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Right to Rent: A Simple Solution to the Foreclosure Crisis

Right to Rent: A Simple Solution to the Foreclosure Crisis. Presentation to EARN Dean Baker Co-Director Center for Economic and Policy Research September 13, 2011. Benefits of Right to Rent (R2R) Provides housing security to homeowners facing foreclosure

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Right to Rent: A Simple Solution to the Foreclosure Crisis

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  1. Right to Rent: A Simple Solution to the Foreclosure Crisis Presentation to EARN Dean Baker Co-Director Center for Economic and Policy Research September 13, 2011

  2. Benefits of Right to Rent (R2R) • Provides housing security to homeowners facing foreclosure • Requires no money and little bureaucracy • Frees up money from high mortgage payments  • Provides incentives for modifications.

  3. Basics of Right to Rent • Foreclosed homeowners can stay in their home post-foreclosure (e.g. 5 years) paying market rent. • R2R can be limited to certain mortgages (e.g. 2000-2007) and house price (below median). • The right to rent is part of foreclosure process.

  4. Mechanics of R2R • Court officer handling foreclosure offers homeowner option to rent. In non-judicial foreclosure states, offer must be made as part of process. • Court appoints an appraiser to determine the market rent. • Rent rises in step with inflation– just cause eviction.

  5. Impact of Right to Rent • Savings by switching from mortgage on bubble-inflated house price to rent can be more than $1,000 per month. • Keeps homes occupied, preventing blight from foreclosure. • Gives banks incentive to modify mortgages voluntarily.

  6. Advantages of R2R • No bureaucracy, no public money • No moral hazard issues, doesn’t give anyone a windfall. • May be acceptable to conservatives (Samwick and Lachman)

  7. Resources on R2R • CEPR R2R page (www.cepr.net/r2r) • The Gains From Right to Rent in 2010 (www.cepr.net/index.php/publications/reports/the-gains-from-right-to-rent-in-2010) • The Right to Rent Plan (www.cepr.net/index.php/publications/reports/the-right-to-rent-plan) • The Right to Rent Act of 2011 (H.R. 1548 – Rep. Grijalva) • FHFA/Treasury/HUD RFI on real estate owned homes – due Sept. 15 (www.fhfa.gov/webfiles/22366/RFIFinal081011.pdf)

  8. Right to Rent: A Simple Solution to the Foreclosure Crisis Presentation to EARN Dean Baker Co-Director Center for Economic and Policy Research September 13, 2011

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