Federal Housing Rescue Plan Could Increase Rental Shadow Market

Photo by Florencia Viadana on Unsplash

According to this article, government officials are considering a plan to pay the mortgages on houses that would otherwise be foreclosed on and then rent those houses back to the former owners at a price they would be able to afford.

This idea comes as a response to the slow progress that the initial housing rescue plan has made.  Red tape and rising interest rates have slowed the progress to refinance mortgages and lower payments for homeowners.

In 2008, the shadow market absorbed a lot of renters, as homeowners attempted to recoup some of their losses by renting out their homes.  More and more of those rental units are being foreclosed on and driving renters back into the apartment market.

If the housing rescue plan goes through, Mr. Willet’s predictions that “[rent] revenues will come down a little bit more, maybe somewhere around 2 percent…and real recovery will take place between 2011 and 2013,” would certainly seem accurate.

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