Home-buying credit needs tweaking
Commentator David Abromowitz
TEXT OF COMMENTARY
Kai Ryssdal: It's not all that surprising that giving first time homebuyers an $8,000 discount on their taxes has helped stabilize the housing market. It's also not so that surprising that with the credit set to expire at the end of the month, signs are that it's going to be extended a while. Commentator David Abromowitz says keeping the credit alive is all well and good. But it needs a little work first.
DAVID ABROMOWITZ: Why not extend the $8,000 first-time home buyer tax credit? Everyone loves a tax break, especially when you get a quick check from the government. But Congress should at least target the credit to the people and places that really need it.
Instead, the majority of people who've taken advantage of the credit so far apparently would have bought a house anyway. A recent National Association of Realtors study showed that only 350,000 buyers would not have bought a home without the credit. Yet nearly 2 million people will get $8,000 checks this year. That means the rest of us taxpayers spent over $40,000 to get that one truly new purchaser out of five to buy a house.
The scattershot nature of this credit highlights its central flaw: it just isn't targeted towards the problems it was billed as solving: turning around communities hardest hit by foreclosures and plunging homes prices.
Worse, Congress is heading in the opposite direction: boosting eligible buyer incomes to $250,000. That's five times the national median income. And handing out $8,000 checks for homes costing up to $800,000.
Giving tax credits to well-paid lawyers in relatively untouched Seattle or Houston does nothing to boost homes sales in areas with rampant foreclosures and struggling economies. Instead, focus home-buying assistance on hard-hit areas like Las Vegas, Miami, and Oakland.
One idea is to offer the credit only for modestly-priced homes. That way, the hardest-hit communities would become magnets for buyers. Economic stimulus would flow to places where home values have dropped, and economies have suffered the most.
We do need to break the cycle of foreclosures and neighborhood destabilization. That remains critical to the nation's overall economic recovery. But for a program that may cost more than $11 billion for just a five-month extension, we should insist on maximum bang for the buck.
RYSSDAL: David Abromowitz is a Senior Fellow at the Center for American Progress.