Rent rather than foreclose
According to the Center for Economic and Policy Research, many homeowners facing foreclosure in Michigan would likely be able to stay in their houses as renters if Congress would temporarily amend the foreclosure law with a Right-to-Rent provision. Such a change would allow owners to become tenants and pay a market-based rent to a mortgage holder for a period of time, say, five to 10 years.
“During ordinary years, homeowners would not gain much from having a right to rent, since the gap between ownership costs and rental costs is usually not very large. However, because of the run-up in house prices during the housing-bubble years, ownership costs vastly exceeded rental costs in many bubble markets,” wrote Dean Baker, co-author of the CEPR report called The Gains from Right to Rent.
Using data from the U.S. Census Bureau and the Department of Housing and Urban Development, the report revealed homeowners in metro Grand Rapids could stay in their houses as renters for $698 a month — roughly $100 to $380 a month less than they would pay as owners. The report, issued last week, found similar savings in metro Detroit.
CEPR said adding a rent provision would make foreclosure a less attractive option for lenders, would lower the number of vacant houses in hard-hit neighborhoods, and would not require taxpayer dollars.
More than 10,000 home foreclosures have reportedly been filed in Kent County from January 2008 to June 2009.
Monthly Home Ownership
Note: Monthly home ownership costs are based on 75 percent of the median house price. Monthly fair rent figures are from HUD.
Source: Center for Economic and Policy Research, July 2009