States Woo Buyers with Tax Credits.

Written by: Steve Cook   Tue, March 17, 2009 Crisis Programs, Crisis Watch

California new home buyers now have an $18,000 reason to get off the fence. That’s how big a tax credit they will receive from both the Federal ($8,000) and a new state tax credit ($10,000) when they buy a newly built home in the Golden State after March 1.

The assembly allocated $100 million for the credit in the recently approved state budget, enough to incite 10,000 home purchases. Some 711 California buyers had applied for $6.9 million worth of credits in the program’s first 11 days. Industry executives hope the credit will boost sales as much as 15 percent.

The Federal credit, initially enacted last summer at $7,500 for first-time homebuyers, was raised by the Senate to $15,000 but scaled back to $8,000 in negotiations with the House, disappointing home builders who fought hard for the higher amount.

But where they fell short at the Federal level, homebuilders are pushing hard for tax incentives in many states. California’s credit touched off legislation in other states to sweeten the pot for homebuyers.

In Georgia, Rep. Ron Stephens’ (R-Savannah) proposal to boost Georgia’s economy with a tax break for homebuyers passed the House last week. It would give a state income tax credit of up to $3,600 over three years for people who buy single-family homes within six months after the bill takes effect. But it would cost the state about $200 million in revenue as Georgia faces a budget shortfall estimated to be at least $2.6 billion.

“Nobody is playing now, and that means everyone’s hurting. We want to get people off the sidelines and into the game,” says Stephens.

In Florida, where there’s a 22-month supply of inventory, the House of Representatives is considering a bill by Rep. Carl Domino (R-Jupiter) backed by Governor Crist that would give first-time buyers a 50 percent property-value exemption amounting to a $2,000 savings in property taxes on a $200,000 home in the first year. The break would phase out after five years and decrease by 20 percent each year. If approved by the legislature and governor, it must be approved by 60 percent of Florida voters in 2010.

Last week the Utah Senate found a way to sweeten the Federal credit with money from the same stimulus package. It approved a proposal to give buyers of newly built homes a $6,000 down payment grant using funding from the $10 million Utah is slated to receive for housing assistance from the American Recovery and Reinvestment Act signed into law last month. Funds would be used to help more than 1,600 buyers on a first-come, first serve basis. Existing homeowners would be eligible as well as first-time buyers.

“The goal is for people to buy the existing inventory out there,” said Sen. Greg Bell (R-Fruit Heights). “We don’t care if it’s their first time, as long they’re buying a new home that’s already on the market.”

Missouri, Illinois and several other states have tax credit legislation under consideration but not yet on the floor of either their house or senate. The Indiana Senate has passed a homebuyer tax credit bill that would take effect only if the state’s surplus is at least 10 percent of the budget—not expected to happen any time soon, since Indiana state revenue collections are far below projections and the last time the general fund surplus was more than 10 percent of the budget was 2001.

Not every state has embraced the idea. Home buyer tax credits got a cold shoulder in Colorado when its House Finance Committee Democrats killed a proposed tax credit for buyers to provide an incentive for people to purchase new homes. House Bill 1212 would have allowed buyers of new single-family homes to receive a state tax credit of 3 percent of the purchase price, up to a maximum of $10,000.

Leave a Reply