Wednesday, August 10, 2011
Obama Administration Embraces Reed Proposal to Convert Foreclosed Homes into Affordable Rental Units
WASHINGTON, DC – In an effort to boost the economy, create jobs, and protect more neighborhoods from being blighted by vacant homes, the Obama Administration today announced it is considering U.S. Senator Jack Reed’s (D-RI) proposal to convert vacant foreclosed homes into affordable, energy-efficient rental units. Reed, who has championed this idea since 2010, said that the Federal Housing Finance Agency (FHFA), U.S. Treasury Department, and the Department of Housing and Urban Affairs’ (HUD) Request for Information (RFI) seeking investor ideas for converting hundreds of thousands foreclosed properties into rental units is a “smart step toward stabilizing the housing market and boosting economic recovery.”
Reed, a senior member of the Banking Committee, recently sent a letter to Acting FHFA Director Edward J. DeMarco, which followed a similar letter sent late last year to HUD Secretary Shaun Donovan. In these letters, Reed questioned why so many homes remain vacant when families are in need of affordable rental housing and urged FHFA and HUD to proactively seek innovative solutions.
Reed’s own proposal seeks to increase the resale value of these vacant foreclosed homes for Fannie Mae and Freddie Mac by turning them into profitable rental units that could be sold to the private sector. Additionally, by calling for the retrofitting and renovation of these homes, much needed jobs would be created.
“I am pleased these government agencies have finally recognized the urgent need to be proactive and creative in pulling the housing market out of the foreclosure tailspin. If we can’t address the foreclosure crisis, then it will be difficult to achieve a sustainable economic recovery. I welcome this step and look forward to assisting the Administration in its efforts,” said Reed.
“This is a call for innovation and an opportunity for businesses to not only make money and create jobs, but also provide affordable rental housing for those who need it and strengthen our communities at the same time,” continued Reed.
Last year, 3,200 Rhode Island families lost their homes to foreclosure, and the average monthly rent for a 2-bedroom apartment in the state has increased by 54% since the year 2000, while the state’s unemployment rate remains the third highest in the nation.
FHFA, HUD, and Treasury anticipate RFI respondents may best address the Administration’s objectives by offering proposals to convert vacant, foreclosed real estate owned (REO) properties into rentals. Proposed strategies, transactions, and venture structures may include:
• programs for previous homeowners to rent properties or for current renters to become owners (“lease-to-own”);
• strategies through which REO assets could be used to support markets with a strong demand for rental units and a substantial volume of REO;
• a mechanism for private owners of REO inventory to eventually participate in the transactions; and
• support for affordable housing.