Rent-to-own buzz, but no sales sizzle

It generated interest but few deals, developers say

Northside Piers
Northside Piers

With the market creeping back, developers now can start to figure out what saved some of them from ruin. Rent-to-own programs likely won’t be on that list.

The buzzworthy idea of 2008 seems to have produced little sales for struggling condos during the depths of the recession. A few leases, sure, but not the kind that turned into sales contracts.

Rent-to-own, which allows renters to put their monthly payments toward the cost of buying their home, seemed like a way for developers to turn renters into buyers.

Toll Brothers’ Adam Gottlieb, the project manager at the Northside Piers condo in Williamsburg, said that while the strategy did bring in foot traffic, a lot of the potential deals never materialized.

Of the 10 apartments that Northside Piers allotted for its rent-to-own program, all 10 were quickly leased when the initiative was launched in spring 2009. But the enthusiasm quickly waned — just two of those renters ended up buying.

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“It does kind of convolute the product slightly,” Gottlieb said, adding that the development likely won’t use the offer in the future if the market goes south again. (Experts say rent-to-own has worked in hard-hit housing markets like Florida, Nevada and California.)

Gottlieb’s development, however, was hardly alone. Plenty of other projects were reportedly offering rent-to-own programs at the onset of the recession, from Williamsburg to the Financial District.

And some developments haven’t abandoned rent-to-own. The Latitude Riverdale, at 3585 Greystone Avenue, still offers it, as does the Greenpoint Lofts commercial development at 231 Norman Avenue.

Brokers are doubtful that rent-to-own would — or should — make a comeback, even if the residential market sees a double dip in the market.

Gary Malin, president of Citi Habitats, said that many of his agents have shown rent-to-own units, but few have been impressed with the sales strategy.

“Most people didn’t feel that it made much sense for them,” Malin said. “I don’t think that the programs were attractive enough. … If they weren’t going to buy to begin with, that program wasn’t going to make it happen for them.”

Even so, appraiser Jonathan Miller, cofounder of Miller Samuel, is less inclined to believe developers are “once bitten, twice shy” when it comes to sales strategies. “I think that this is one of those programs that is enabled in any market downturn,” Miller said, “because I think the phrase ‘this time it’s different’ always applies.”