rssHousing Market Madness? A New Push for a Bigger Homebuyer Tax Credit
Thursday, June 11, 2009 at 9:06 am
- 5 Comments
Are we really going to go through this again? Immediately after the U.S. Department of Housing and Urban Development finished putting the final touches on a controversial plan to allow first-time homebuyers to use an $8,000 tax credit as a downpayment on a new home, some in the Senate are proposing nearly doubling the credit — and making it easier for more people to apply for it.
You can’t pin this one on Republicans alone. It’s true that Sen. Johnny Isakson (R-Ga.) came up with the idea to revitalize the proposal, which first surfaced earlier this year in negotiations over the stimulus package – -but Senate Banking Committee Chairman Christopher Dodd (D-Conn.) is a co-sponsor. Coincidentally, I’m sure, Dodd is in the midst of a tough re-election battle. I’d imagine offering a $15,000 credit for first-time homebuyers and eliminating any income ceilings so even wealthy people are eligible probably will lpay pretty well in Greenwich.
First, a little background. As TWI reported recently, Congress approved the $8,000 tax credit as a way to jumpstart the housing market, and HUD came up with a plan to allow homebuyers to access the credit immediately for downpayment money. This seemed slightly problematic to many, given the long history of fraud and abuse associated with downpayment assistance schemes for government-backed loans. Also, some wondered why the government was helping people who couldn’t afford downpayments to buy houses, given that having no skin in the game leads to defaults, which was supposed to be one of the lessons learned from the mortgage crisis.
To its credit, HUD came out with revised guidelines for the program, requiring borrowers to put down some of their own money for the downpayment, along with accessing the credit. And it issued stern warnings to third-party firms that might try to offer bridge loans for the credits at high interest rates.
That should have ended it. But then lawmakers came up with the new idea to increase the size of the credit and open it to everyone. Here’s how Clusterstock summarizes it:
The government continues its desperate effort to make the cost of dwelling more expensive. There’s already an $8,000 homebuyer tax credit, but it’s obviously not done enough, so Senators Johnny Isaacson and Christopher Dodd are proposing to up it to $15,000.
And, perhaps more importantly, they’re eliminating the income requirements. Under the previous tax credit, a couple had to have a combined income of less than $150,000. Now any upper-middle class homebuyer is eligible, and hopefully this will get the McMansion sales going again.
Yes, that’s just what America needs – more McMansions.
It’s true that interest rates are jumping and the housing market isn’t exactly soaring. And the Obama administration’s homeowner rescue plan isn’t quite taking off, either. Those are serious problems that need to be addressed. Is handing out a $15,000 tax credit the best way to accomplish that?
If this tax credit expansion passes, look for someone to suggest a way to let borrowers turn it into downpayment money. Then they can buy bigger houses than they probably can afford.
We might not have learned much from the current foreclosure crisis, but at least the builders of all those McMansions will be happy.
5 Comments
Comment posted June 11, 2009 @ 8:07 am
The right kind of credit is a credit to all owner-occupied households within 500 feet of a house in foreclosure. The amount of the credit should be measured monthly so that the longer a house sits in foreclosure the more credit is delivered to neighbors who suffer the economic loss and the diminished quality of life that foreclosure visits on neighbors. The recipients would be able to maintain their homes better and would be less likely to abandon the neighborhood if their economic and insecurity were recognized and there was a reward for remaining a vital part of the neighborhood. That is a tax credit aimed directly at neighborhood stabalization.
Comment posted June 11, 2009 @ 2:02 pm
Lawmakers 'came up with' the idea the same way they 'come up with' all their ideas–by industry lobbying and generous campaign donations from special interests who stand to profit. The real estate, mortgage, and homebuilding industries are among the most powerful in DC, unfortunately. Perhaps this is why our govt allowed this industry to take out the economy and is now entertaining these same folks in senate and house committee meetings, etc, instead of investigating more of them for wrongdoing.
Comment posted June 11, 2009 @ 3:07 pm
The right kind of credit is a credit to all owner-occupied households within 500 feet of a house in foreclosure. The amount of the credit should be measured monthly so that the longer a house sits in foreclosure the more credit is delivered to neighbors who suffer the economic loss and the diminished quality of life that foreclosure visits on neighbors. The recipients would be able to maintain their homes better and would be less likely to abandon the neighborhood if their economic and insecurity were recognized and there was a reward for remaining a vital part of the neighborhood. That is a tax credit aimed directly at neighborhood stabalization.
Comment posted June 11, 2009 @ 9:02 pm
Lawmakers 'came up with' the idea the same way they 'come up with' all their ideas–by industry lobbying and generous campaign donations from special interests who stand to profit. The real estate, mortgage, and homebuilding industries are among the most powerful in DC, unfortunately. Perhaps this is why our govt allowed this industry to take out the economy and is now entertaining these same folks in senate and house committee meetings, etc, instead of investigating more of them for wrongdoing.
Comment posted July 3, 2009 @ 6:34 pm
Why is Congress doling out tax credits only for special groups of taxpayers and no-strings attached TARP taxpayer money to save money center banks, who then went right ahead and slashed credit card credit lines and raised credit card interest rates and payments, thereby destroying million of consumers, as cynical appreciation of those taxpayers? If taxpayers must use federal money to try to rescue the economy from the financial crisis, then federal loans should be fairly available to all adult citizens to help them transform excess mortgage debt and credit card debt to low-interest long-term federal debt.
The right program would not only free up home equity, and transform a lot of burdensome risky consumer debt, it would automatically liquefy lenders balance sheets in an equitable manner. It would do it without increasing the federal deficit, and, in fact, would reduce the debt since the loans aren't expenses, would carry interest income, would make the economy recover thereby increasing tax revenues, allow repayment of TARP funds, and would decrease the need for the many federal special loan programs and guarantees that will inevitably be triggered by a long grinding economic recession or a very slow recovery that we're facing. One such program is The AllStreets Bailout detailed at http://www.themortgagenews.info.
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