Are moderate-income households, especially in urban markets, a no-fly zone for private sector residential developers and builders? Face it, two innovation killers suppressing greater access to more attainable new housing development and construction are heavy-handed local policy and regulation and overly restrictive access to finance and capital.

The question is, are those two innovation-squelchers--regulatory overreach and financial intransigence--susceptible to mold-breaking, transformative innovation?

Unless builders and developers can learn ways to navigate around or hurdle those two daunting enemies of change, motivation to transform their own cost structure and processes won't likely fully kick-in.

On the other hand, were builders and developers and their investment partners to discover how to turn all construction productivity gains into both price reductions and more assured profitability, they'd be highly motivated to begin doing things differently.

At least some of the potential solution to land use and financial barriers--even in market-rate single-family and multifamily rental development, may come from looking at successful case studies in both areas that aim at serving below-market-rate need for housing, where bright spot programs are breaking through some of the local impediments.

Among the top 10 finalists for the Ivory Prize for Housing Innovation, which we'll spotlight live during our Housing Leadership Summit, May 13-15, at the Ritz Carlton Laguna Niguel, Calif., two stand out as moderate-income market-rate housing programs with potential lessons and applicability to a wider group of market-rate players.

You can register for HLS by clicking here.

Still, when the rules that apply to traditional subsidized affordable housing development--for low income households--are so different than ones that market rate players face in finance, development, operations, construction, and marketing, how can it be that lessons from one can be applied to the other? They must, especially for households in the moderate income brackets--largely left out of the lift of economic recovery and social mobility, but also unable to access housing subsidy programs. It comes down to two factors necessary for any big social change. One is lowering the barriers to making that change--making it easier, and the second is elevating the expectations and efficacy of the person or people for whom that change is intended.

One of the programs, Hello Housing out of Oakland, Calif., leverages seldom-used tax law to get at vacant, blighted, and distressed residential properties in a municipality and resurrect them for use, with provisions and covenants that will protect them at below-market-rate homes in perpetuity. Another initiative--Home Partners of America (HPA)--works of a lease-to-own model that puts working households on a path to credit-worthy qualifications as a mortgage borrower.

The Ivory Prize for Housing Innovation will be announced April 10, at the National Press Club, in Washington, DC.

What the founders of Hello Housing--Mardie Oaks, president, vp Jennifer Duffy, and special projects manager Lin Chin--is to put Chapter 8 tax code to work to unlock thousands of abandoned, languishing, tax-defaulted properties in and around the Bay Area in Northern California and restore them as permanently attainable to moderate-income working households. This lowers the barrier to changing both the lives of people in those households, and the neighborhoods themselves living through the scourge, and growing expense, of growing blight.

Here are highlights of the Hello Housing impact story:

With permission from Hello Housing.
With permission from Hello Housing.

Hello Housing is the only company we have seen acting on tax-defaulted foreclosed and blighted properties. The Company’s partnerships across the public and private sectors with the county government, tax collectors, and private developers is unique. These relationships have allowed them to break through walls and create an innovative program. The most important aspect of Hello Housing is the mentorship they have provided to neighboring counties and the How-To Manual they have provided to help other nonprofits navigate the complex tax code.

This project is not reliant on public subsidy. Hello Housing created their own self-subsidizing financial model. A project-wide subsidy pool was created by the Company negotiating the purchase of all 26-lots for a price of $13,500 per property from the Tax Collector. These properties were then sold to City-selected developer partners for a price of $45,000.

As mentioned above, Hello Housing has already successfully assisted other counties in California in creating similar programs. By using the Hello Housing's Chapter 8 How-To Guide, other local governments and nonprofits in search of new housing tools have both a blazed trail and clear roadmap to follow. While the Chapter 8 Tax Sale may be unique to California, property tax sales are regularly taking place across the country in the form of Tax Lien Sales and Tax Deed Sales. In some states, there are provisions that allow municipalities to take over control of unsold tax-defaulted properties, that are declared abandoned by the courts, and reposition these properties for sale to the private sector. Quasi government-controlled land banks have been formed in some states and are able to act on tax-defaulted properties. These land banks may work to reposition these properties to meet a public need or sell these properties to private investors. Provisions within the tax sale procedures that might enable nonprofit housing organizations to directly act on tax-defaulted properties are underutilized, unknown and burdened by complicated bureaucratic procedures that further cause these properties to either languish in their communities or to be lost altogether to the speculative market.

With the right attention and proven success of their pilot, Hello Housing and other housing nonprofits using their method will be able to gain the necessary funding to sustain the project. Growth can be supported because the players (county/city governments and developers) are established and partnerships can be easily created.

In other words, the tax lien and tax deed sales model Hello Housing has created could work in other localities, among investors, developers, and builders who could create infill programs using their current operational footprints, and do so profitably.

This Hello Housing program speaks to a market-rate--albeit non-profit--strategic and operational model that aims to lower barriers to improvement at the household and community level.

HPA lowers the barriers to change as well, however, the way it approaches doing that is by working to elevate--gradually, methodically, and with incentives--the motivation, the financial wherewithal, and the personal efficacy of people at the household level. The program, over time, transforms people who would not qualify for a mortgage loan into ones who do. Since its launch, HPA has purchased over 12,000 homes in 40 metro markets and 20 states nationwide for a total investment of over $3.5B. Over 800 HPA resident households have exercised their “right to purchase” and have successfully purchased their home from HPA utilizing the lender of their choice. This equates to approximately 6.6% of total HPA purchases converting into home ownership. HPA has over 65,000 real estate agents nationwide registered in its network.

Here's how the HPA story maps as an innovative financial and operational model:

HPA is one of the most well-established rent-to-own homeownership models in the nation. Similar Ivory Prize nominees include Divvy, Landed, and Point. Of these companies, HPA has reached the largest population thus far. Differentiating factors of HPA include their robust Multiple Listing Service (MLS) completed with proprietary algorithms, a strong network of partnering real estate agents, and a locked in rent schedule for renters.


Home Partners has successfully scaled their model to operate in 20 states and 40 metro markets nationwide. Currently, HPA is evaluating expansion into markets including Phoenix, Las Vegas, and Boston. Many other companies including Point, Divvy, and Landed have adopted models similar to HPA’s lease purchase program. According to a news article from Bloomberg1, HPA has been engaging in discussions of a potential IPO. If this is the case, HPA may be too large of a company to qualify for the Ivory Prize as the recognition and funding will not significantly impact the company.


Home Partners has formed partnerships with Coldwell Banker, Century 21, ERA, and Better Homes and Gardens. These partnerships create an extensive network of real estate agents and brokerage firms to help reach a wider consumer base. Investors include BlackRock Private Equity Partners, Kohlberg Kravis Roberts, Range Light, and THL Credit. HPA is funded through both debt and equity. HPA’s previous years of experience and success indicate that the Company’s business model is sustainable.

Hello Housing's model lowers the Bay Area's market barriers to entry by adding infill lots to real estate inventory at a fraction of what they would have cost traditional land acquisition programs. Home Partners raises its customers' aspirations and abilities by journey-mapping them into a homeownership-level credit-worthyness, with training and incentives. Together, the two programs reflect the ability of innovators to penetrate what seems like an impenetrable resistence to market-rate development for moderate and just-below-moderate income households.