May 22, 2008
New Bill Pushes for Greater Housing Security for Families Facing Foreclosure
CEPR's Dean Baker testifies on merits of Own-to-Rent before House Subcommittee on Domestic Policy
For Immediate Release: May 22, 2008
Contact: Alan Barber, (202) 293-5380 x115
WASHINGTON, D.C.- In an effort to provide greater housing security to families put at risk by the current crisis in the housing market, Congressman Raul Grijalva, (D-AZ) introduced a bill yesterday that would allow homeowners of moderate-value homes who are facing foreclosure to remain in their homes as renters. The core components of the bill were later discussed by Center for Economic and Policy Research (CEPR) Co-Director, Dean Baker during a hearing before the Subcommittee of the House of Representatives Oversight and Government Reform Committee.
The hearing, "Neighborhoods: the Blameless Victims of the Subprime Mortgage Crisis," focused on the effects of the meltdown of the mortgage market on neighborhoods and communities, particularly the increase in the number of vacant and abandoned properties due to foreclosures.
To offset this rise in vacant houses and, more importantly, make sure that families have safe, secure housing, Congressman Grijalva's bill, "The Saving Family Homes Act of 2008," incorporates many of the ideas found in Dean Baker's Own-to-Rent proposal.
The key feature of both the bill and Own-To-Rent proposal would allow moderate-income homeowners facing foreclosure to remain in their homes paying the fair-market rent for their house. This rent would be adjusted annually in accordance with the consumer price index. This would apply to mortgages issued on owner-occupied homes prior to July 2007 and would be targeted at homes appraised at less than the median price of the market in that area.
The plan is likely to lead to many homeowners staying in their homes as owners, since it gives lenders a strong incentive to negotiate terms of mortgages rather then end up as landlords with a long-term tenant.
Unlike other solutions to the mortgages crisis, the bill and proposal help families at no taxpayer expense. Also, there is no need for additional bureaucracy since this plan would be an outgrowth of current foreclosure structures. As part of the existing foreclosure structures, the plan would provide immediate relief with no additional time needed to take effect.
The idea of Own-to-Rent is one that enjoys support across the political spectrum, having received praise from conservative economists including American Enterprise Institute (AEI) Fellow Desmond Lachman, and former economic advisor to President Bush, Andrew Samwick. For more on Congressman Grijalva, please visit his official website. More information on the Own-to-Rent proposal and Dean Baker's testimony can be found here.
The Center for Economic and Policy Research is an independent, nonpartisan think tank that was established to promote democratic debate on the most important economic and social issues that affect people's lives. CEPR's Advisory Board of Economists includes Nobel Laureate economists Robert Solow and Joseph Stiglitz; Richard Freeman, Professor of Economics at Harvard University; and Eileen Appelbaum, Professor and Director of the Center for Women and Work at Rutgers University.