Here’s a discouraging follow-up to a post about Fannie Mae’s enormous roster of foreclosed homes that require millions of dollars in upkeep: our government now owns so many homes it is thinking of getting into the rental business.
According to AP, the government owns 248,000 homes, about 70,000 of which are for sale. What’s more, officials are expecting even more homes to fall into that category as foreclosures pick up after a brief lull. So, what to do with so many government-owned houses? One option is to turn them into rental units. The acting head of the agency that oversees Fannie Mae and Freddie Mac says changing the homes into rentals may reduce “credit losses and help stabilize neighborhoods and home values,” because sales of foreclosed homes are, on average, at a 20 percent discount, thereby depressing the prices of surrounding homes.
I think turning foreclosed homes into rental properties would be a ludicrous mistake. It’s bad enough that the federal government lost its shirt in the mortgage guarantee business and owns hundreds of thousands of unwanted properties — now we are going to hire countless people to try to rent and manage the properties and collect rent checks and security deposits? And while the below-market sale of a foreclosed home isn’t great for a neighborhood, often living next to a rental home is worse because the renters could care less about upkeep on the property. Speaking as someone who once lived next to a rental home, I think it is far better to sell the property to someone who will live there and take care of it, even if the sale is at a discount.
Renting just defers the problem. I’d rather the federal government do whatever it takes to sell its inventory of homes, get out of the home ownership and upkeep business once and for all, and get back to focusing on doing what federal governments are supposed to do — like, say, providing for our national defense.