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Milwaukee Program Bypasses Banks To Help People Get Into Homes


Suppose you really want to buy a house, but you can't qualify for a loan. You don't have the down payment. Corrinne Hess of Wisconsin Public Radio reports on a Milwaukee person's effort to make this happen.

CORRINNE HESS, BYLINE: There's a worn bungalow next to an empty lot on an otherwise crowded street here in Milwaukee's central city. This house, with its peeling gray paint, has been vacant for about a decade. Its windows are broken. The roof is completely shut. But on this hot August day, the house is bursting with activity. Reginald Reed says when his crew is finished with the rehab, a family will move in, paying on a rent-to-own basis, and they'll eventually own this house.

REGINALD REED: Every transaction doesn't require people to make money. And I think that's something that America probably needs to understand if we're going to really fix problems like homelessness and starvation and underserved communities having no opportunities.

HESS: All across the country, there are hundreds of thousands of people paying more in rent than they would for a mortgage. That's in part because they're low-income or their credit score is keeping them from qualifying to buy a house. What Reed's program is doing is essentially cutting out the bank or mortgage company. After a 13-year career in contracting, he launched an employment agency that focuses on skilled trades. The agency's trainees renovate the homes, and they're given the chance to buy them, paying 60% of the market value of the house on a rent-to-own basis. Reed's working in a part of Milwaukee where incarceration rates are some of the highest in the nation. He grew up here.

REED: This is the place where we technically don't make it. And so not only are we making it, we're thriving. We're creating opportunities for other people to make it. And we're doing it in a way where no one can stop us.

HESS: Reginald Reed works with the city of Milwaukee to buy blighted, city-owned homes that are affordable but often require tens of thousands of dollars of repairs just to make them inhabitable. He has ambitious plans. He wants to build or rehab 11 homes on this block. Kirk Wegner is a master carpenter who worked on large construction projects in Milwaukee, including building Fiserv Forum where the Milwaukee Bucks play. He now works with Reginal Reed to help train and oversee those learning the skills they need to rehab houses.

KIRK WEGNER: You got the satisfaction, you know, of knowing that you're doing something, not just filling my boss' pockets.

HESS: While this project is innovative, it's one of many rent-to-own rehab programs across the country. A California-based startup wants to help renters build credit until they can buy a place. The group is raising $165 million from investors that includes Jay-Z's Roc Nation and Will Smith's Dreamers VC. Logan Mohtashami studies the housing market at HousingWire, an industry trade publication. He says these innovative programs need significantly more investment, and cutting out banks or mortgage programs is tricky, in part because the U.S. government backs mortgage loans through programs like Fannie Mae and Freddie Mac.

LOGAN MOHTASHAMI: There's obviously a group of Americans that have just the kind of lower level income stream that just doesn't have the buying power that other Americans have.

HESS: Reginal Reed says he plans to rehab or build 100 homes in Milwaukee's central city, and the waiting list of would-be homeowners is a long one. He and others across the country say they'll continue to work on ways to help people who can't get traditional home loans become homeowners.

For NPR News, I'm Corrinne Hess.

(SOUNDBITE OF YONDERLING'S "FARAWAY") Transcript provided by NPR, Copyright NPR.

Corrinne Hess