Costs of Renting Still Considerably Cheaper than Ownership
Right to Rent legislation would slow soaring rate of foreclosure.
For Immediate Release: July 27, 2009
Contact: Alan Barber, (202)293-5380 x115
Washington, DC- Though Congress leaves for its August recess this week, one of the items sure to be on the agenda when it returns is how to deal with the continuing collapse of the nation’s housing market. A new study from the Center for Economic and Policy Research (CEPR) examining housing costs shows that market rents are far below ownership costs in many parts of the nation.
The paper, “The Gains from Right to Rent,” analyzes the costs of renting versus owning a house in several major cities and finds that the Fair Market Rents in these metropolitan areas is often much lower than the cost of ownership.
“Ordinarily, the gap between owning and renting is not that large,” said Dean Baker, Co-Director of CEPR and an author of the report. “Due to the enormous run-up in house prices over the housing bubble years, however, ownership costs now vastly exceed rental costs in many of the bubble markets and homeowners in these markets have much to gain from having the opportunity to remain in a home as a renter following a foreclosure."
The report looks at the costs of renting and owning before and after taxes in 16 metropolitan statistical areas (MSAs) and details substantial savings gained from renting across all scenarios depicted. The various scenarios consider the costs of mortgage payments, property taxes, insurance and maintenance costs, and mortgage deductions. An appendix is included that compares ownership and rental costs across 100 MSAs as well.
Under Right to Rent legislation, Congress would temporarily alter foreclosure laws to let foreclosed homeowners remain in their homes as renters for a substantial period of time. This would save families from being kicked out of their homes and would go far to stop the blight of foreclosures affecting many of our communities. This plan requires no taxpayer dollars and no new bureaucracy to implement. The admisnistration would be well served in bringing up such legislation during the President's meeting with the Treasury Department discussing the housing sector.
“The loan modification plans put forth so far aren’t working,” continued Baker. “They are unlikely to benefit more than ten percent of homeowners facing foreclosure and are slow to go into effect. Right to Rent, on the other hand, would benefit millions and could go into effect immediately.”
The full report on homeownership and rental costs can be found here. More details on the Right to Rent plan can be found here.