Photo: Taber Andrew Bain / Flickr
There are plenty of studies out there harping on the impact of the foreclosure crisis, but nothing better illustrates just how hard American consumers have been hit than the 500,000 shuttered homes left vacant on our blocks. With even more foreclosures heading their way this year, lenders are facing a new dilemma:
What are they supposed to do with all those empty houses?
In response to the Federal Housing Finance Agency’s (FHFA) call for help, the centre for American Progress came up with a pretty compelling idea: Get government-backed lenders to rent them out.
The Rehab-to-Rent (R2R) program calls for FHA, Fannie Mae and Freddie Mac to sell foreclosed properties to landlords, who would be tasked with renovating them and parsing them off as rentals.
Since the trio owns about half of all foreclosed homes on the market right now, roughly 230,000, the program has the potential to make a big dent in the market.
If the idea sounds familiar, that’s because it is. Back in December, Bank of America started tossing around the idea of leasing foreclosed homes back to their previous owners to take care of their own problems selling off properties.
Both plans would help keep the lights on in neighborhoods hit hardest by the recession, especially in areas heavily skewed toward minorities and low-income residents.
It seems like a simple enough concept, especially as the rental market is booming with a surge of former homeowners looking to downsize.
The only trouble would be convincing FHA, Fannie, and Freddie to do without the short-term returns they could get by trying to sell the homes off to the highest bidder.
To that argument, the CAP says the lenders should focus on trying to stabilise the housing market and how they could benefit taxpayers by keeping For Sale signs off the lots for a while.
Flooding the market with a mass foreclosure sale would only drive down home values in areas that have already been through enough.
As for where the R2R program would be needed the most, the CAP proposes cities with the strongest markets for rentals and most foreclosures, naturally:
Photo: centre for American Progress
Atlanta, Ga., Fort Lauderdale, Fla., Los Angeles, Miami, Fla., and Sacramento, Calif. were high on the list.
“It is no surprise .. to see three California cities listed on the “priority” list,” the organisation says. “California has one of the highest per-capita foreclosure rates in the nation and has seen one of the largest drops in home prices.”
For now, this program is just a pipe dream.
Headed for foreclosure? Read this step-by-step guide to walk away from your mortgage >