To address a few of Bruce's points, it's true that some people in a rent-to-own arrangement don't end up buying. It depends, in part, on how the deal is structured. It also depends on the renter's/buyer's circumstances; sometimes they change so much that what appeared to be the right decision (to buy) isn't the right decision a few years later. Maybe the person got married, and the house isn't suitable for the couple. Maybe the person took a job elsewhere, and the commute doesn't work. And while most owners or investors who put rent-to-own deals together hope that the tenant-buyer will exercise his/her option and buy (because that's where the real payoff is), some investors are content with the constant churn of option money down, above-market rent for a year or two, then a new tenant-buyer, repeating the whole cycle. So, agreed, it doesn't always work out.
Note that the amount of money you provide up front is NOT a down payment. It's a non-refundable option fee. And it should be stated and presented like that at the beginning. It's the consideration that the owner receives for which, in return, he grants an option to the tenant-buyer. If the tenant-buyer does purchase, the option fee should be credited toward the purchase price. If the tenant-buyer does not purchase, he/she forfeits the option fee, just as any person loses an option fee if failing to exercise an option. But that should be made very clear to the tenant-buyer up front, so there are no surprises a year or two down the road.
There can be definite advantages to the tenant-buyer in a rent-to-own arrangement--locking in a price for the property, having much more of the lease payment credited toward the purchase price than would be realized from an amortized loan, having the ability to "walk away" after a year or two if the property didn't suit his/her needs. Gosh, imagine how many fewer foreclosures there'd be today if some of the people who 2 years ago were so desperate to buy that they did 100% financing, negative amortization loans, then got caught upside down. Worse case scenario if they'd gone with a lease-option: They'd have paid a nonrefundable option fee of maybe 3%-5% of the home's value, paid rent (costing no more than those artificially low first year mortgage payments), and now their maximum exposure would have been their option fee. Instead, thousands of people are losing everything. Yes, they made some very poor decisions in deciding to buy at (what we now now was) the top of the market, using some exotic loan instruments. When people aren't in a position to buy, but are eager to buy, a lease-option should be considered.
As for Texas effectively outlawing them--yes, there were abuses. You find different states reacting (usually overreacting) to abuses. In Maryland, a couple of years ago, as a result of some real abuses, a law (SB 761) was passed that makes it very dangerous and tricky to buy a house in preforeclosure. While there are some legitimate consumer protection elements in the law, it also pretty much eliminated the ability of many people facing foreclosure from selling their property during the month or so prior to foreclosure. So, the law is protecting people against some abuses, but has really hurt them in other ways.
Regardless, buyers, sellers, and agents should always be aware of, and abide fully by, the laws of whatever jurisdiction they're in.