This article appeared today. What are your thoughts on whether or not the tax credit should be extended or revamped to include "move-up" buyers?
HUD Secretary Hedges on Extension of Homebuyer Tax CreditOct 20, 2009 11:30 AM
By Richard Rubin,
CQ StaffHousing and Urban Development Secretary Shaun Donovan equivocated Tuesday on whether Congress should extend an expiring tax credit for first-time homebuyers.“I can assure you that the administration will work with Congress to fashion appropriate and effective homebuyer incentives, mindful of both their benefits to stimulating new demand and their costs to the American taxpayer,” he said in prepared testimony for a Tuesday morning hearing of the Senate Banking, Housing and Urban Affairs Committee. Donovan acknowledged congressional support for an extension, but he did not endorse it himself.The current $8,000 tax credit for first-time homebuyers, created in the economic stimulus package (PL 111-5) enacted early this year, expires Nov. 30. Housing and real estate interests and their allies on Capitol Hill are pushing hard for an extension. Some also want to make the credit available to all home purchasers, not just first-time buyers, and to loosen the income eligibility limits.Various extension proposals have drawn support from lawmakers in both parties, including Senate Banking Chairman Christopher J. Dodd, D-Conn.“The credit is set to expire in five weeks,” Dodd said in his prepared opening statement. “But the work of stabilizing the housing market won’t be done. We still need to use every tool at our disposal to fix this problem.”The intensified focus on the tax credit’s looming expiration came as the Commerce Department said Tuesday that while construction of new homes and apartments rose 0.5 percent in September, new applications for building permits fell 1.2 percent. That was the sharpest decline since a 2.5 percent drop in April and may have reflected uncertainty about the tax credit.Under questioning from Dodd, Donovan said there was “clear evidence” that the tax credit has helped housing markets, but he added that the administration wants to do more research on the costs.“We understand the urgency of this situation,” Donovan said. “And we believe that within the next few weeks, we will have additional data that will allow us to sit down with you” and discuss whether and how to extend the credit.Donovan downplayed the potential impact of allowing the tax credit to expire as scheduled next month. “The end of the tax credit would have some negative implications for the market,” he conceded, “but I do not believe based on all of the other actions that we’re taking . . . I do not believe that a catastrophic decline would be the result of the end of the tax credit.”The lead Senate supporter of an extension, Johnny Isakson, R-Ga., also testified at the hearing.Under a plan he is trying to attach to legislation extending unemployment benefits (H.R. 3548), the tax credit would be available to all purchasers of a primary residence. His proposal would double the allowable income of homebuyers eligible for the tax credit, to $150,000 per year for individuals and $300,000 for married couples. The credit would be available through June 30, and the Joint Committee on Taxation estimates it would cost $16.7 billion, according to Isakson’s office.“It brings a lot of Americans to the market that are sitting on the sidelines today,” Isakson said of his plan to broaden the credit, pointing in particular to the “move-up” market among people who already own homes.Isakson said that based on his conversations with administration officials and his Senate colleagues, he did not think there was support for boosting the maximum credit to $15,000, as he originally proposed, or extending it beyond June 30, 2010.“It’s the art of the doable and the art of the possible,” he said.Many economists have criticized the tax credit, saying that it would subsidize people who would buy houses anyway.Sen. Richard C. Shelby of Alabama, the committee’s ranking Republican, echoed those concerns and said “some basic questions need to be answered” before the credit is extended. He also said that a credit offset by a reduction in government spending would have a much different impact from an extension offset by higher taxes elsewhere.Supporters of the bill have varying ideas on whether and how any extension should be offset. Isakson and Dodd said they are looking for offsets.“If we can find a pay-for, I’m all for it,” said Dodd.
Source: CQ Today Online News
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