Right To Rent Plan Offers Simple Solution to Foreclosure Crisis

[Hannah Bell]

For Immediate Release: July 16, 2009
Contact: Alan Barber, [phone] x 115

Washington, D.C.- In the face of mounting frustration over the nation's soaring foreclosure rate, the Obama administration and Congress are exploring a handful of options to offer families relief from the current housing crisis. Of these options, one policy has emerged that offers an easy, straight-forward means of ensuring housing security for millions, the Right to Rent Plan.

Acknowledged as a means of keeping families in their home while helping to alleviate the neighborhood blight of soaring foreclosures, this proposal has already been endorsed by several members of Congress and enjoys support from both the left and the right.

The Right to Rent Plan, first proposed two years ago by Dean Baker, Co-Director of the Center for Economic and Policy Research (CEPR), would allow families facing foreclosure to rent their homes at the market rate for a substantial period of time. The market rent would be determined by an independent appraiser in the same way that homes are appraised when banks issue a mortgage.

"The Right to Rent Plan is simple," says Baker. "It can take effect immediately, it requires no taxpayer dollars, and it creates no new bureaucracy."

Late in the last Congress, Rep. Raul Grijalva introduced the Saving Family Homes Act, based on the Right to Rent Plan. Other members of Congress have voiced support for the plan, including Sen. Charles Schumer and it is consistently mentioned as one of a few proposals currently being considered by the White House.

The full details of the plan can be found here...

http://www.cepr.net/index.php/press-releases/press-releases/right-to-rent-plans-offers-simple-solution-to-foreclosure-crisis/

[MercutioATC]

1. Prone to both abuse and uselessness.

Depending on the individual housing market:

1) Renting is cheaper than buying. I buy a big house, default on the note, and get to live in the house for less money.

2) Buying is cheaper than renting. I can't afford my $1000/month mortgage payment, but local rent for a comparable house averages $1200/month.


There may be a way to make it work for some people, but it's not nearly as simple proposal as it seems at first glance.

[Birthmark]

2. Correct on all counts. nt

[ProgressiveProfessor]

3. It will not survive as outlined

It ties up the capital of banks and others with compensation or due process. Its a idea that will garner a lot of sympathy, but it won't hold up legally across the board. However, I would be in favor of banks who accept Federal support funds being required to offer something like it.

[yodoobo]

6. The banks will get plenty of compensation from the rent

And their due process will come from the foreclosure process.

But most of all, screw the banks.

We as taxpayers are now shareholders, and as shareholders its something that we have the right to demand.

[ProgressiveProfessor]

9. I agree for anyone that has taken Gov money but I would not support this

for private mortgages etc.

[malletgirl02]

4. I think is a great Idea

There is another post on DU right now about banks walking away from foreclosed houses and leaving them to rot, I'm sure you have seen the thread. This idea will not only help keep people in their homes, but help the surrounding neighbors, by not having a dilapidated house near them.

[elehhhhna]

11. the owners can squat versus rent. Squat not rot!

[varelse]

5. This could keep property safe from vandalism, keep communities from falling apart

and protect property values in neighborhoods from falling even further. I hope it can be done.

[dkf]

7. If they've lost their jobs, I bet they can't afford rent either.

This should be an option for a bank, but shouldn't be mandatory. I think the goal should be for people to appropriately be matched with what they can afford and too many people overreached.

We can't all live in 2000 square foot houses with granite countertops and stainless steel appliances.

[pinto]

8. These are the details highlighted at the website -

The Right to Rent Plan

• Gives homeowners facing foreclosure the option of renting their home for a substantial
period of time (e.g. 5 to 10 years) at the market rate. This rate would be determined by an
independent appraiser in the same way that an appraiser determines the market value of a
home when a bank issues a mortgage.

• Requires no taxpayer dollars or new bureaucracies. It would be administered by a judge in
the same way that foreclosures are already overseen by judges. It simply would change the
rules under which foreclosures can be put into effect.

• Does not bail out in any way lenders who made predatory mortgages or made risky gambles
in the secondary market.

• Provides no windfalls for homeowners. They would have the right to stay in their house, but
would no longer own the home. This means that there would be little incentive to abuse the
program. The plan could be capped at the value of the median house price in a metropolitan
area (or higher, if Congress chose), so it would not benefit high income homeowners.

• Adjusts rents in later years according to the Labor Department’s Consumer Price Index for
rents in each area. If either the owner or renter were to believe that the rent is unfair, they
would be allowed to arrange, at their own expense, to have the court make a second
appraisal.

• Allows the mortgage holder to resell the home after foreclosure, but binds the buyer to the
commitment to accept the former homeowner as a tenant for the rest of the guaranteed
period.

• Prevents the sort of blight that often afflicts neighborhoods with large numbers of
foreclosures. Homes would remain occupied, and long-term renters would have the
incentive to maintain the properties. This would help to sustain property values for entire
neighborhoods.

1 Dean Baker first proposed the Right to Rent concept in 2007 as the Subprime Borrower Protection Plan (see http://www.cepr.net/index.php/op-eds-&-columns/op-eds-&-columns/the-subprime-borrower-protection-plan/) and in 2008 as an Own to Rent transition (see http://www.bepress.com/ev/vol5/iss1/art5/).

2 See http://www.freddiemac.com/news/archives/servicing/2009/20090305_reo-rental-initiative.html

3 See http://www.govtrack.us/congress/bill.xpd?bill=h110-6116

[ProgressiveProfessor]

10. There are some obvious holes as Post #1 points out

It might be viable for banks that have taken Gov money, but not for private lenders etc.