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Somehow in the midst of the state’s worst budget crisis ever, Governor Arnold Schwarzenegger found money to give a $10,000 tax break to anyone who bought a newly built home in California. The idea was to help out the state’s crumbling home building industry and save some construction jobs. Coupled with the $8,000 federal credit that’s a nice $18,000 incentive to buy a new home. Like the federal credit, this only applies to people buying a house they plan on making their primary residence.
The home builders in the state are happily touting the new tax savings. And the Governor’s office recently sent a list of glowing headlines about the credits (see below). Not everyone is happy about the handouts, however.
Here’s what apartment developer Ric Campo said about homebuilders going to the government for help. In particular he noted recent federal tax law changes that allow companies to extend the period of time they can deduct prior year losses from current taxes, a move that particularly helped the money-losing builders. “I don’t think we should be subsidize housing,” Campo says. “They were feasting on everyone. Now they’re trying to get a free lunch from the government so they can build more houses. We’ve got an excess.”
Here’s the Governor’s version:
What They’re Saying …
… About The New $10,000 State Homebuyer Tax Credit
**Tax credit goes into effect March 1, 2009**
This Tax Credit “Will Give A Shot In The Arm To The Home-Building Industry” And “Stimulate A Revival Of Housing Purchases.”
Chief Executive Of Van Daele Development Mike Van Daele: The State Tax Credit Is “The Most Significant Boost To New Homebuilding That Has Been Put In Place To Date Because It Is Being Made Available To Everyone And Anyone.” (Leslie Berkman, “U.S., State Rolling Out Incentive Welcome Mat To Homebuyers,” Riverside Press-Enterprise, 2/27/09)
President Of Stockton-Based FCB Homes Tom Doucette: “It’s Going To Have A Stimulative Effect On Buyers.” “There’s no question people are talking about it … It’s going to have a stimulative effect on buyers, because for many people, it becomes a source (indirectly) of their down payment.” (Bruce Spence, “Home Tax Credits On Tap,” Stockton Record, 2/27/09)
President Of Shea Homes’ Northern California Division Layne Marceau: “This Is Something That Our Industry Has Been Desiring To Have For Quite Some Time.” “This is something that our industry has been desiring to have for quite some time … [Homebuilding is] “an economic engine. The whole intent here is to stimulate sales activity, the ability to start housing projects again, get the state economic engine moving again. We believe the housing industry is the catalyst to do that.” (Jenny Shearer, “Two Tax Credits A Boost For Eligible Homebuyers,” Bakersfield Californian, 2/27/09)
Marceau Said That Even Though The Funding Will Run Out … He Is Hopeful The Buyer Excitement Will Be Sustained.” Riverside Press-Enterprise: “Marceau said that although the state program funding may run out before the end of the year, he is hopeful the buyer excitement will be sustained and possibly the program will receive a further allocation.” (Leslie Berkman, “U.S., State Rolling Out Incentive Welcome Mat To Homebuyers,” Riverside Press-Enterprise, 2/27/09)
Stockton Record: “The State Tax Credit Could Bump Up Sales By 15 Percent To 20 Percent.” (Bruce Spence, “Home Tax Credits On Tap,” Stockton Record, 2/27/09)
Research Fellow At The Public Policy Institute Of California In San Francisco Jed Kolko:”It’s Designed To Boost The Construction Industry, Which It’s Likely To Do.” (Carolyn Said, “State Offers Tax Break For New-Home Buyers,” San Francisco Chronicle, 2/27/09)
Los Angeles Times L.A. Land Blog: “State Builders Hope This Will Give A Shot In The Arm To The Home-Building Industry.”(Lauren Beale, “Buying Newly Built? There Could Be $10,000 In It For You,” Los Angeles Times L.A. Land Blog, 2/26/09)
Central Valley Business Times: “Builders Hope The Tax Credit Will Stimulate A Revival Of Housing Purchases, Kick-Starting New Construction And Jobs.” (“Builders Hope Tax Credit Will Spark New Home Sales,” Central Valley Business Times, 2/26/09)
It Is Already Spurring Renewed “Interest” And Builders Are Already Looking To “Increase Production.”
Senior Vice President For Government Affairs For The California Building Industry Association Tim Coyle: “Already, With The News Of This Tax Credit Being Authorized, We’re Beginning To See Interest.” “What we’ve been missing in the market place for the last couple of years are people … Already, with the news of this tax credit being authorized, we’re beginning to see interest among those people who we desperately need to have confidence to return back to housing markets where they haven’t been for so long. We think this tax credit will do that.” (“Builders Hope Tax Credit Will Spark New Home Sales,” Central Valley Business Times, 2/26/09)
Coyle: When Congress Enacted The Same Credit “It Stimulated Sales, Doubled Sales Within A Year.” “Back in 1975, the U.S. Congress enacted a tax credit identical to this one and it worked. It stimulated sales, doubled sales within a year.” (KABC’s “Evening News,” 2/25/09)
President Brookfield Homes’ San Diego/Riverside Division Steve Doyle Is Already Looking To “Increase Production.” San Diego Union-Tribune: “Steve Doyle, president of Brookfield Homes’ San Diego/Riverside division, said he hopes to increase production 15 percent to 20 percent beyond the 150 units planned this year if the tax credits generate increased sales.” (Roger Showley, “Home Builders Expect Boost From State Tax Credit,” San Diego Union-Tribune, 2/27/09)
Californians Are Feeling More “Comfortable” - Saying This Tax Credit “Makes A Big Difference.”
New Homebuyer Cristi Guglielmoni Says The Tax Credit “Makes A Big Difference.” “I think it’s fantastic … It makes a big difference.” (Jim Wasserman, “Date Clarified For $10,000 Tax Credit Eligibility,” Sacramento Bee, 2/25/09)
KABC News: Vanessa Hunter Is Ready To Buy “Because Of The State’s New $10,000 Tax Credit.” “Indecisive for months, 24 year-old Vanessa Hunter says she’s ready to take the plunge because of the state’s new $10,000 tax credit for homebuyers.” (KABC’s “Evening News,” 2/25/09)
Vanessa Hunter: “If We All Try To Do What We Can To Put Our Confidence And Our Money Back In, Then That Will Really Go A Long Way Towards Making Things Better.” “If the government is willing to put that money towards, you know, getting people to buy houses it makes you feel a little bit more comfortable … if we all try to do what we can to put our confidence and our money back in, then that will really go a long way towards making things better.” (KABC’s “Evening News,” 2/25/09)
BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.