Inside the rent-to-own startup that’s putting aspiring homeowners in financial jeopardy:

Old-fashioned as it may seem, the association between homeownership and the American dream has endured—and with good reason. Homeownership remains the primary driver of wealth creation in the U.S. Conversely, Americans who rent have just one-fortieth of the household wealth that homeowners enjoy, according to the Joint Center for Housing Studies at Harvard University. Soaring home price appreciation is further exacerbating this inequality—along with the wealth gap between white households and households of color, who are less likely to own.

The customers whom Divvy targets have been living in the shadow of these trend lines. They may not have good credit scores, steady employment histories, or 401(k)s, but they are well aware that their ability to retire depends on their homeownership status. When Divvy appears in a Facebook ad and offers them a chance at safety and security, they often stretch their finances and take a gamble. For half of Divvy customers, according to the company, the bet pays off, and they become homeowners. But others find themselves in over their heads. They deplete their emergency funds and borrow from family in order to cover Divvy’s down payment fee. While paying top-tier rental rates, they struggle to find the extra cash to cover surprise maintenance bills. If they want or need to exit their contracts early, they lose essential savings. And, as pandemic protections for renters expire, they face eviction in increasing numbers.