A Very Good Development

I think this is a very good sign of reality finally sinking in and effecting policy.

The Obama administration, in a major shift on housing policy, is abandoning George W. Bush’s vision of creating an “ownership society’’ and instead plans to pump $4.25 billion of economic stimulus money into creating tens of thousands of federally subsidized rental units in American cities.

The idea is to pay for the construction of low-rise rental apartment buildings and town houses, as well as the purchase of foreclosed homes that can be refurbished and rented to low- and moderate-income families at affordable rates.

Analysts say the approach takes a wrecking ball to Bush’s heavy emphasis on encouraging homeownership as a way to create national wealth and provide upward mobility for low- and working-class families, especially minorities. Housing and Urban Development Secretary Shaun Donovan’s recalibration of federal housing policy, they said, shows that the Obama White House has acknowledged that not everyone can or should own a home.

In addition to an ideological shift, the move is a practical response to skyrocketing foreclosure rates, tight credit, and the economic crisis.

“I’ve always said the American dream should be a home - not homeownership,’’ said Representative Barney Frank, chairman of the House Financial Services Committee and one of the earliest critics of the Bush administration’s push to put mortgages in the hands of low- and moderate-income people.

Conservatives, however, believe that President Obama and HUD shouldn’t head too far in the other direction; in some cases, rent can be more expensive than a mortgage payment.

Done properly, they say, homeownership can bolster the tax base and bring stability to neighborhoods and families, reducing crime and helping people achieve financial independence.

The $4.25 billion set aside for the creation of rental housing will come from $14 billion that HUD has received from the federal economic stimulus package. Another $4 billion of the money will be used to fix up the nation’s existing public housing stock of 1.2 million units.

The funds for new units will be available under competitive grants, and officials in Massachusetts said they will be among the states aggressively competing for the money.

In Boston, more than 20,000 households are on a waiting list for affordable rental housing, said Lydia Agro, a spokeswoman for the Boston Housing Authority. “There’s definitely a need out there,’’ she said.

City, state, and federal officials said they could not yet estimate how many new rental units will be created with stimulus money, but HUD said the “tens of thousands’’ of apartments and town houses it will produce nationwide will ease an increase in homelessness that has resulted from the foreclosure crisis.

Carol Galante, HUD’s assistant secretary for multifamily housing, said HUD will still be in the business of helping people buy homes using existing lending subsidies.

The difference from the Bush administration, she said, is “we’re trying to have a balanced policy. We’re not trying to say homeownership isn’t important, because it is. But we have to be sure we’re helping people get into homes that are sustainable for them.’’

RealtyTrac, a private company that follows homeownership trends, reported Thursday that the number of foreclosure notices issued to homeowners nationwide increased 9 percent during the first half of 2009. At the same time, the US Census Bureau reported that the vacancy rates for homeowner housing nationwide crept up for the second consecutive quarter, further signs of the ongoing mortgage crisis. The foreclosures are displacing large numbers of families, who will need new housing.

“People who were owners are going to be renting for a while,’’ said Margery Turner, vice president for research for The Urban Institute, a Washington think tank that studies social and economic policy.

“There is a housing stock that is sitting vacant. There is a real opportunity here’’ to use those homes as rental property and solve both problems, she said.

Duh! To say this is obvious is so very obvious and not to mention that it is about time.