“The country is on a path where it is likely to see foreclosures at a pace of more than 150,000 a month for at least two years,” warns Dean Baker, codirector of the Center for Economic and Policy Research in Washington, D.C. Instead of rushing to retool the system, policy makers seem to be at a standstill. They need to do something radical. And they need to do it quickly.
Enter Baker. In the Fall-Winter 2009 issue of Shelterforce, he proposes that Congress pass a “right to rent” law, meaning that legislators could bend the policy rules and make it legit for homeowners facing foreclosure to stay in their homes for a set number of years (he suggests 5 to 10). They would simply pay the market-value rent, which would be determined by an appraisal jointly paid for by the renter and the lender. The agreement would also protect the tenant from eviction without just cause, and no taxpayer dollars would be used.
Baker acknowledges that fears about letting banks play landlord when they lack experience are legitimate but notes that many already contract with management companies to handle tenants. Another concern is that without the option to foreclose, lenders would see mortgages as riskier lending situations and thus hike interest rates. This threat is actually a potential upside, Baker says, since it might mean banks would become more cautious about making loans when housing prices are out of step with economic reality.
So far no state has enacted a right-to-rent law, but mortgage giant Fannie Mae offers a one-year rental plan that can be renewed, and Freddie Mac has a plan that operates month to month.