Government Considering Turning Foreclosures into Rentals

The Obama administration is getting creative with what to do with the glut of foreclosed upon homes that are waiting to be sold: they are considering renting them out. The homes would no longer be for sale (or not placed for sale to begin with, as we know that there are a lot of repossessed homes that are not for sale right now) and would be made available for rent. This would serve two purposes, the first being that by decreasing the supply of homes for sale, it would help stop prices from falling further. The second is that it would increase the supply of rental homes, thus helping to stop rents from increasing further due to escalating demand.

By renting out the homes the government would be able to help cover their carrying costs and it would potentially give the housing market enough time to stabilize so that the homes would eventually be sold at a higher price than they could currently command, thus further minimizing the government's losses. But before these homes can be rented out the government would have to make the homes inhabitable again. Most foreclosed properties have suffered from neglect, but many are also missing appliances or have other deferred maintenance or outright damage that make them unfit for habitation. So before they can be rented, the government must invest in them, which is not something that they have been doing. The government is used to playing landlord with public housing and VA housing, but it isn't used to renting out individual homes that are spread throughout the country. It remains to be seen how they would handle this added responsibility. 

According to the Wall Street Journal, one idea the government is considering is selling thousands of foreclosed properties to investors who would rent them out. But this doesn't seem like a good idea to me because it would enrich wealthy investors by allowing them to buy masses of deeply discounted homes. The government would not see the benefit of waiting out the market for the homes values to stabilize and the public wouldn't get the opportunity to get those bargains. The only benefit would be to the rental market. 

Fannie Mae and Freddie Mac currently sell round 50,000 foreclosed upon homes each month. If this were decreased to 30,000 homes (with the 20,000 homes being rented out), it could help to avoid further decreases in home prices.