WASHINGTON (AP) — The Obama administration may turn thousands of government-owned foreclosures into rental properties to help boost falling home prices.

The Federal Housing Finance Agency said Wednesday it is seeking input from investors on how to rent homes owned by government-controlled mortgage companies Fannie Mae and Freddie Mac and the Federal Housing Administration.

The U.S. government rescued Fannie and Freddie in September 2008 and has funded them since the financial crisis. The mortgage giants own or guarantee about half of the nation's mortgages and nearly all new mortgages.

At the end of last month, the government owned roughly 248,000 foreclosed homes, officials said. About 70,000 of those are listed for sale. But officials expect the number of foreclosures to soar in the coming months.

Many foreclosures have been stalled so attorneys general and federal regulators can investigate whether lenders cut corners and improperly handled thousands of cases. Once a settlement is finalized, foreclosures are expected to pick up again and further depress home prices.

The full story is at http://hosted.ap.org/dynamic/stories/U/US_GOVERNMENT_HOME_RENTALS?S…

What could go wrong?

In a word, everything.  How could the government screw this up?  For starters, it would put the government permanently in the landlord business.  Second how is the government going to determine who gets certain houses?  A recent news story told of residents on public assistance being placed in luxury condos that many people in the county who worked full time could not afford.  

Would the government start subsidizing those houses so the poor could move in?   What will this do to middle class neighborhoods, where people have paid for their houses to escape the carnage that comes with public housing? 

There is a solution, though it is something of a painful solution.  The government is holding housing so the government should simply liquidate the housing.  We’ve been on a housing bubble.  Yes, that is going to drive down the prices of houses but by the same token, as those values go down, they will be affordable to people who might not otherwise be able to pay for them.  It is the market at work.  Such a move will keep the government out of the landlord business.

To be really cynical and it is hard not to be cynical with the Obama regime, are they using this just to create another government dependency class?  Will they offer these houses with a subsidy that will create a new entitlement group that will always vote against any cut to their entitlement?

I would not hold my breath on the government doing the right thing here.  Our only hope is for the House to block any such effort until 2013, when we can get the Obama regime out of power.

Until then, it is still going to be a bumpy ride.