U.S. Sens. Tina Smith, D-Minn., and Jeff Merkley, D-Ore., introduced the Residential Rent-to-Own Protection Act to protect consumers in Minnesota and across the country from predatory rent-to-own housing contracts.

According to a news release, their measure would allow rent-to-own residents-many of whom are often people of color or low-income Americans-to seek damages from landlords who violate contracts. The measure is aimed at putting protections in place to ensure these residences are safe.

"Rent-to-own contracts can create valuable pathways to homeownership and security, but they don't always protect consumers. We want to change that," stated Smith, a member of the Senate Banking, Housing, and Urban Affairs Committee, in a news release. "This bill would establish standards for rent-to-own contracts so that residents do not have to live in fear of being treated unfairly or having the rug pulled out from under them and their families."

"Rent-to-own housing agreements could provide access to homeownership for people who may not be able to get a traditional mortgage," stated Merkley in the release. "But for decades, these agreements have often been scams that rip people off and turn the dream of homeownership into a nightmare. That has to change."

Rent-to-own housing contracts-also called land contracts or contracts-for-deed-usually require tenants to make payments directly to the seller over a period of time. For many of these contracts, the payments come in the form of rent plus an added premium, and in turn the seller promises to transfer the home title when the full purchase price is paid in full. Because of a lack of consumer protections, tenants who enter into these contracts can find themselves saddled with maintenance responsibilities they didn't expect, and some even lose out on the home they've been promised after just one late payment.

These contracts have disproportionately targeted people of color and low-income Americans, putting real barriers in place for many of these people to become homeowners, the news release stated.

Sens. Smith and Merkley's bill takes aim at fixing this problem by providing consumer protections against predatory practices. The Residential Rent to Own Protection Act would:

• Establish safety standards for residential rent-to-own contracts by requiring sellers to ensure homes meet state or local rental habitability requirements.

• Protect tenants from arbitrary evictions.

• Allow tenants to seek damages should landlords violate contracts.

• Create exemptions for nonprofit organizations that offer residential rent-to-own contracts with wraparound housing counseling services.

• Direct the Consumer Financial Protection Bureau to regulate residential rent-to-own contracts.

• Direct the Government Accountability Office to study market conditions, prevalence and outcomes of residential rent-to-own contracts.

The bill is supported by National Consumer Law Center, Americans for Financial Reform and Consumer Action.