Home Buyer Tax Credit Gets Mixed Reaction From Multifamily Industry

By Anuradha Kher, Online News EditorWashington, D.C.–In its ongoing advocacy efforts for balanced housing policy by the federal government, the National Multi Housing Council has released a statement saying that lawmakers under political pressure to “do something” to fix the current foreclosure crisis must act carefully and reject proposals that will do more harm than good. This includes the pending legislation that would create a new tax credit for people who buy a new house or a house in default or foreclosure.On Jan. 29, Senator Johnny Isakson (R-Ga.) introduced a bill (S. 2566) to create a one-time $15,000 tax credit for taxpayers who purchase a primary residence that is certified by the seller to meet one of the three stipulated requirements.Jim Arbury, senior vice president of Government Affairs for NMHC and the National Apartment Association Joint Legislative Program, issued a statement in response, noting: “A home buyer tax credit does nothing to help people stay in their houses. The real problem is not the oversupply problem, which the homebuyer tax credit targets, but the liquidity problem. Investors have lost confidence in the mortgage market securitization process and until that confidence is restored, the housing market will continue to suffer.”If Congress wants to address the problems in the housing sector, Arbury said they should instead be encouraged to start with measures targeting the mortgage market instead of the sales market.“Proponents argue that the tax credit is needed to stimulate house sales, but a taxpayer-financed solution to oversupply problems is neither necessary nor fiscally responsible. The marketplace can, and should, correct it just as it has corrected past oversupply problems in housing and other sectors,” Arbury added.Arbury also said that the unintended consequences of a homebuyer tax credit should cause any lawmaker to wonder if this could actually increase foreclosures and accelerate house price declines.He says that the tax credit would cause a decline in house prices, specifically the house prices of fiscally responsible owners. If responsible owners want or need to sell their houses, they will have to compete with new and foreclosed properties that come with a $15,000 taxpayer subsidy (the value of the proposed home buyer credit). The National Association of Home Builders, however, believes a tax credit such as this could stabilize the market. Robert Dietz, director of Tax Issues at NAHB, tells MHN, “Falling housing prices increase foreclosures, because as the equity in the home falls, it becomes more difficult to refinance. A homebuyer tax credit will increase housing demand—particularly among those who are waiting on the sidelines because they believe prices will continue falling—and that increase in demand will stabilize housing prices.”Dietz says this will help struggling homeowners refinance or work with their lenders to continue payment. More fundamentally, he says, “stabilizing housing prices is critical for the overall economy. Falling housing prices place additional pressure on the financial sector, increasing the negative effects of the credit crunch, for homeowners, property owners and builders alike.”