As the large inventory of distressed homes on the market continues to push a reduction in home prices as well as an increase in rental prices, the government is thinking about renting the homes owned by Fannie and Freddie.
The proposal has two benefits:
- Reducing the amount of distressed homes for sale
- Clearing the surplus of homes currently unoccupied.
These benefits would be the keys to a successful housing market recovery. Increasing the amount of rental properties available can also stabilize rent prices, which have been going up as foreclosed families wait before buying another home.
While the benefits of the proposal are obvious, it is still just a proposal. It’s too bad the Administration did not listen to Oppenheim Law back in 2009 when we advocated using the inventory of foreclosed homes to benefit communities, instead of just letting them sit unoccupied and cause suburban blight.
The Government could easily enact the proposal by ordering Fannie and Freddie to sell their foreclosed homes to investors who promise to rent them out. The investors could then hire management companies to look after the houses. If the Administration decides to follow through with the plan, the Government might actually make money on the deal and help the housing recovery at precisely the right time for it: before the next wave of foreclosures hit. That way, the market can be more resilient when the next hit comes and absorb more losses.