Thursday, February 5, 2009
Another Stimulating Proposition
Yesterday, in a show of bipartisanship, the Senate passed a 10% tax credit (capped at $15,000) for purchasing a home. The bill was presented by Republican Georgia Senator and former real estate agent Johnny Isakson. Sen. Isakson referenced the homebuyer tax credit during the recession of 1974 - then $2,000 - remarking:
“Within one year of the inception of that tax credit, two-thirds of the available inventory that was on the market was gone. The market moved back to a balanced inventory, values stabilized and things became very healthy. The only reason I know all of that is I was selling houses in 1974, that’s what I was doing to feed my family and make a living.”
This points out just how integral a housing market is to employment. It's not just construction workers who are pinched by stagnant home sales; designers, real estate agents, material suppliers, home inspectors, title companies, and all involved in the cycle of housing our citizenry take a hit.
And, I know from experience that it is supremely challenging to build an affordable home these days. Add some progressive innovation, let's say a solar electric system, and phantom costs of getting the contractor, and for that matter the architect (including this one) "up to speed" on the technology comes into play.
Fifteen grand would certainly compensate for the gap in the actual cost and market cost in the delivery of affordable housing. The cap at $15,000 is, I believe, a very wise move that supports the creation of reasonably sized and priced homes. A McMansion costing $1.5 million to build would only recognize a 1% savings, while a home costing $150,000 or less would realize the full 10%.
Read a NYT story on the program here.