A bill that would dramatically expand the 2008 home buyer tax credit has been introduced in the U.S. Senate.

 Senate Bill 253, the Fix Housing First Homebuyer Tax Credit, sponsored by Sen. Johnny Isakson (R-Ga.), amends the tax code and would:
* Include all buyers of primary residences, as opposed to just first-time home buyers;
* Extend the tax credit period from July 1, 2009, to Dec. 31, 2009;
* Limit the repayment requirement to those buyers who resell their homes within three years;
* Increase the amount of the credit from a flat $7,500 to 10 percent of the sale price of the house, capped at 3.5 percent of FHA loan limits, ranging between approximately $10,000 and $22,000;
* Monetize the credit to make the funds available at closing to cover the down payment or other expenses related to the purchase; and
* Allow the credit to be used in conjunction with mortgages financed by state or local bonds.

"I hope we're going to be able to deliver," Isakson told BUILDER on Monday afternoon. "I haven't heard anyone come out in opposition against it. The proof will be when the stimulus bill comes out of the Senate Finance Committee. I've been pushing very hard to get the tax credit included."

The bill goes well beyond the stimulus package proposed by House Democrats earlier this month, but still stops short of the entire Fix Housing First agenda advocated by the National Association of Home Builders. In addition to the tax credit, the NAHB would like Congress to authorize below-market interest rates on 30-year fixed-rate mortgages and continue foreclosure prevention measures.

Isakson says that the stimulus package is the only item on the agenda for the Senate Finance Committee right now. He's pushing to make the tax credit part of that package; the interest rate reduction wasn't essential. "Rates are coming down right now," he says. "We don't need lower rates; we need buyers."

Not surprisingly, reaction from home builders to the Isakson legislation was enthusiastic.

"I think this is awesome legislation," says Chris Jaussi, president of Timberhawk Homes  in Mount Pleasant, Utah. "The reality is that the current $7,500 tax credit is flawed and has had little impact on our ability to sell townhomes to first-time buyers.  … Tax credits that have no immediate benefit and must be paid back may sound great in a committee in Washington, D.C., but are almost useless in the real world."

Kevin Enyeart, vice president and general manager of Gale Home Builders in Lee's Summit, Mo., said that the features of the new bill would be "huge" for his target buyers, many of whom are single women selling their houses and moving into more affordable townhomes, young couples who pay their bills on time but haven't had much time to save for a down payment, and empty-nesters who want to downsize. The current tax credit wouldn't help any of them.

"We have to have something the buyers can access and monetize at the closing table," he says. "These programs are going to greatly assist us."

Mike Baptist, former president of Haven Properties, a builder that was forced to shut down in Atlanta, says the bill would help people who have a job and good credit make a decision to buy a home "when they are scared to do so. Right now, anything that can move even a few buyers to purchase a home and reduce the high inventory level is a good thing for everyone in and out of the housing market."

Leigh Tarullo, a former sales manager for Ryland Homes and now an Orlando, Fla.-based sales consultant, says that the bill is praiseworthy, but she's afraid its effect will still be negligible because it only addresses one part of the problem. "Confidence can only be rebuilt with programs that address job loss, foreclosures, overall supply, and price stabilization," she says.

Isakson says he understands, though, how important housing is to the overall economic recovery.
"Housing got us into this, and housing will get us out of it ... . We're going to keep pushing on this thing until we get a remedy."

Pat Curry is a senior editor with BUILDER magazine.

Learn more about markets featured in this article: Atlanta, GA.