A new report found about 1,000 recorded land contracts a year in Detroit over the past two decades — a sign that the potentially risky financing tool remained a fixture in the city’s housing market even after years of economic uncertainty, when traditional mortgage lending bounced back.
Land contracts are a way for residents who don’t qualify for traditional mortgages or are unfamiliar with the banking system, such as immigrants, to become homeowners, according to June findings from Detroit Future City. But land contracts can be precarious, too, since they have fewer protections than mortgages and are not as well-regulated or tracked, housing experts said, noting the need for legislative attention.
The report is one of the first steps toward policy change, said Anika Goss, CEO of Detroit Future City.
“All of these issues around safe, affordable, stable housing for families, you can’t actually create the policies unless you actually have the data,” she said.
A land contract is essentially a legal arrangement where a buyer makes payments to a seller over time for the purchase of a property. The researchers analyzed recorded land contracts in Detroit within the Wayne County Register of Deeds, conducted interviews and gathered focus groups. The report identified 17,688 land contract transactions in the city since 2008, but that is likely an undercount. In 2024, there were 4,309 mortgages, compared to 934 land contract deeds, according to the report.
Here are three takeaways from the June report, published in partnership with Data Driven Detroit and funded by the Rocket Community Fund:
- While mortgages dipped after the Great Recession and then climbed in the years to follow, land contracts held steady over the past two decades. Land contracts are a “permanent fixture” of Detroit’s housing market and not just a temporary mortgage replacement during the Great Recession when lending was limited.
- Detroiters used land contracts for a variety of reasons, including first-time homebuyers with limited savings, debt, bad credit and an irregular income, who can’t rely on traditional financing. Others may have qualified for a mortgage, but banks did not want to give them loans for the homes they were looking to buy.
- Land contracts are common among immigrant populations, who may be unfamiliar with the U.S. banking system. This group is at risk for predatory sellers because of language barriers.
“Today, where we’re seeing a lot more discriminatory and targeted policies towards foreign-born and immigrant residents, new residents to Detroit, we’re now also seeing a high concentration of land contracts in those communities, where this is a form of stable housing finance for families that may not be able to qualify for a mortgage,” Goss said.
For many Detroiters and Michiganders, land contracts, if used responsibly, may be the only way to become homeowners, said Libby Benton, director of the Michigan Poverty Law Program. They are used throughout the state, in urban and rural areas, she said.
“On the flip side, this is a financial product that has very few regulations or oversight in Michigan. There’s very few federal laws that apply. The state laws are very thin,” Benton said.
The law, for instance, doesn’t require the seller to provide proof of property ownership, she said. It doesn’t require basic terms, such as names and addresses or buyers and sellers. That can lead to confusion around who is responsible for maintenance and property taxes. What’s more, a seller can use a quicker forfeiture process if the buyer falls behind on their payments, putting them at risk of eviction and losing the equity they put into the property, Benton said.
“The use of these products isn’t going away, and we do need legislators to step up and work with folks to craft some thoughtful reforms to make these a safer product,” Benton said.
A 2024 Pew report found that Michigan led the country in recorded land contracts from 2005 to 2022, and laws do little to protect buyers. The financing tool was most common in and around Detroit, according to Pew.
Benton said key reforms include: requiring land contracts to be recorded; proof of ownership by a seller; ensuring agreements have clear language around who is responsible for what, such as insurance, property taxes and repairs, and allowing buyers time to cancel their agreement to prevent fraud.
How to get help
In 2022, the city and partners published a 32-page land contract buyer guide and accompanying website to help buyers protect themselves. For more information and resources, go to www.detroitlandcontracthelp.com.
Michigan Legal Help website (funded, in part, by the Michigan Supreme Court) has a website about land contracts: michiganlegalhelp.org/resources/housing/overview-of-land-contracts. To find help by location, go to michiganlegalhelp.org/guide-to-legal-help. Call the Counsel and Advocacy Law Line (CALL) at 1-888-783-8190.
Reach reporter Nushrat Rahman at nrahman@freepress.com
