Washington lawmakers are considering legislation that would make it easier for people to rent foreclosed properties, but some experts are questioning that method of handling the housing crisis.
The bill, known as the Neighborhood Preservation Act, would allow banks insured by the Federal Deposit Insurance Corp. to rent out foreclosed properties for up to five years. The logic behind the proposal, which has been approved by the House and is pending in the Senate, is that by allowing banks to lease foreclosed homes for an extended period, the number of foreclosures for sale will drop and priceswill stabilize.
Homeowners who have been foreclosed on could rent out their own property under the legislation.
Some, however, fail to see the logic.
The Center for Economic Policy Research, a Washington think tank, opposes the legislation, saying the measure would fail to protect homeowners because banks ultimately decide whom to rent to.
“In communities where foreclosure remains a problem, homeowners should be given the opportunity to remain in their homes as renters paying the fair market rent,” said Dean Baker, co-director of the center. “This ‘right to rent’ would provide homeowners facing foreclosure in hard-hit areas an important degree of housing security and stability.”
Local real estate agent Donna Evers also bristled at the bill, arguing that, instead, it would be in the banks’ interest to work with homeowners to restructure their payments so they can keep their homes, rather than let them rent out their own properties. Evers also favored a right-to-rent approach as a potential way to ease the financial struggles of homeowners facing foreclosure.
“I just feel like it can’t have been thought through very well,” she said.
Banks also would face the double problem of having a foreclosure on their books while acting as landlord, Evers said.
To that end, some banks are delayingtheir final foreclosure notices and leaving defaulted homes in the property owners’ name, said Rick Sharga, vice president of marketing for the foreclosure-tracking site RealtyTrac. That way, the homeowner is still liable for the property, and banks don’t have to face potential lawsuits from municipalities, he said.
Jill Landsman, spokeswoman for the Northern Virginia Association of Realtors, said vacant homes potentially can be terrible for neighborhoods, and in some cases it is better for homes to be occupied — by anyone, including investors — than for them to sit vacant.
