Builders Look for Stimulus Bill to End Downward Spiral
Stimulus legislation is needed to break the downward cycle in the nation’s housing industry before it further undermines the strength of the nation’s economy, Joe Robson, first vice president of NAHB, told members of the House Small Business Committee on June 5.
“Home builders, who are largely small businesses, are struggling to even stay solvent in the current economic environment,” Robson warned the congressional panel. “They are taking drastic steps to minimize costs, generate capital and keep their businesses afloat, including laying off workers and raiding personal retirement accounts, just to name a few.”
If nothing is done to generate an upturn in home sales and prices continue to fall, he said, economic growth, which slowed to a crawl in this year’s first quarter, could eventually lapse into recession and conditions in the credit markets could deteriorate further.
“Continued downward pressure on home prices also further reduces the quality of outstanding mortgage credit, making it even more difficult to refinance or restructure adjustable-rate mortgages that have encountered or are facing payment resets. These effects, in turn, will worsen the alarming upsurge in mortgage foreclosures; move even more homes onto the for-sale market; put even more downward pressure on house prices and mortgage quality; and stretch out the contraction in new housing production even further,” Robson testified.
“This vicious circle,” he said, “can create the conditions under which the housing market will overcorrect on the downside, imposing huge costs on our nation’s home owners, state and local governments, financial institutions, housing- and construction-related small businesses and other stakeholders in housing.”
Robson told the committee members that the temporary home buyer tax credit proposed in H.R. 3221, the American Housing Rescue and Foreclosure Prevention Act of 2008, could stimulate a wave of home buying and quickly reduce excess housing inventories and halt the dangerous erosion of house prices and mortgage credit quality.
That provision would provide a temporary, first-time home buyer tax credit of $7,500 for the purchase of any home used as a principal residence and closed on between April 9, 2008 and April 1, 2009.
"NAHB believes that the home buyer credit model in H.R. 3221 would help address many elements of the current housing crisis," said Robson. "The tax credit would increase home sales, which would cause inventories to fall and stabilize home prices and mortgage markets. NAHB would urge Congress to consider options for increasing the size of the credit to maximize its impact and effectiveness."
In crafting a final housing bill, Robson also urged lawmakers to incorporate the following tax provisions to achieve a comprehensive solution to the housing crisis:
- Expansion of the mortgage revenue bond program. Expanding the cap for mortgage revenue bonds by an additional $10 billion, as well as modifying the rules so that state housing finance agencies may use the proceeds of the bonds to refinance troubled mortgages, would reduce the number of foreclosures, help home owners stay in their homes and protect local property prices.
- Modernization of the Low Income Housing Tax Credit (LIHTC). Modifying this program is essential to expanding the supply of much-needed affordable renting housing and would stimulate local economies through jobs, taxes and wages and salaries paid.
- Expansion of the net operating loss deduction carryback. Allowing businesses, particularly highly cyclical companies in the building industry, to accelerate taking their tax losses will help them weather the economic storm and keep their existing employees on the payroll.
To read H.R. 3221, click here and enter the bill number in the box at the center of the page.
For more information, e-mail Greg Brown at NAHB, or call him at 800-368-5242 x8421.