Builders rally for extension of tax credit for buyers
| Wednesday, May 13 2009 06:18 PM
Last Updated Wednesday, May 13 2009 06:24 PM
Home builders are pushing state legislators to extend a popular state income tax credit of up to $10,000 for the purchase of new single family homes.
Under an existing program that began in March, buyers of new homes can receive a tax credit of 5 percent of the value of the home, not to exceed $10,000. The program runs through March 1, 2010, and is capped at $100 million.
Two bills working their way through the state Legislature would extend the program.
Senate Bill 49, sponsored by Sen. Robert Dutton, R-Rancho Cucamonga, would remove the funding cap, but keep in place the provision that the home must be purchased before March 1.
Assembly Bill 765, introduced Wednesday, would increase the cap from $100 million to $300 million and allow buyers to reserve the credit at the time of the purchase agreement rather than at the close of escrow.
That way homebuyers could take advantage of the credit even if their house is still under construction when the credit sunsets.
The new bill is co-authored by assembly members Anna Caballero, D-Salinas; and Jose Solorio, D-Santa Ana.
Solorio said the credit isn't a subsidy for purchasers of new homes, but an economic stimulus.
For every new home built, three direct new jobs are created, he said.
In light of the real estate slump and its impact on the recession, "It's imperative that we improve our economy and help our home builders," Solorio said.
Horace Hogan, president of Brehm Communities in San Diego and chairman of the California Building Industry Association, said extending the credit is a critically important component to getting construction workers and others involved in building back to work.
"It's really increased our traffic since it was implemented, and not just lookey-loo shoppers. It's real buyers," he said.
The Assembly members insisted the program would assist everyone, not just builders and new home buyers.
Even renters and owners of existing homes would benefit because the tax revenue from job creation and new property taxes would help pay for police, firefighters, schools and other services, Caballero said.
The state tax credit has been popular, with one-third of the funding cap used in the first month since it was enacted. The Franchise Tax Board estimates the $100 million cap could be reached by June.
According to the Construction Industry Research Board, 3,317 permits were pulled in California in March, up 39 percent from February.
Some new home buyers who take the state credit also are eligible for a federal income tax credit of up to $8,000. The federal program is limited to first-time home buyers and applies to new homes purchased between Jan. 1 and Nov. 30 of this year.
