A second round of fiscal stimulus, directed squarely at the housing sector, is a far better path to take.
With respect to options, NAHB has the following tax policy recommendations for the committee:
- First, create a tax credit for the purchase of a home.
Consumer interest in home buying appears to be perking up a bit as affordability measures improve, although home sales still are deteriorating. A temporary tax credit for home buyers could quickly energize the markets, reduce the record overhang of vacant housing units, stabilize house prices and halt the destructive decline of mortgage credit quality.
- Our second recommendation is to expand the Mortgage Revenue Bond program.
This program offers a method of increasing housing demand and responding to foreclosure concerns. A special allocation of bonds to be used for either purchase or refinancing would be beneficial for housing and the economy.
Expanding the reach of the MRB program would be particularly helpful for communities facing waves of foreclosures or heavy inventory conditions.
The committee adopted this proposal during its work on the first economic stimulus bill, and we urge that it be included in any future package.
- We recommend lengthening the time frame to carry back net operating losses.
A second stage of economic stimulus should also lengthen the time frame for businesses to carry back net operating losses as deductions against previously paid taxes — from two to five years.
In the case of home builders, the immediate boost to financial resources would lessen the need for high-cost financing or accelerated sales of land and housing inventory onto glutted markets. Again, we appreciate the committee’s efforts in moving this provision as part of the first stimulus package.
- Finally, we recommend that housing be designated as an eligible investment for tax-preferred retirement accounts.
The down payment remains the single largest hurdle for most first time home buyers, particularly considering today’s much tighter lending standards. Congress could increase capital available for downpayments by allowing them to qualify as an eligible investment for tax-favored retirement accounts.
NAHB looks forward to working with the committee and the Congress on these and other options for addressing the crisis in housing.
Thank you for the opportunity to testify today.