Lease-purchase may be the answer to a struggling real estate market

A few months ago, Urban Studies theorist Richard Florida floated several suggestions for remedying the current real estate crisis. One of these was that banks should be encouraged to rent foreclosed homes to their former owners. While this plan violated the classic nugget of wisdom that banks don't like to be landlords, its potential for improving the current situation made it tantalizing.

In many ways, the emerging lease-purchase market fulfills the promise of Florida's plan. Pride of Ownership, an Atlanta firm, renovates and rents out foreclosed homes. Tenants agree to lease for three years. At the end of that period, they have the option of buying the home or moving on. If they choose to buy, they can use half of the rent that they paid during the lease period as a down payment. By giving tenants a shot at traditional loans, the company helps them enter the housing market as solid borrowers, with a better chance of success.