Do You Want the Federal Government as Your Landlord

After watching failed program after failed program, many in the housing industry wish that the government would stop trying to “fix” the mess and leave real estate alone.

But instead, they’ve come up with a new plan. Right now it’s in the concept phase, but if carried out, it could mean that the Federal Government will be the proud owner of thousands of rental homes across the country.

One reason given is that rents are rising while home prices are continuing to fall.

The theory behind this plan is that Fannie Mae, Freddie Mac, and the Department of Housing and Urban Development would hold these homes as rental properties until the market turns around and prices rise. Renting them out would offset the costs of holding them. Some believe they could actually turn a profit.

However, the cost of setting up rental management offices across the U.S. and maintaining good accounting records could quickly eat any profits. Perhaps if they turned management over to private rental management firms and paid the going rate for professional management, it could work.

Fannie and Freddie are already in the rental management business. At present, they rent a few thousand homes to former owners and tenants.

Another angle under consideration is that these entities would sell the homes to private investors who would agree to rehab and rent them, rather than putting them back on the market for sale.

Meanwhile, removing these homes from the glut of under-priced bank-owned properties could have the effect of allowing prices to stabilize.

Depending upon which analyst you listen to, taking these homes off the market could prevent an additional drop in home prices of from 3% to as much as 20%.

Because of the number of foreclosures over the past 5 years, the demand for single family rental homes has grown at 5 times the pace of demand for overall shelter.

While the Obama administration is promoting this plan, it cannot go forward without the approval of the Federal Housing Finance Agency. At this time, their spokesperson said the agency is “open to considering initiatives that are consistent with the goals of the conservatorship.”

What do you think? Should the Federal Government become a large-scale landlord to consumers who have lost their homes through foreclosure? Or will their involvement simply depress rental fees in the free market rental market?

Have they finally come up with an idea that has merit? Or not?

Or should the Federal Government back off entirely and let a free market take it’s course?

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