Congress urged to pass rental plan

Pressure is mounting for Congress to pass a controversial plan that would require lenders to allow foreclosed homeowners to stay in their homes as renters for up to 10 years.

Action is expected to take place this fall, but the details are up in the air.

As foreclosure rates continue to rise, even critics of the plan, dubbed Right-to-Rent, agree that something drastic needs to be done. Proponents of the plan concede they likely will have to make compromises in order to keep the proposal alive.

"More people are getting thrown out now than before the modifications," said Dean Baker, co-director of the Center for Economics and Policy Research. Baker first proposed a version of the plan two years ago.

"I think when people understand the details, they'll be more comfortable with it. Most people are somewhat sympathetic to the plights of people losing their homes."

Some versions of the plan involve lenders selling foreclosed homes to approved professional landlords. In other versions, the lenders would sell to private investors or keep the home and hire a management firm to handle the rental arrangement.

Professional appraisers would determine the market-rate rent for the home. A lender would still have the right to sell the house, but the foreclosed homeowner would come with it. The new owner would be required to uphold the terms of the lease.

At issue is fairness.

Some don't like the idea of their neighbors getting to stay in their homes and pay far less in rent than the mortgage would be. Investors would lose some property rights, and homes would be tied up for years, clogging the already troubled real estate market, said Jack Rodriguez, president of the Greater Tampa Association of Realtors.

Lenders would be pressured to sell so they don't become landlords, and investors would get the homes at low-ball prices. That, he said, could further depress the market, which has seen prices drop 20 percent in the past year.

Some critics question how foreclosed homeowners could afford the rent if they can't afford the mortgage.

Baker said the proposal would work because renting is cheaper than owning a home. That is especially true in Florida and Tampa Bay.

"Due to the enormous run-up in house prices over the housing bubble years, ownership costs now vastly exceed rental costs in many of the bubble markets," he said.

The report tracks the costs of renting and owning before and after taxes in 100 of the country's largest metropolitan areas, including Tampa. The cost of mortgage payments, property taxes, insurance, maintenance costs and mortgage deductions are considered.

The monthly fair-market rent in the Tampa-St. Petersburg-Clearwater area in 2009 was $946. That compares with ownership costs ranging from $1,102 to $1,496.

Foreclosed homeowners and the communities where they live "have much to gain from having the opportunity to remain in a home as a renter following a foreclosure," Baker said.