Easing the Housing Crisis by Building Better Tools

Founder's Mission & Origin

• Adina Cushman (founder of Divi) aims to make homeownership accessible, inspired by her father's 1980s experience of securing seller financing due to lack of FICO scores and English proficiency.
• Her family refinanced their home multiple times to fund college for four children, defining the American Dream as wealth creation for the next generation through property.
• Cushman notes that 80% of Americans cannot currently access a mortgage due to median income levels versus average home prices ($400,000) and high interest rates (7.15% average 30-year fixed).

Industry Obstacles

• The U.S. mortgage industry relies on underwriting criteria and structures established in the 1940s that have not evolved to account for modern income volatility (1099 workers, gig economy).
• The last major innovation attempt by Fannie Mae's COO caused a global housing-led recession, resulting in industry-wide stagnation regarding structural reform.
• Primary barriers to entry remain down payment requirements, FICO scores, and rigid income verification methods.

Divi's Business Model: "Run to Own"

• Divi operates a rent-to-own program where the customer selects the home, and Divi purchases the property, handling inspections, title checks, and closing costs.
• Customers pay a 1% initial "savings contribution" to gain immediate equity, followed by monthly payments comprising rent and equity.
• The program builds customer equity from 1% to 10% over a three-year period, at which point customers can refinance into a traditional mortgage or cash out.
• Divi covers all maintenance, taxes, and insurance, contrasting with predatory historical rent-to-own models where tenants bore these costs.

Market Expansion & Customer Demographics

• Initially targeting low-cost housing markets to prove the model with a $3 million seed round, the first market was Cleveland, Ohio.
• Current operations span 20 metros across nine states, with the largest markets being Atlanta (Georgia), Florida, and Texas.
• The customer base consists of individuals with household incomes around $100,000; 51% are non-salaried (1099/gig workers).
• Over 50% of customers are underrepresented minorities, and 80% of transactions are female-led, focusing on healthcare, education, and service sectors.
• Divi intentionally avoids coastal elite markets (San Francisco, New York) to serve populations traditionally ignored by mainstream financing.

Ethical Innovations & Risk Management

• To mitigate predatory practices, Divi implemented a cap on buyback price appreciation, limiting it to 6% annually despite third-party forecasts predicting 15-20% in certain markets.
• The company utilizes independent third-party sources for appreciation calculations to ensure separation from internal financial incentives.
• Cushman mandates an internal culture where every decision is made as if for one's own family, though she admits a lack of regulatory guidance necessitates self-imposed policy enforcement.

Regulatory Engagement & Stance

• Cushman asserts that the onus is on startups to proactively initiate dialogue with regulators (e.g., CFPB) rather than waiting for government outreach.
• She highlights the difficulty founders face in navigating government relations due to a lack of clarity on contacts and communication channels, suggesting the need for intermediary platforms.
• Divi actively seeks to "sanity check" assumptions with regulators to build new industry standards collaboratively.

Housing Market Forecasts (2023-2024)

• Institutional buying has halted; Cushman predicts home prices will decline year-over-year in Q1, forecasting a 10-15% drop.
• While prices are down 8% year-over-year in some metrics, they remain up 8% compared to the previous year due to prior appreciation.
• Transaction volume is currently down approximately 20% year-over-year as high interest rates cause demand to stagnate.
• Comparisons to the 2009-2012 crisis show a key difference: over 50% of homes currently hold 50% or more equity, a buffer absent during the previous crash.
• Cushman anticipates a market reset that will wipe out recent gains (2019-2022 price surges of ~50%) but expects the decline to be faster and less extreme (10-20% vs. 30-40% historically) due to under-supply and migration trends.

Long-Term Migration Trends

• There is a persistent shift toward second-tier cities and ex-urban environments driven by remote work capabilities.
• This migration is expected to sustain demand in non-coastal markets despite national price corrections.
• The overall market correction is viewed as healthy for long-term affordability, though it will require consumers to prepare for a tighter economic environment in 2023.