LadderUp Housing announced on Thursday that it received an investment from the Richard King Mellon Foundation to expand its rent-to-homeownership model into Allegheny and Westmoreland counties in Pennsylvania.
The company said the funding will support the acquisition and renovation of homes aimed at helping low- to moderate-income families transition from renting to owning through financial coaching and mortgage-readiness programs.
Founded as a mission-driven housing company, LadderUp purchases, renovates and constructs single-family homes in markets with aging but relatively affordable housing stock. The homes are rented to families who may not yet qualify for a traditional mortgage.
During the rental period, tenants work with financial coaching partners to improve credit scores, build savings and prepare for homeownership. Once they become mortgage-ready, tenants can purchase the homes, often at or below the original appraised value, according to the company.
“Homeownership remains one of the most important wealth-building opportunities for working families, yet millions of Americans remain locked out of traditional mortgage pathways,” LadderUp founder and CEO Tom Voutsos said in a statement.
In an interview with HousingWire, Voutsos said the company focuses on cities where relatively affordable housing stock still exists but often requires renovation and investment.
“We think that cities like Pittsburgh or across the Midwest have an interesting housing dynamic where there’s still this high volume of low-cost housing stock that exists, but it’s in need of capital improvement to make it truly a home for someone,” he said.
The company said its model is intended to preserve affordable homeownership opportunities in neighborhoods increasingly targeted by institutional investors seeking long-term rental properties.
Voutsos said LadderUp aims to avoid contributing to displacement or gentrification by helping existing residents become homeowners.
“We think that it’s important that you have programs where there’s on-ramps to homeownership for existing neighborhood residents,” he said.
LadderUp said it has acquired nearly 90 homes and renovated more than 65 housing units across four markets since its founding. The company said it has helped six families become homeowners, with all home sales completed directly with existing tenants.
Participants in the program have seen average credit score increases of 75 points, according to the company.
Voutsos said credit scores remain the biggest barrier preventing many renters from qualifying for mortgages, even in markets with comparatively affordable homes.
The company initially expected tenants would take about three years to become mortgage-ready, but Voutsos said LadderUp has been working to shorten that timeline to roughly two years on average.
Voutsos said that unlike some rent-to-own operators, LadderUp does not require non-refundable down payments or multi-year lease commitments. Tenants also are not penalized if they decide not to purchase the home.
“We really wanted to preserve optionality…not everybody needs to be a homeowner. There should be a variety of options in every neighborhood when it comes to renting or owning,” he said.
He continued, “There are 4 million families that have paid their rent on time for the last 12 months across the country…not that all 4 million families should be homeowners, but what can we do to make sure that those 4 million families have an option to be a homeowner, and then they can choose what works best for them.”
The Richard King Mellon Foundation made the $250,000 investment through its Social-Impact Investment Program, which supports for-profit startups with social missions aligned with the foundation’s philanthropic strategy. The foundation said it has invested more than $25 million in 76 impact-focused startup ventures.
Voutsos said the partnership with the foundation will also help LadderUp establish relationships with local organizations and community groups as it enters the new markets.
