LOS ANGELES METROPOLITAN AREA — Jubilee Homes, a San Francisco-based startup, is offering a fractional land-ownership model to homebuyers in the Los Angeles metropolitan area, purchasing the land beneath homes with cash while buyers finance only the structure with a separate mortgage. The model is designed to lower down payments and monthly costs in a region where land often accounts for well over 60 percent of a single-family home's total value.

Under Jubilee's arrangement, the company buys the land and offers homebuyers a 99-year lease, under which they pay monthly rent in addition to their mortgage. Jubilee says its model yields total monthly costs that are lower or roughly comparable to a traditional home purchase and requires a smaller down payment. Homebuyers can purchase the land at any time for an amount determined by a third-party appraiser.

If homebuyers sell the property, they package the home and land together, and Jubilee receives a share of the total sales price proportionate to its initial share in the land. For example, if the land accounted for 65 percent of the initial purchase price, Jubilee would receive 65 percent of the sales proceeds.

Fractional ownership startups more broadly partner with homebuyers to purchase properties, taking a stake and sharing in future upside. These startups aim to expand access to homeownership while generating profits for themselves and their investors. Fractional owners hold a stake from the first day of ownership, and the model often appeals to young, financially constrained individuals who might otherwise spend additional years renting. Fractional ownership can also reduce concentration risk in buyers' portfolios by allowing them to invest in assets other than their home.

In the third quarter of last year, the typical down payment was $30,400. For a household earning the median income and saving the average amount, it would take seven years to accumulate that sum — twice as long as before the pandemic.

Sharon Cornelissen, director of housing for the Consumer Federation of America, expressed caution. "If it sounds too good to be true, it usually is," Cornelissen said. "People who sign on to these deals may not understand the precise financial tradeoffs, or they may wind up bearing the burden of ongoing homeownership costs — maintenance, insurance, property taxes, etc. — while investors enjoy most of the upside," she added.

Brian Elbogen, CEO of Jubilee, said his own experience informed the company's approach. "You can either own nothing, or you can own everything," Elbogen said. About a decade ago in San Francisco, Elbogen and his wife, after losing out on several homes, bought a three-unit building with two other families. He described sorting out the financing and legal details as a "cockamamie-like process." "But you know what it did? It got us in the door," Elbogen said.