Will the Government Transition Foreclosures Into Rentals?
The Obama administration is apparently exploring options to stabilize the housing market, including pulling foreclosed properties off the market and renting them. Senior officials said the plan is still in the concept phase, but under “serious consideration,” partly because rents are rising while home prices are falling—due to high numbers of foreclosures.
Federal Reserave Chairman Ben Bernanke said last week that reducing the glut of unsold foreclosed homes on the market was “worth looking at.”
In May, home prices were 7.4% lower than the same month in 2010. Foreclosure sales made up the bulk of the loss. They now account for 30% of homes sold every month.
But is it a good idea for the government to become a landlord? Or is it better to sell the homes to experienced investors, who would agree to rent them?
Because rents are rising due to high demand, the new idea “could have some legs,” according to a former White House economist. Renting foreclosed homes could at least cover the costs of holding the properties until the market stabilizes, and could even mean a profit for Fannie Mae, Freddie Mac, the Department of Housing and Urban Development, and other holders of foreclosed properties.
This idea potentially sets up the federal government as a direct competitor of private investors and groups who began buying distressed properties in hopes of renting or flipping them. And as the home buying market increasingly turned to renting, that option turned out to be a better way to go for most of these investors. Single-family rentals are a fast-growing segment of the market.
What do you think of this idea?
January 31st, 2012 at
[...] we reported last July, the Obama administration has indicated it would transition foreclosed properties into rentals. And [...]