Land Contract (sometimes called “contract for deed”) provides all of those same benefits, from the same people, to the same people, as renting. It is a bit of a misnomer in that it applies to any real property, and not just “land”.

The difference from renting is that with the land contract:

• 1. The monthly price is fixed for the life of the contract;
• 2. After three years (in my state), the occupant begins gaining equity.

Grad students, visa holders, travel nurses, etc. might not necessarily want to purchase the property they are staying in, but they might also find themselves living in that area for longer than they expect. A land contract gives them the security of fixed housing costs and the flexibility of being able to walk away at any time and for any reason. They also allow the occupant to begin earning equity while still living in “temporary” housing, allowing them to save more for the future.

But, in our current market, renting is more lucrative to the landlord.

So how do we drive landlords to offer land contracts instead of rental agreements? We provide property tax exemptions to owner-occupants. We increase the nominal property tax rate: run it sky high. But, the owner-occupant exemption means the effective tax rate for homeowners (including land contract buyers) doesn’t actually increase. Only investors - people who own housing they don’t live in - will be paying that punitively-high tax rate.

With that sky-high tax on investment properties, today’s landlords will be incentivized to become private lenders. They will be taking the exact same financial risk on the exact same people, but now those people will be called “buyers” instead of “tenants”.

The only “renting” that will still remain is from landlords who live in one unit of a 2-4 unit property, or a roommate agreement, or short-term use like hotels and motels.

Home ownership is the single best predictor of financial prosperity in the US. Every housing contract should include some sort of provision for equity.