March 7, 2021

U.S. Seeks Ideas on Renting Out Foreclosed Property

WASHINGTON — Uncle Sam wants you — to rent a house from Uncle Sam.

The Obama administration said on Wednesday that it was soliciting ideas on how to turn the federal government’s inventory of foreclosed houses into rental properties that could be managed by private enterprises or sold in bulk.

The goal, the administration said, is to stabilize neighborhoods where large supplies of empty, foreclosed properties have hurt property values. In addition, the plan is an effort to clear the nation’s balance sheet of real estate holdings that, because they have been difficult to sell individually, have hung over the housing market and stunted sales of existing homes and new construction.

The Federal Housing Finance Agency, the Department of Housing and Urban Development and the Treasury Department are jointly requesting ideas for sales, partnership ventures or other strategies that would help to unload approximately 250,000 properties owned by Fannie Mae, Freddie Mac and the Federal Housing Administration. Those properties account for about half of all properties that have been foreclosed upon and are still awaiting resale nationwide.

As it considers the proposals, the government-sponsored enterprises that now own the houses will continue to offer individual properties for sale, Edward J. DeMarco, acting director of housing finance agency, said Wednesday. But the government says it believes that given the slow pace of those sales, it must find new ways in which properties can be pooled, sold and privately managed as rentals.

Greater flexibility in disposing of the houses will have other benefits as well, Timothy F. Geithner, the Treasury secretary, said. “Exploring new options for selling these foreclosed properties will help expand access to affordable rental housing, promote private investment in local housing markets and support neighborhood and home price stability,” he said in a statement announcing the new program.

While home prices have remain depressed since the 2008 financial crisis, rental prices have not come down. The Joint Center for Housing Studies at Harvard University reported in the spring that more than 10 million households — or one-quarter of all renters — pay more than half their income for housing, a record level.

“We have to find and promote new ways to alleviate the strain on the affordable rental market,” Shaun Donovan, secretary of the Department of Housing and Urban Development, said.

John Taylor, president of the National Community Reinvestment Coalition, said in an interview that an added benefit of such a program would be the creation of construction jobs for rehabilitation of the properties.

The Obama administration and Congress have been working on plans to wind down Fannie Mae and Freddie Mac, which the government took over in 2008 as losses on loans guaranteed by the agencies expanded.

Of the 248,000 homes owned by Fannie Mae, Freddie Mac and the F.H.A. at the end of June, 70,000 were listed for sale, said Corinne Russell, a housing finance agency spokeswoman. The remainder were not yet on the market or the agencies had already received an offer from a prospective buyer.

But it is possible that hundreds of thousands of more homes that are now in the foreclosure process could come into the possession of the federal government in the next few years, housing experts say.

“This is a call for innovation and an opportunity for businesses to not only make money and create jobs, but also provide affordable rental housing for those who need it and strengthen our communities at the same time,” said Senator Jack Reed, Democrat of Rhode Island, who has pushed for such a program.

The proposals are at an early stage, and there is no guarantee that any such programs will go forward. After considering the responses to the request for information, which are due by Sept. 15, the entities may issue a request for proposals to put specific programs in place either jointly or separately.

Among the strategies on which the administration is seeking comment are rent-to-own programs, in which previous homeowners or current renters could lease properties as a path to ownership, and ways in which the properties can be used to support affordable housing.

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