There’s an old Lily Tomlin joke where she says, “Wouldn’t it be great if all the people in New York who talk to themselves were paired off, so it looks like they’re talking to each other?”
In a similar spirit, apparently, Senator Jack Reed (D-R.I.) has proposed a solution to America’s foreclosure problem (i.e. there are too many of them) and its rental problem (i.e. prices are too high). We should, Reed says, simply put renters in some of the available foreclosed homes.
Housing Wire’s Jon Prior notes that Reed sent a letter to the acting director of the Federal Housing Finance Agency detailing his plan to generate revenue from the inventory of foreclosed homes. Currently Fannie Mae, a quasi-governmental agency that backs a large portion of the mortgages in the U.S., is stuck with more than 100,000 repossessed properties.
So why not get into the landlord business? Or to quote Reed: “The number of vacant foreclosed homes waiting to be sold at depressed prices is increasing at the same time that the demand for rental properties is increasing.”
The obstacles, of course, would be many. Who will fix these homes up? Who becomes their property manager? Bureaucrats who don’t have enough manpower and time to process the foreclosures that they already have won’t suddenly get more manpower and time in order to repaint living rooms and fix toilets. (I’m speaking as someone who took two hours of my work day yesterday to get my tenant a new microwave.)
Also, properties tend to get foreclosed upon when homeowners lose their jobs, which means the foreclosed homes are not in the same place as rental demand. To put it another way, there’s strong demand for rentals in cities with jobs (think San Antonio, with its 8.1% unemployment rate) while the pools of foreclosures are often in cities without many jobs (think Las Vegas, with its 13.8% unemployment rate.)
Yet, with too many people in positions of power bewailing the housing crisis without taking steps to correct it, there’s something appealing in the fact that Senator Reed is at least trying to think outside the lockbox. (Sorry, bad real estate joke.) When Sen. Reed says that we all need to be more proactive and creative in healing the housing market, he’s not just talking about the problem. He’s trying to search for some kind of solution. A little more of that creative thinking might give us a nudge in the right direction.