House To Offer Plan on Housing
Tuesday, April 8, 2008
House Democrats are crafting a response to the nation's housing crisis that would offer tax breaks to homeowners, first-time homebuyers and developers of low-income housing but would not provide tax relief to the struggling homebuilding industry.
The measure, which is expected to be unveiled today, puts the House at odds with Senate leaders, who last week agreed on a bipartisan housing plan that includes billions of dollars in tax refunds for home builders, lenders and other money-losing businesses.
"We need to provide relief to the buyers and families themselves, not just the banks and builders," House Ways and Means Committee Chairman Charles B. Rangel (D-N.Y.) said yesterday in a written statement. "The House bill will put families first."
The House proposal would create a temporary tax credit of as much as $8,000 for first-time buyers and would increase the availability of tax credits for investors in low-income housing, according to senior Democratic aides. Like the Senate bill, it would create a standard deduction for property taxes that would assist more than 28 million homeowners who do not itemize on their federal tax returns. And it would expand the authority of state and local housing finance agencies to use tax-exempt bonds to refinance troubled mortgages.
To cover the cost of the legislation -- about $11 billion over the next decade -- the House proposal would require brokers to report the purchase price as well as the sales price of stocks and other instruments subject to the capital gains tax. It also would delay for one year the implementation of certain tax benefits for multinational corporations.
Rangel has scheduled a committee meeting for tomorrow to consider the legislation. If approved, House leaders hope to pair the tax package with an ambitious proposal to permit the Federal Housing Administration to underwrite up to $300 billion in loans for borrowers who can't meet the obligations of their current mortgages.
House Financial Services Committee Chairman Barney Frank (D-Mass.) plans to hold hearings this week on that proposal, which is aimed at giving lenders a powerful incentive to forgive a portion of the debt on troubled mortgages and saving more than a million homeowners from foreclosure.
The House packages together would represent the most far-reaching attempt by Congress to address the mortgage crisis, which is driving the nation toward recession. House leaders plan to present it to the full chamber for a vote in the next few weeks, said Rahm Emanuel (D-Ill.), chairman of the House Democratic Caucus. "There's a determination to get this done," he said.
The Senate also is at work on a broad FHA bill similar to Frank's, with hearings scheduled this week in the Senate Banking Committee. But first, the Senate will consider the more limited housing bill that won bipartisan approval last week. A final vote on that measure is expected today or tomorrow.
There are a number of key differences between that legislation and the tax package being unveiled today in the House. Chief among them: The Senate would allow businesses that lose money in 2008 and 2009 to apply those losses to federal taxes paid as far back as 2004. The "carryback" provision, as it is known, currently permits business losses to be applied retroactively for only two years.
Changing that provision would return an estimated $25.5 billion over the next three years to home builders, lenders and other businesses whose profits have evaporated during the economic downturn. Supporters say aiding businesses would save jobs, but consumer groups and some economists argue that it would do little to help the distressed homeowners most in need of assistance.
Both packages contain a tax credit for homebuyers, but the Senate version would apply only to foreclosed properties. The House is trying to assist first-time buyers who purchase any property in the next 12 months. Under the House plan, the credit would have to be repaid over 15 years, making it "essentially a zero-interest loan," Rangel said.
An aide to Senate Finance Committee Chairman Max Baucus (D-Mont.) said he plans to review the House tax package. Despite the differences between the two packages, aides said Democrats in both chambers are highly motivated to reach an agreement.