LBJ School of Public Affairs and William Wayne Justice Center collaborate on ‘Contract for Deed’ Study in Colonias

Oct. 5, 2011

AUSTIN, Texas — The Lyndon B. Johnson School of Public Affairs and the William Wayne Justice Center for Public Interest Law at The University of Texas at Austin will undertake a major study for the state of Texas on the use of contracts for deed, land agreements that often exploit residents of Texas colonias.

The project will be funded through a $200,000 grant from the Texas Department of Housing and Community Affairs (TDHCA). The grant will come to the LBJ School of Public Affairs and will fund faculty and graduate student research collaboration between the two schools.

Colonias are unincorporated subdivisions created by developers for low-income individuals in which homes are often characterized by a lack of basic services such as access to potable water and sewer service. Texas has both the largest number of colonias and the largest colonia population in the nation, with approximately 400,000 Texans living in these conditions in communities bordering Mexico, according to the Texas Secretary of State. Another estimated 100,000 people live in similar subdivisions away from the border — including many in Central Texas counties in the Austin-San Marcos region.

The contract for deed is a financing arrangement between the individual and the land owner that is often characterized by high interest rates, whereby land ownership often remains with the seller until the entire purchase price of the home and land is paid. Traditionally, the contract for deed has been the most frequently used method of financing homes in the colonias because many residents have neither the credit history nor the financial resources to qualify for traditional bank financing. Legislation to regulate contract for deeds was enacted in 1995 in the border counties, and in 2001 elsewhere.

This study will examine recorded and unrecorded contract for deeds as well as other types of contemporary property sales and transfers that emerge through informal land sales, subdivision and intestate inheritance.

The study is led by Peter M. Ward , C. B. Smith Sr. Centennial Chair in U.S.-Mexico Relations at the LBJ School, along with Heather Way, director of the Community Development Clinic , and Lucille Wood , research fellow at the Justice Center, as co-investigators.

"This research is a prime example of how faculty and student research at The University of Texas offers multidisciplinary and real-world applications to Texas’ government and its citizens," said Ward. "Since contracts for deed are often not recorded with the county clerk’s office, this research project will be essential to determining the number and scope of the contract for deed and other similar practices in Texas colonias and subdivisions, which have at times led to predatory practices by land owners against some of the state’s most impoverished residents."

Designed in two phases, the research team, including students from the Sociology Department, the LBJ School and the Law School, will first examine current contract for deed practices in seven border counties — Cameron, El Paso, Hidalgo, Maverick, Starr, Val Verde and Webb — which account for roughly 70 percent of formally recognized colonia residents in Texas. In addition, the research team will review contract for deed practices in five Central Texas counties.

In the second phase, the team will be joined by 20 law students to participate in fieldwork under the auspices of the Law School’s Pro Bono Program. Working with members of the research team, the students will travel to the border region and homeowners in communities selected for further study. The final report to the TDHCA is due in August 2012.