Could Right-To-Rent Help Fix the Foreclosure Crisis?

As foreclosures continue, even with government programs in place from the Bush Administration and the Obama Administration, there are concerns about what happens to empty homes. (I know all about this from experience; the house behind me has been foreclosed and vacant for a year and a half.) Vacant homes create problems for property values, as well as for the character of the neighborhood.

One proposal that is getting a fresh look is right-to-rent. CNN Money describes right-to-rent:

One proposal making the rounds in D.C. is Right to Rent: a program, first floated two years ago by liberal think-tanker Dean Baker, that would allow folks who have lost their home to foreclosure to continue living in the home as a renter.  As Baker sees it, giving the foreclosed the right to rent their home at a market rate for a long stretch (perhaps five to 10 years) is a win-win. The landlord (an investor or bank) gets market rental income, the homeowner isn’t uprooted, property values aren’t further depressed by foreclosure fire sales, and taxpayers aren’t asked to bail out lender or borrower.

The idea is that, instead of making mortgage payments, the homeowner is making rent payments. In many cases, market rental rates are lower than mortgage payments, so it could allow families to stay in homes. And, since the property isn’t vacant, it doesn’t have the same impact on property values.

Unfortunately, in practice this might be difficult. Setting rental rates is hard, and for some, living in a home they “bought” may not be so pleasant now that they are suddenly renters.