Builders in New Jersey are hoping that a state-funded bill that would extend tax credits for home buyers beyond the federal tax credit’s April 30 deadline will reach Gov. Chris Christie’s desk within the next 30 days.
The New Jersey Builders Association has crafted a bill that would create a $100 million program. Home buyers would be eligible to receive a $5,000 tax credit per year for three years. Three-quarters of that allocation would be for purchasers of new homes, although that could change, as the state’s real estate agents are calling for more of an equal balance between new and existing home buyer recipients.
The bill’s two sponsors in the New Jersey Legislature are Sen. Paul Sarlo (D-Bergen) and Assemblyman Lou Greenfield (D-Camden). Last summer, Sarlo sponsored another bill, which the New Jersey Builders Association also championed, that provides developers with a fast-track application process to convert active-adult communities to market communities.
Tim Touhey, the New Jersey Builders Association’s chief executive, told BUILDER last week that he saw “a lot of support” for the tax credit among the state’s elected officials. Under Touhey’s leadership over the past two and a half years, the association has become more aggressive politically about advocating housing-related issues. “We needed a different legislative policy so that we could be at the front of the line. Now, we are being asked for our opinion in Trenton,” the state’s capitol.
Indeed, on Monday a panel set up by the governor's office to review regulations presented Christie with a 65-page report recommending ways to spur economic growth by cutting red tape for developers, such as reducing the wait time for permits and allowing municipalities more leeway about the development within their boundaries.
The proposed tax credit in New Jersey is taking its cue from California, whose governor, Arnold Schwarzenegger, in late March signed into law a bill that allows a tax credit to first-time buyers of new and existing homes. Buyers can claim 5% of their purchases against their state taxes, up to $10,000. That bill allocates $100 million each for purchasers of new homes and existing homes. The tax credit is available for purchases made through the end of this year, although some tax experts in the state believe it will be expended well in advance of that date.
As the federal tax credit is about to expire, opinions vary about how effective it has been as a home-buying stimulus. But there’s general consensus among builders and real estate agents that the tax credit got hesitant buyers off the fence. The National Association of Realtors (NAR) estimates that 900,000 more buyers nationwide came back into the market as a result of the tax credit, which NAR also thinks helped to stabilize home prices. NAHB has projected that federal tax credits ultimately will increase home sales by more than 180,000, and add 211,000 construction jobs. In Indiana, about 40,000 Hoosiers have collected $270 million in first-time home buyer incentives, according to the latest figures from the Treasury Department. In Pennsylvania, more than 65,000 have already collected $448 million in first-time home buyer tax credits, according to the Internal Revenue Service.
The big question, though, is whether buyers across the country will stay in the market once the tax credit disappears. While few states are jumping in to replace the federal program with one of their own, a number have buyer-assistance programs already in place. In South Carolina, for example, public employees such as teachers, firefighters EMS personnel, and police can take advantage of the Palmetto Heroes Program, which offers a fixed-interest rate as well as assistance with down payments and closing costs.
JohnCaulfield is senior editor for BUILDER magazine.