Dean Baker of the Center for Economic and Policy Research suggests that one way that the federal government could help millions of Americans squeezed by the housing crisis is to permit homeowners to enter "own-to-rent" arrangements.
"The government can't shield every homeowner from the collapse in house prices, but it can help out the most vulnerable among this group. The simplest way to help moderate-income homeowners facing foreclosure is to adopt an "own to rent" policy under which the rules on foreclosure would be temporarily changed to allow moderate-income homeowners the option to remain in their home as renters."
"Under this own to rent plan, the judge handling a foreclosure would call in an independent appraiser, who would determine the rental value of a house in the same way an appraiser determines the sale value of a house before a bank issues a mortgage. The homeowner would then have the option to remain in the house as a tenant, paying the rent determined by the appraiser."
"This policy would provide some security to millions of moderate-income homebuyers. They would have the assurance they would not be thrown out on the street by a foreclosure. More importantly, this own to rent policy would provide the mortgage holder with a very strong incentive to negotiate terms that allow the homeowner to keep ownership of their house because banks are not interested in becoming landlords."
"In the run-up of the housing bubble, millions of moderate-income families purchased homes, following the advice of politicians, investment advisors, economists, community groups, and a lot of other people who should have known better. The poor should not again be forced to pay for the bad judgment of the policy elites. Own to rent is a very simple policy that can make a huge difference for millions of people. In the absence of a better proposal, Congress should have it at the top of its agenda."