Economic Stimulus Package as it Pertains to Housing

The following lengthy summary was sent to me by my broker. Again, its long, but it goes over everything in the package as it relates to housing. I'll use the next few posts to go over how this may impact our local Intown Markets.

There are several provisions in the overall stimulus package that will be beneficial and help stimulate demand for housing.
Chief among these is an $8,000 home buyer tax credit for new home buyers. While we are disappointed and would have preferred a more enhanced tax credit like the Senate version, the conferees did retain some key elements from the Senate and made other modifications that are beneficial to home buyers and home builders. For qualified home purchases in 2009, the legislation:

· Stipulates that the $8,000 tax credit does not have to be repaid, unlike the tax credit passed last summer;

· Keeps the tax credit refundable, or claimable regardless of tax liability;

· Extends the sunset date from July 1, 2009 until Dec. 1, 2009 so that consumers can utilize it during the critical summer and fall buying months;

· Allows tax credit home buyers to participate in the mortgage revenue bond program; and

· Permits state housing finance agencies to help buyers at closing by advancing the credit amount as a loan using tax-exempt bond proceeds.

While much of the industry's focus was on the home buyer tax credit, there are several other important components in the legislation that will help small businesses and bolster the housing market. H.R. 1, the American Recovery and Reinvestment Act of 2009, will:

· Help home borrowers in high-cost markets by extending the 2008 FHA, Fannie Mae and Freddie Mac loan limits of $729,750 through the end of this year;

· Temporarily allow exchange of Low-Income Housing Tax Credit allocating authority for tax-exempt grants and appropriates $2 billion in HOME funding for affordable housing projects;

· Provide up to a 10-year deferral of tax due to business debt restructuring;

· Expand the net operating loss carry back period from two years to five years for small businesses (businesses with average gross receipts of no more than $15 million over the prior 3 years) for losses arising in tax year 2008;

· Extend the 25C existing home remodeler credit through the end of 2010, increase the credit rate from 10 percent to 30 percent, raise the lifetime cap from $500 to $1,500, and expand the set of qualifying property;

· Provide an Alternative Minimum Tax patch for tax year 2009;

· Increase bonus depreciation and Section 179 small business expensing for business investment in 2009;

· Increase New Markets Tax Credit allocating authority for 2008 and 2009; and

· Delay for one year the start of the 3 percent government contractor withholding requirement (from 2011 to 2012).

Once the bill is signed into law, NAHB will be reaching out to Realtors to provide information and marketing tools to make home buyers aware of the tax credit and to help builders utilize other aspects of the legislation in order to maintain and/or grow their businesses.

Keep in mind this stimulus legislation is just a first step and we know it is far from perfect. Rest assured, NAHB will leave no stone unturned until the housing market gets back on track. In the days, weeks and months ahead, NAHB plans to work closely with the Congress and the Administration on a host of issues to achieve these aims. Our primary focus will be on efforts to:

· End the credit crunch, particularly as it relates to acquisition, land development and home construction lending;

· Mitigate foreclosures; and

· Further reduce mortgage interest rates to stimulate home buying.

Key Provisions of the American Recovery and Reinvestment Act

Tax Provisions
. $8,000 first-time home buyer, true tax credit (no repayment) for the purchase of a principle residence between January 1 and December 1, 2009. Recaptured if home is sold within three years. Removes the restriction on the use of tax credit proceeds with Housing Finance Agency-issued tax exempt mortgage revenue bonds.
. Short-term gap financing for Low Income Housing Tax Credit (LIHTC) projects:
1. Provision allowing states to turn in portion of 2009 LIHTC allocations for cash.
2. Special appropriation of $2 billion in HOME funds.
. Up to a ten-year deferral of tax from business debt cancelled as part of a repurchase or restructuring.
. 5-year carryback of 2008 net operating losses for businesses with gross receipts of less than $15 million (three year average).
. Extension of enhanced bonus depreciation.
. Extension of increased small business expensing.
. Enhancements to the section 25C program for energy efficiency remodeling improvements to existing homes.
. One-year patch of the Alternative Minimum Tax.
. Increase New Markets Tax Credit allocating authority for 2008 and 2009.
. Delays for one year the start of 3% government contractor withholding requirement.

Appropriations Provisions
. $2 billion for full year payments to owners of Section 8 project based rental assistance properties.
. $2.25 billion through HOME program and Low Income Housing Tax Credit program to fill financing gaps.
. $1 billion for CDBG.
. $2 billion for Neighborhood stabilization program.
. $1.5 billion for homelessness prevention activities (help with rents, etc).
. $250 million for energy retrofitting and green investments in HUD assisted projects.
. $1 billion for Section 502 direct loans under the Rural Housing Service.
. $10.4 billion for Section 502 guaranteed loans under the Rural Housing Service.
. $27.5 billion for highway spending.

Other Key Provision
. Increases in FHA, Fannie Mae and Freddie Mac loan limits to 2008 levels.