Subsidizing rents will not work. It will create an artificial demand for rental property which will drive up rents. This then makes the overpriced houses look cheap. It boils down to supply and demand. You increase demand with a constant supply, prices go up. Both rents and the prices of houses are out of line. A place that I rent looks like it will increase its rents about 7% next year. They are ignoring their own vacancy rates, that people are considering moving out and that several apartment buildings were recently constructed and have opened up. Their justification is that their ‘market surveys’ are showing the increase is justified.
What will happen with the foreclosed homes, is that they will either be resold on the market at significantly reduced prices or will become available for renting. This will increase the supply of housing, allowing for decreases in rents etc.. provided we don’t screw with the demand portion of the equation.
There will be a period of tightening of belts.. but that follows any overindulgence.
Also follow the money.. lessee.. subsidizing rents, allowing high rents to persist, causing the real-estate entities to have higher than normal profits… yeah right, just continuing the same ole problem. Some of the entities who build the overpriced houses also build and operate apartment complexes (BRE/KB for example).
BTW, having higher than normal rents is real. I checked the recapture of construction costs on the place I am in, and they covered the cost of construction (including land) in under 6 years.
PS: If you want to effect a reduction on rents, particularly considering that the builders of houses are also the same ones operating several apartment buildings, don’t subsidize rents. Instead, look at rent control.
