The California Building Industry Association is spearheading a nationwide campaign to enlist the support of builders and the National Association of Home Builders in an effort to lobby Congress to create a one-time, limited 5% tax credit for the purchase of new homes.
The proposal is similar to a tax credit enacted during the Ford Administration in 1975 that provided a 5% tax credit to consumers who bought new homes between March 12 and December 31 of that year. That program was credited with cleaning out the backlog of inventory that had accumulated during the recession of 1974-'75 and leading to a rebound in the new housing market in 1976.
David Crowe, senior staff vice president at NAHB, said the proposal "is now under consideration. I have no idea how this will turn out," he added. "This is our policy making process."
The NAHB board is expected to take up the matter at its meeting later this month.
Robert Rivinius, president and CEO of CBIA, said four other state associations have signed on to support the effort, including New York, Illinios, Georgia, and New Hamshire in addition to CBIA. Several other state associations are still considering the matter.
The idea is the brainchild of Jim Ghielmetti, CEO of Pleasanton, Calif.-based Signature Properties. "I was sitting in my office on a Friday afternoon, and Jim called," said Rivinius. "He said, 'You and I are old enough to remember when they did that tax credit back in the '70s. Why don't we do that?'"
"I thought it was a great idea," said Rivinius. He brought it to the CBIA board, which endorsed the proposal at its meeting at the end of October.
According to U.S. Census Bureau data, home sales peaked in 1972 at 718,000, then fell to 634,000 in 1973, 519,000 in 1974 and inched up to 549,000 in 1975. In 1976, homes sold was back to to 646,000 and up to 819,000 in 1978.
Still, Rivinius said, "This is not scientific. We think a little stimulus will get [the market] going, and in the long run, the federal government will benefit."
To be sure, California can use some help. "Probably by the end of the year, starts will be off 40 to 45%," said Rininius.
The text of the proposed resolution, as circulated by the Home Builders and Remodelers Association of New Hampshire , follows:
"Whereas, home building accounts for 15 percent of the annual growth in the US economy, and
"Whereas, home building and the industries supplying home building account for more than 4 million jobs in an average year, and
"Whereas, the impact of home building on a typical market generates new revenues and taxes to the local governments that outweighs the added costs of supplying fiscal services and infrastructure,and
"Whereas, recent housing market activities have slowed the number and rate of new and existing home sales severely, and
"Whereas, the supply of unsold new homes is at a 16 year high, and
"Whereas, the growing inventory of unsold homes has caused housing production to fall by almost 50 percent in 18 months, and
"Whereas, the rapid decline in home building has resulted in loss of manufacturing, retailing and construction jobs, and
"Whereas, in 1975, the US Congress passed and the President signed the Tax Reduction Act, which included a Home Buyer Tax Credit; providing a 5 percent tax credit to the purchaser of a newly built home between March 12, 1975 and December 31, 1975, and
"Whereas, a year after the 1975 credit was effective, the level of housing production nearly doubled,
"Now therefore be it resolved that the National Association of Home Builders urge Congress to enact a temporary tax incentive for purchasers of newly built homes.
"Be it further resolved that the National Association of Home Builders urge Congress to consider additional incentives needed to return the home building industry to full employment so that the industry can continue to contribute to the nation's economic stability and growth."