A report just released suggests that giving homeowners the right to rent their house at a fair market price could be a game changer in the nation's foreclosure crisis. Gains from Right to Rent in 2010, from analysts at the Center for Economic and Policy Research, suggests that ownership may not be the smartest option for some.
The report dissects the benefits of a drafted bill, H.R. 5028, also known as The Right to Rent. Under the legislation, homeowners entering the foreclosure process would be able to occupy their homes for up to five years, while paying rent to a lender. Rent would be based on fair market price as determined by an independent appraiser and adjusted annually.
The report compares the costs of owning a home and renting in 16 major metropolitan statistical areas around the U.S. It found that homeowners would see substantial reductions in costs by becoming renters if they rented in a bubble-inflated market. Savings are much less, however, if the market was not affected by the housing bubble.
Los Angeles homeowners would save $1,586 per month by becoming a tenant, for example. The median home price in 2006 and 2007 was $608,600. Based on that number, CEPR found the monthly cost of ownership as $3,128 versus $1,420 to rent. New York/New Jersey, Sacramento, San Diego and San Francisco savings are all over $1,000.
In Detroit, however, the marginal saving is only $89 between owning and renting home. Areas including Baltimore, Chicago, Cleveland, Minneapolis, Philadelphia, Phoenix, and Tucson had a difference of less than $500.