The Centre for American Progress is a Democrat-aligned American think tank headed by former Clinton chief of staff John Podesta. They have an excellent “idea of the day” feature on their website that dishes out a policy prescription every 24 hours.
Friday’s idea is that the government rent out the hundreds of thousands of homes they hold after foreclosure. There is some sense in this.
Stepping back from the most obvious beneficiaries, demographic and economic trends are driving up demand for affordable rental properties. Young families are finding it more difficult to put together a down-payment under tighter mortgage rules. This proposal would increase the availability of low-cost rental housing and help those families get the resources to buy in time.
It would also increase labour mobility, making it easier for people who are without a job to move to a new community where there is employment. Neighbourhoods gutted by foreclosures would have more eyes on the street and more people invested in making them safe.
Perhaps most importantly to the broader economy, they would taken tens of thousands of housing units off the market. Right now, there is a huge excess inventory in new housing stock. This is depressing prices, making it impossible to sell a home you live in, and terrifying to buy. If tens of thousands of housing units were taken off the “for sale” market, the value of the remaining properties begins to stabilize and even rise.
Canada avoided the worst of the mortgage default crisis. Our lending rules are more stringent and we lack the mortgage interest deductions that incent Americans to stay deeper in debt longer. But we still have a small stock of foreclosed properties that tend to find their way back into the market quickly.
It would be a worthwhile pilot project to rent a small number of CMHC-held foreclosed properties. In a market like Quebec City, Regina and Winnipeg, where vacancy rates are below 1 per cent, it may provide a reasonable short-term influx of rental properties.