The National Association of Home Builders (NAHB) has called on Congress to quickly enact a second round of economic stimulus programs directed at the housing industry.
Speaking for the Association, which represents more than 235,000 members involved in all aspects of home building and remodeling, Chief Economist David Seiders told the Senate Finance Committee last week that "The U.S. housing market now is in the contraction phase of the most pronounced housing cycle since the Great Depression. Single-family housing starts are already down by 60 percent from their peak at the beginning of 2006 and the bottom is not yet in sight. Congress can, and should, do more."
The recently enacted Economic Stimulus Act of 2008 could fall short of achieving
its intended results because it does not address the problems posed by the housing
contraction that are at the root of today's economic and financial market
problems, Seiders said.
Topping the list of initiatives NAHB is proposing is the creation of a tax credit for the purchase of a home.
"The biggest bang for the buck most likely would be provided by a temporary home buyer tax credit. Tax credits for the purchase of a home are a means of eliminating excess inventory, relieving some of the pressure on falling housing prices and ending the waiting-on-the-sideline strategy some potential buyers have adopted in response to overly negative media stories concerning the future of the housing market."
Seiders pointed out that a similar version of a home buyer tax credit was used successfully in the mid-1970s when Congress established a temporary tax credit for the purchase of a newly-constructed home to help clear what was at that time a record-breaking inventory of unsold homes.
Several proposals have already been introduced in Congress. Senator Debbie Stabenow (D-Michigan) is sponsoring S. 1988 which would provide for a temporary, one-time refundable tax credit for first-time home buyers of 10 percent of the purchase price of a principal residence; Senator Johnny Isakson (R-Georgia) has introduced S. 2566, a bill creating a one-time $15,000 tax credit for the purchase of a single family residence that is either newly constructed or one that is in default or foreclosed within a one-year time frame.
"What is common among these tax credits for the purchase of a home is that they represent policies that increase housing demand, thereby enabling home purchases for families and fight falling housing prices, which threatens the economy as a whole," said Seiders. "We recommend a targeted home buyer tax incentive in order to maximize induced purchases."
Seiders also urged the Senate Finance Committee to consider the following changes to tax policy in order to get housing moving again:
- Expand the mortgage revenue bond program to be used for either home purchases
or refinancing of existing mortgages to help strapped borrowers, particularly
in those communities hard hit by defaults and foreclosures.
- Allow businesses to carry back net operating losses for five years. For
home builders large and small, the importance of the ability to claim and
carry back net operating losses deductions to years when significant taxes
were paid cannot be overstated, said Seiders.
- Designate housing as an eligible investment for tax-deferred retirement accounts. A down payment remains the single largest hurdle for most first-time home buyers. Congress could increase capital available for a down payment on the purchase of a home by allowing buyers to use IRAs or 401(k) accounts to purchase a home without suffering tax penalties.