'Right to Rent': A Solution to Elk Grove's Foreclosure Problem?

You’ve heard about Rent-to-Own. But how about Own-to-Rent?

That’s one idea being batted about by economists on both the left and right as a solution to the nation’s foreclosure crisis.

Under a ‘Right to Rent’ policy, homeowners who have been foreclosed on would have the option of staying in their houses as tenants, paying market-rate rent to the mortgage owner. Rent would be determined by an independent appraiser.

Arianna Huffington, founder of Patch’s sister publication The Huffington Post, wrote about ‘Right to Rent’ in a recent column. Scroll down to see an excerpt.

‘Right to Rent’ is far from the most radical idea emerging about how to deal with the nation’s foreclosure crisis. San Francisco Supervisor John Avalos, for example, recently suggested that banks be required to lower the amount of underwater homeowners’ mortgages to the home’s current value. Members of the Occupy Wall Street movement in various cities have begun camping out at foreclosed houses to prevent their occupants from being evicted.

Certainly, some will object that a 'Right to Rent' law would infringe on banks' private property rights. But as one gazes at Elk Grove’s empty foreclosed houses, while homelessness here is on the rise, it’s hard not to wonder if there’s a better way to match up the community’s needs and its resources.

Here’s the excerpt from Huffington’s column:

...A perfect example of a sensible, widely-praised idea that has nevertheless gone nowhere [in Congress] is an idea I touted in the This Week green room segment after the show: Right-to-Rent. It's a concept first proposed in 2007 by Dean Baker of the Center for Economic and Policy Research, and endorsed by Andrew Samwick, an economics professor at Dartmouth and the former chief economist on George W. Bush's Council of Economic Advisors...

Aside from keeping families from being forced out of their homes, it would also stop the myriad array of problems that follow every foreclosed house—including the fact that foreclosures drive down the value of surrounding homes. "The own to rent plan is a simple and low cost way to help moderate income homebuyers," wrote Baker when he first introduced the idea. "It doesn't require any tax dollars and does not set up a new government bureaucracy to manage the housing market." As Andrew Samwick put it: "If the government is going to intervene in the aftermath of this meltdown, I haven't seen a better proposal than this one." Samwick and Baker later co-authored an op-ed about the plan...

...even if our government won't embrace the idea, the private sector can. In April, Felix Salmon wrote about a Cincinnati-based company called American Homeowner Preservation, which is utilizing the right-to-rent concept in a for-profit model. Run by real estate entrepreneur Jorge Newbery, the company finds a buyer for a house facing foreclosure, convinces the bank to do a short sale, and works out an agreement with the buyer to allow the former owner to stay in the house as a renter. "This looks like a win-win for all concerned," wrote Salmon. "The owner gets to stay in their house, the bank gets to avoid the expense of foreclosure proceedings, and the investor gets decent returns. Clever!"

It would be great to see that cleverness on a national scale—and quickly—because it's clear that the foreclosure crisis and the misery it brings won't be ending any time soon.

Read the full column here.

Readers, what do you think? Could Right to Rent work in a place like Elk Grove? And what are some other creative ways to address the foreclosure crisis?