A former top Obama Administration official Tuesday suggested a more sweeping approach to solving the nation's housing crisis.
"I think there's a lot wrong in the housing market," says Austan Goolsbee, former chairman of the Council of Economic Advisers. He says that helping people to refinance their mortgages would be helpful, but he also advises a broad expansion of an existing program to rent out foreclosed homes. "If Fannie and Freddie would start enabling people to rent out the vacant homes, that would also help."
The Federal Housing Finance Agency, which oversees mortgage giants Fannie Mae and Freddie Mac, launched a pilot program earlier this year to help foreclosed homes become rental properties. Goolsbee wants that more widely available, allowing homes sitting empty to be occupied.
While housing has in the past helped to drive recoveries, it has been slow to rebound since the collapse. Despite mortgage rates that have been at historic lows for years and at near-historic lows for months, Americans have been slow to start buying homes, and prices have remained depressed. Just today, private real estate data firm CoreLogic reported that prices rose by 3.8 percent from July 2011 to July 2012, the most in six years.But they are still 27 percent below their 2006 peak.
Many states are plagued with a backlog of homes stuck in the foreclosure process, further slowing the housing recovery. While the process of unclogging the housing market is a slow slog, Goolsbee maintains that the only way through the housing crisis is a difficult march forward.
"The first thing we've gotta recognize is, we're not going to reinflate the bubble. That's not a solution," he says. "We still have five million vacant homes. The fact is construction is not aggressive when there's five million vacant homes is not a surprise."