Right-To-Rent Becomes a Reality 15 comments
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Something has happened on the right-to-rent front! It comes from Fannie Mae (FNM) and it’s called deed-for-lease, and I’m basically in full agreement with Dean Baker on this one: it’s a step in the right direction, but it’s still a far cry from what should be happening. Not only should the lease be for more than 12 months, but the program should be rolled out to all mortgages, not just those owned by Fannie Mae.
In the meantime, it’ll be fascinating to see just how popular this program is. Lots of bright ideas get rolled out and fail to gain traction; Fannie Mae should keep a close eye on this one, and make it more attractive if people aren’t making use of it. And Freddie Mac (FRE) should in any case try to one-up them, perhaps with a three-year lease. Let’s keep the momentum going!
(Via Indiviglio)
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How is the US government becoming our direct landlord a good idea?
How is keeping the number of empty houses artificially low going to help us over the long run?
How many billions will Fannie have to pay out to collect rents, evict nonpayers and then fix the destruction many will cause?
How is a loss tomorrow really any better than a loss today?
This article is proof that we are living in the Twilight Zone.
Postponing the inevitible usually does not result in better outcomes, just more skewed stats for today.
not making some principal payment, it's a bad idea. If the agency in
charge of creating the program does not have the staff to check the
condition of the property on a regular basis, it's a bad idea.
dick streich
We do
If you didn't want the Federal government in the real estate business at all, too bad: it's too late.
If you don't want the deadbeat to stay in the houses whose mortgages we-the-people own, you have to take possession of the property. So we are in the RE business, like it or not.
So then what? Do you want the houses empty, earning nothing and remaining a liability, or do you want cash flow? If you're going to sell the house, in a market already swamped with foreclosed properties, you're more likely to find an investor to buy it if the house is occupied and producing cash flow. If the occupant does not pay the rent, you can still evict. Most places, it's easier to evict a tenant than an "owner."
Plus the social benefit of allowing people to rent their homes instead of making them homeless is not trivial. We have enough homeless people already in this country, and no way to provide for them.
I have to guess that you have never rented a home, and I am certain that FNMA hasn't. If FNMA couldn't make money in a high-margin monopoly, what makes you think that they will succeed in a low-margin business which has intense competition. There is no indication that FNMA has the tools it needs to be a landlord.
"Plus the social benefit of allowing people to rent their homes instead of making them homeless is not trivial. "
Encouraging people to live beyond their means is what caused this mess. There is no social benefit to letting people RENT a home that they CAN'T afford.
Here is the Social Benefit, we are going to keep houses in the shadow inventory so that the people who buy now are certain to over pay. Those loans will over time go bad, as inventory is released from the shadows.
Thanks but, no. We need homeowners in these properties who will bring capital into the home. The last thing that you need is an over-extended renter renting from an incompetent landlord. Again, the biggest problem that we face today is trapping of capital in the hands of the brainless and this proves two things the amount of capital that is trapped and just how brainless our leaders are.
On Nov 11 04:30 PM Alan Young wrote:
> Felix, right. Above comments, wrong. Very simple, but the commenters
> either have not read the policy (it's only one page!) or haven't
> thought about it.
>
> If you didn't want the Federal government in the real estate business
> at all, too bad: it's too late.
>
> If you don't want the deadbeat to stay in the houses whose mortgages
> we-the-people own, you have to take possession of the property. So
> we are in the RE business, like it or not.
>
> So then what? Do you want the houses empty, earning nothing and remaining
> a liability, or do you want cash flow? If you're going to sell the
> house, in a market already swamped with foreclosed properties, you're
> more likely to find an investor to buy it if the house is occupied
> and producing cash flow. If the occupant does not pay the rent, you
> can still evict. Most places, it's easier to evict a tenant than
> an "owner."
>
> Plus the social benefit of allowing people to rent their homes instead
> of making them homeless is not trivial. We have enough homeless people
> already in this country, and no way to provide for them.
Here is my prediction as to what is going to happen. Fannie will set up a humongous department that will suck even more free government cash, hundreds of contractors will pop up around the country with a few low paid employees that actually manage the properties (this is SOP in low income housing) with the executives/owners pocketing humongous amounts of government cash and leading the life of the rich and famous.
This is what happens with EVERY government/ quasi-government program.
Not too mention, how long will it be before many of these homes get approved for Section 8 housing.
Then the cycle will be complete and WDC can add yet another paid-for-life, heavily benefited department of surly federal employees.
Apparently in our new world, that is success.
On Nov 12 09:42 AM TeresaE wrote:
> Glad to see others see that programs such as this only keep the housing
> bubble alive and well, while cutting off the ability of millions
> that could buy homes if the prices fell to reasonable (vs income)
> levels.
>
> Here is my prediction as to what is going to happen. Fannie will
> set up a humongous department that will suck even more free government
> cash, hundreds of contractors will pop up around the country with
> a few low paid employees that actually manage the properties (this
> is SOP in low income housing) with the executives/owners pocketing
> humongous amounts of government cash and leading the life of the
> rich and famous.
>
> This is what happens with EVERY government/ quasi-government program.
>
>
> Not too mention, how long will it be before many of these homes get
> approved for Section 8 housing.
>
> Then the cycle will be complete and WDC can add yet another paid-for-life,
> heavily benefited department of surly federal employees.
>
> Apparently in our new world, that is success.
Unfortunately, that's the way our housing market has been operating for 2-3 decades. House prices went to "unaffordable" level relative to underlying (affordable) rents, meaning there was no point in buying houses.
On Nov 11 06:43 PM a fat panda wrote:
> "So then what? Do you want the houses empty, earning nothing and
> remaining a liability, or do you want cash flow?"
>
> I have to guess that you have never rented a home, and I am certain
> that FNMA hasn't. If FNMA couldn't make money in a high-margin monopoly,
> what makes you think that they will succeed in a low-margin business
> which has intense competition. There is no indication that FNMA
> has the tools it needs to be a landlord.
>
> "Plus the social benefit of allowing people to rent their homes instead
> of making them homeless is not trivial. "
>
> Encouraging people to live beyond their means is what caused this
> mess. There is no social benefit to letting people RENT a home that
> they CAN'T afford.
>
> Here is the Social Benefit, we are going to keep houses in the shadow
> inventory so that the people who buy now are certain to over pay.
> Those loans will over time go bad, as inventory is released from
> the shadows.
>
> Thanks but, no. We need homeowners in these properties who will bring
> capital into the home. The last thing that you need is an over-extended
> renter renting from an incompetent landlord. Again, the biggest
> problem that we face today is trapping of capital in the hands of
> the brainless and this proves two things the amount of capital that
> is trapped and just how brainless our leaders are.
I had property taxes triple and water/sewer quadruple in 18 years. Constant renovation after destructive tenants, yet the landlord is the government's adversary. The same government constantly decries the low-income housing shortage.
Government now wants even more tax dollars to prevent market clearing prices on housing. Once again, deflation is confined to average American's pay.
And is this something that you want to continue? The government is trying to continue it by hiding the inventory in the rental market at taxpayer expense.
I think you ought to revisit your data point as well. This isn't a 2-3 decade event. Housing costs after inflation have risen but so did wealth and income. Housing in 2000 was very affordable when the Nasdaq was at 5000. Hell it was dirt cheap if you were buying the house with shares of Coke or Cisco as I did. So I think you are dealing with a recent event - one that isn't good for the country or the people who live here.
On Nov 12 10:31 AM Graham and Dodd Investor wrote:
> "letting people RENT a home that they CAN'T afford."
>
> Unfortunately, that's the way our housing market has been operating
> for 2-3 decades. House prices went to "unaffordable" level relative
> to underlying (affordable) rents, meaning there was no point in buying
> houses.