and contribute to neighborhood disinvestment and decline. Historically, exploitative land contract practices have been used primarily in Black communities and existing data indicate that the recent resurgence in land contracts is concentrated in these communities again, particularly in midwestern states. What is more, researchers have found that a significant share of recorded land contracts in Detroit are being used in bad-faith: Land contracts have become a favorite tool of investment-backed portfolio investors, who for years have purchased properties in bulk from the Wayne County tax foreclosure auction, sold the homes on predatory terms, and evicted occupants in large numbers. Between 2005 and 2015, some of Detroit’s most egregious contract sellers had filed even more evictions than properties they owned.

We cannot overlook the critical role land contracts play as a homeownership tool in communities like Detroit—both because of the serious risks they can present and also because of their potential. With the right guardrails and supports in place, land contracts can allow buyers and sellers to sidestep the barriers presented by the mortgage industry and increase the value of their homes in every sense of the word.

What were your “aha” moments (the key insights) that led you to see how your innovation could work?

As nonprofit organizations dedicated to advancing racial equity in housing, Enterprise and Poverty Solutions began collaborating on land contracts research because we had become concerned by the resurgence of land contracts in Detroit. Given the longstanding history of predatory land contracts, particularly in Black communities, we initially sought to learn more about how to prevent land contract usage or how to construct a strict regulatory framework that mimics, to the extent possible, the framework for home purchasing on a mortgage.

Yet early on, we were surprised to learn that several of Detroit’s most trusted nonprofit partners—including leaders of community development organizations and other mission-driven groups—had a different perspective. They pushed back on ideas that would restrict the use of land contracts or substantially change their capabilities and shared their view that the tool is not inherently predatory. In fact, they considered land contracts an important tool in the community development toolbox, citing numerous stories of using land contracts to make homeownership accessible to credit-constrained households.

These conversations inspired us to reframe our research and reconsider land contracts as a viable pathway to achieve the chief benefits of homeownership: housing stability, wealth building, and strong communities. We wondered how land contracts could work in the interest of both buyers and sellers. Is it possible to turn a tool that has worked to extract wealth from individuals and neighborhoods into a one that infuses it back in?

When we delved into the literature, we found little information about the ways land contracts can be beneficial to low-income buyers, minimal mention of mission-driven sellers, and almost no data on numbers or outcomes of land contracts in Detroit. In the absence of this data, we interviewed various nonprofit leaders to understand the fundamentals of land contracts and the key elements of land contract programs that advance homeownership goals.

With a more nuanced understanding of the pitfalls and potentials of land contracts, we developed a new vision for land contract reform: reform that codifies and expands the best practices of mission-driven sellers via policy and programmatic interventions and focuses on increasing the prevalence of good-faith land contracts in Michigan.

How does your innovation create structural change? What will be different in 5-10 years if you are successful?

Our innovation creates structural change through legislative policy change. Land contract reform will fundamentally alter for the better the legal landscape and enabling environment in which land contract transactions take place.

Our innovation also includes complementary programmatic initiatives that directly empower buyers and provide capacity supports for grassroots actors. These initiatives will enable effective implementation of new laws and further improve land contracts through ground-up change in practices. They include: consumer education campaigns; expansion of legal and financial services and counseling; partnerships to assist mission-driven sellers in acquiring properties for sale and buying out bad-faith land contracts; research on the longer-term efficacy of mission-driven sellers’ land contract programs; and creating a best practice guide for mission-driven sellers.

While our work is currently focused within Michigan, our research has already informed reform efforts in Maryland and, in the future, we hope to expand our scope to support policy and programmatic changes in other states and transform land contracts across the country for the better.

Our vision for the world after our structural change takes hold includes:
• Increase in good-faith land contracts. With legal protections and increased capacity of mission-driven sellers, there will be fewer predatory land contracts and good-faith actors will represent the majority of market share.
• Increase in the overall homeownership rate and wealth, specifically among Black households. As more households have access to homeownership via good-faith land contracts, and as buyers are more educated and empowered, there will be a decrease in forfeiture and more buyers will achieve homeownership.
• Deeper understanding of land contracts. Recordation requirements will lay the foundation for data collection and evaluation efforts to understand the prevalence of land contracts and outcomes for buyer and sellers. This understanding will point the way for future innovations and reforms in this sector.
• Local, State and Federal policy will work in concert to support an effective and equitable land contract market. The existing patchwork of regulations will be better aligned, more widely understood, and enforcement will be consistent, leading to improved buyer outcomes across the country.

What is your innovation’s path to (i.e. strategy for) success? What momentum or impact have you achieved thus far?

Our strategy for success centers on close collaboration with key stakeholders to continue refining and advancing our policy and programmatic recommendations. This approach was key to our research process for our policy brief, as we met with leaders representing different fields and areas of expertise to understand their perspective and priorities. Throughout, we have striven to identify shared values and goals and focused on advancing reform in areas of consensus.

Our work has been progressing briskly. Since publishing our policy brief in May 2021, we began working with the Michigan State Housing Development Authority and other government partners to delve into options for implementation of policy reform. We conducted an extensive analysis of peer states’ land contract regulations and met with key stakeholders from the public, private and nonprofit sectors to further refine our recommendations and achieve buy-in. Our state partners recently identified a potential sponsor for a land contracts reform bill package directly informed by our work and we expect a package to be introduced Spring 2022. Additionally, a concurrent reform effort at the City of Detroit seeks to pass an ordinance that would codify some of the best practices identified in our research. Our research also inspired a Maryland legislator to expand land contract protections in his state and we worked with the Brookings Institution to inform and advise House Bill 1108, which was introduced in February 2022. Finally, we have shared our recommendations for supportive land contracts with market-based innovators and are exploring collaborations that would pair the power of policy- and market-based initiatives to achieve land contracts systems change.

We are also advancing complementary programmatic initiatives. In collaboration with the City of Detroit, we drafted a Land Contracts “Buyer Guide” to equip buyers with information to protect and advocate for themselves. During the drafting phase, we collected input from legal experts, outreach and communication experts, and residents via one-on-one meetings, focus groups, and community listening sessions. The guide will be published on the city’s website in Spring 2022 and distributed to neighborhood organizations who advise prospective homebuyers. A next step will be to create a “Seller Guide” for designing and executing good-faith land contracts.

What will take your innovation to the next level?

To reform the landscape that surrounds land contracts and more reliably produce successful outcomes for buyers, we will need at least the following:
• A broad-based coalition must recognize the potential of land contract reform as a tool to advance racial equity and choose to advance a set of common-sense reforms that provide the guardrails necessary to protect buyer interests. Ideally, the coalition would include a strong champion within Michigan’s legislature to usher key legislative changes into law, as well as stakeholders from the public, the nonprofit community, private real estate groups, City of Detroit government, and more.
• Advancing our innovation will require resources to complete a comprehensive legal precedent analysis, including collecting data on the outcomes of similar legislative changes in other states to further inform policy recommendations.
• Advancing our innovation will also require funding for programmatic initiatives that support buyers in succeeding as homeowners. Programmatic resources are also necessary to support existing and aspiring good-faith sellers in structuring and executing mutually beneficial land contract agreements.
• To support implementation of our innovation, resources are necessary to streamline and clarify administrative processes within local government that enable buyers to access critical information and exercise their duties and rights as home purchasers. Processes include searching government records to confirm a seller’s ownership of the property and identify outstanding liens, recording the contract after signing, and filing for tax exemptions.
• To ensure our innovation is advancing as intended, we need resources to evaluate the outcomes of any policies and programs that result from this work. With the addition of a recordation requirement, we would have the ability to identify land contract sales and learn about short-term and long-term outcomes for buyers. Such data will also allow us to identify the location and characteristics of land contract buyers and sellers and target programmatic supports. Qualitative data collection through interviews, surveys, and focus groups with key stakeholders will help us keep a pulse on our efforts, supporting iterative improvements to our innovation and the implementation process.

How will you involve others to move your initiative forward?

Continued engagement with public, private, and nonprofit sector stakeholders will be key to building a coalition of supporters and achieving success.

City and state government elected officials and staff must choose to stand behind land contract policy reform. Legislators will introduce and pass bills, while government staff will be key in refining the bills and supporting implementation. Government leaders across the political spectrum recognize homeownership as foundational for generational wealth and are committed to building the middle class and ensuring residents are stably housed in safe and healthy homes. Increasing the prevalence of good-faith land contracts and reducing exploitation would advance these priorities. We are working closely with staff at state agencies to inform legislators proposing land contract reform, as well as with City of Detroit staff to ensure recommendations address Detroiter’s unique needs.

Private sector real estate groups, including land contract sellers and realtors, must view reforms as complementary to their work and preserving of the efficiencies that make land contracts uniquely useful. These partners are interested in offering good-faith land contracts and addressing reputational risk associated with land contracts given the tool’s history of exploitation. Our proposed reforms would increase the legitimacy of land contracts and may help these stakeholders expand their client base by reaching prospective homebuyers that do not have access to traditional mortgages. We are engaging these groups to learn how our recommendations could be win-win for buyers and sellers.

Nonprofit groups, including legal advocates and community-based organizations, share goals of stabilizing and building wealth for residents and communities. Several of these groups use land contracts to achieve those goals and share the private sector’s aim to maintain land contracts’ efficiency and flexibility. Our innovation would advance their missions and strengthen their own land contract programs. We continue to engage and seek guidance from this sector to ensure our recommendations reflect their best practices and needs. We are also engaging with market-based land contract innovators to explore how our research and recommendations could inform and strengthen their strategies and vice versa.

What is the current composition of your team (types of roles, qualifications, full-time vs. part-time, board members, etc.). How do you plan to evolve the team’s composition as the innovation grows?

This work is a collaboration between Enterprise Community Partners and Poverty Solutions. Enterprise is a national non-profit organized around three central goals: to increase housing supply, advance racial equity, and build resilience and upward mobility. We support community development organizations on the ground, aggregate and invest capital for impact, advance housing policy at every level of government, and build and manage communities ourselves.

The Enterprise Detroit market office is led by Melinda Clemons, Vice President and Market Leader. A native Detroiter who has dedicated her career to working in and with the City of Detroit, Melinda received her MBA and BA from the University of Michigan. Evelyn Zwiebach, Senior Program Director for State and Local Policy, will be leading this innovation on behalf of Enterprise. Evelyn has nearly 15 years’ experience in policy and community development and earned her MUP and BA from Harvard University. Enterprise will also leverage the internal expertise of its Federal Policy Team, Policy Development & Research Team, and complement of 10 additional State and Local Policy Directors, tapping into their deep knowledge of evidence-based best practices in housing policy from around the country. As a recipient of both public and private funding for nearly 40 years, Enterprise has the capacity to comply with the provisions of award agreements, including extensive experience in cooperative agreements and grant awards.

Poverty Solutions, an initiative housed within the University of Michigan, brings its expertise in, and track record of, partnering with communities and policy makers to find new ways to prevent and alleviate poverty. Senior Strategic Project Manager, Karen Kling (MUP), will represent Poverty Solutions in this effort and will work under the guidance of Poverty Solutions’ director, Dr. Luke Shaefer, a renowned expert on poverty and social welfare policy in the United States.

Poverty Solutions works closely with faculty advisors from across the University, many of whom have published extensive research on housing issues. These experts will be available to guide this work. Poverty Solutions also has access to a pool of Graduate Research Assistants from the Ford School of Public Policy who offer capacity for literature reviews and precedent analysis that will be a critical and ongoing portion of this work.

How does your team reflect communities directly impacted by the topic you are addressing? Why are you, your team, or organization dedicated to the issue?

Detroit is a place where disparities in health, wealth, and economic success are clearly visible along racial lines. For decades, the built environment was used to disconnect, exploit and segregate communities. Residents still endure the legacy of these decisions. At Enterprise, dismantling the enduring legacy of systemic racism in housing—in policy, practice and investment—has become central to the work it does. Poverty Solutions partners with communities and policymakers to find new ways to prevent and alleviate poverty through action-based research. Both organizations are deeply committed to partnership, centering community voices, and leveraging data and evidence to address racial inequities across a set of interconnected systems, including the housing market.

Our work to advance racial equity through land contract reform fits squarely within our organizations’ mission and values. Both organizations view land contract reform as a racial equity issue rooted in a history of policies and practices that have continued to extract wealth from Black communities. For Enterprise, this works is part of a broader national agenda to increase the supply of affordable homes, advance racial equity, support residents and communities to become most resilient, and make upward mobility possible. For Poverty Solutions, it is part of a portfolio of research and engagement aimed at confronting and seeking equitable solutions to the set of interlinked systems—housing, education, criminal justice, labor markets—that fail to function as they should for people with low incomes.

And, in keeping with our commitment to centering community voices, our land contracts reform initiative has been iterative, beginning with listening. Poverty Solutions was first invited to dig into land contract reform by the City of Detroit who had become increasingly concerned about the exploitation of Detroit home purchasers. At the same time, Enterprise was working in parallel to understand how land contracts drive racial inequities and explore policy remedies. Since joining efforts in 2019, we have continued to revise our understanding, research agenda, and recommendations based on feedback from stakeholders at the ground level and across the public, private, and nonprofit sectors. In doing so, the work has been most responsive to Detroiters’ needs.

Is there anything else you think we should know about your innovation?

N/A

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