Posted on Reuters by Felix Salmon:
Obama administration officials are now going on the record when it comes to what I’ve been calling the Baker-Samwick proposal but which Dean Baker has now much more pithily rechristened the right-to-rent plan:
A top Treasury Department official told a Senate panel yesterday that the government is considering a proposal to allow homeowners to stay in their home as renters after a foreclosure…
“It’s certainly an idea we’re thinking about,” Herbert M. Allison, assistant secretary for financial stability, told the Senate Banking Committee.
The idea was first floated by Dean Baker in August 2007; Andrew Samwick signed on, from the other end of the political spectrum, almost immediately. (Contra Joe Nocera, this idea was not “first broached” by Dan Alpert in October 2008; the Alpert plan is needlessly complicated, and involves giving away to homeowners a valuable option to repurchase their homes which is neither necessary nor desirable.)
It’s worth noting that the right-to-rent plan is very different from the existing Fannie Mae plan which allows homeowners to rent their homes on a month-to-month basis, if they give up their cash-for-keys option whereby they get paid for moving out. Renting month-to-month is not a happy state of affairs: your landlord can kick you out of your home at any time. It’s easy to see why most homeowners would prefer cash up front for moving now. Under right-to-rent, by contrast, the homeowner can stay in the home for at least five years, if not ten.
In an ideal world, banks which foreclosed on homeowners would then sell those homes to professional landlords, who would rent the houses out in perpetuity, either to the former homeowner or to renters who moved in after the homeowners moved out. That would raise the amount of rented housing in the US, and decrease the homeownership rate — and lower homeownership means lower unemployment. This plan isn’t just good for soon-to-be-foreclosed-upon homeowners, it’s good for employment, too!