Addressing teh Housing Affordability Gap: Gradual Homes’ Innovative Approach

amidst a growing crisis in housing affordability, Pryconsa’s subsidiary, Gradual Homes, is actively seeking a new round of investment to scale its rent-to-own program. This initiative aims to bridge the gap for individuals and families struggling to secure customary mortgages due to insufficient savings for down payments,a problem that affects a important portion of the population,especially young adults. According to recent data from the National Association of Realtors, the median down payment for first-time homebuyers is around 6% of the purchase price, a hurdle that many find difficult to overcome.

How Gradual Homes Works: A Three-Way Partnership

gradual Homes operates on a unique model that connects prospective homeowners with investors.The process begins with the client identifying a second-hand home they wish to purchase. Instead of providing the standard 20% down payment, the client contributes just 5% of the property’s value. Gradual Homes then secures an investor who provides the remaining capital.The client then rents the property, with the option to buy it after three years, and up to seven years. A portion of their rent, up to 30%, can be deducted from the final purchase price.

We are an investment that tries to solve a social problem. Obviously investors are in this trying to help solve a social problem in some way.

Guillermo Estévez, general director of Gradual Homes

investment Chance: Social Impact and Financial Returns

Gradual Homes presents a unique investment opportunity that combines social impact with financial returns. Investors, who are typically institutional entities like insurers and mutual funds, receive a commission from Gradual Homes and can expect returns between 7% and 8%. Pryconsa itself participates as an investor, further aligning its interests with the program’s success. This model offers investors a stable, relatively low-risk investment while concurrently addressing a critical social need.

Expansion Plans and Investor Profile

With an initial €20 million already secured from Pryconsa, an insurer, and a mutual fund, Gradual Homes has acquired nearly 50 properties. However, the company recognizes the need for additional capital to meet the growing demand for its services. the company is seeking investors with a similar profile to its existing partners: institutional investors who prioritize stable, low-risk investments with a positive social impact. The company is currently operating in Madrid, Valencia, Alicante, and Malaga, but has received requests from potential tenants in numerous other cities.

Challenges and Future Outlook

While Gradual Homes has experienced significant success, it faces challenges in meeting the overwhelming demand for its services. The company receives far more applications from potential tenants than it can currently accommodate, limited by both available funding and investor preferences for specific locations. The average price of homes acquired through the program is currently €240,000. As Gradual Homes seeks to expand its reach, it will need to attract additional investment and carefully manage its growth to ensure it can continue to provide affordable housing solutions to those who need it most.