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Sometimes good ideas are copied by others – which is not necessarily a bad idea. In this case, the federal government's plan to convert thousands of government foreclosures into rental properties through a partnership with private equity investors is being copied (in a manner of speaking) by New Jersey.
New Jersey has been hit hard by the foreclosure crisis since it began with a bang in 2007. There are an estimated 35,000 foreclosure properties in New Jersey currently, roughly one out of every 3,340 units (and those figures may be low; some suggest there are upwards of 125,000 foreclosure properties). Most are concentrated in Ocean, Atlantic, Cumberland, and Salem counties in the south, with a heavy dose of foreclosures also in the Trenton state.
It makes sense, then, that the Garden State would want to find some way to alleviate the burden of so many foreclosure listings on the market while also offering affordable housing to its residents. Thus, the state is seeking to create a state agency that will purchase some of these home foreclosures and convert them into rental units or homes to buy. Approximately 10,000 homes will be converted in such a manner, according to current plans.
It will be funded through a combination of sources, such as an existing state fund, federal dollars, and settlement money from the recently-signed National Mortgage Settlement Agreement, and would be administered by the New Jersey Housing and Mortgage Finance Agency.
Will the program have success in its presumed goal of lowering the amount of foreclosure listings on the market today? More than likely, it will – if only because buying foreclosures and putting tenants or owners in them no longer makes them foreclosures. Home values could rise as a result of downward pressure being eliminated by fewer foreclosures on the market, and it is likely that homes will be divvied up, so to speak, to homeowners viewed as “responsible” by the agency – like teachers, firefighters, and police officers.
It is not entirely clear if the proposal will involve rental units, like the federal program, or homes for purchase, or a combination of the two. What is clear, though, is that the role of the government in influencing the foreclosure market is being established at the state level as well as the federal level – a fact that may have lasting implications for the market going forward.