First-Time Homebuyer Tax Credit Should Never Expire
Here's a radical idea: Make the first-time homebuyers tax credit permanent.
Seriously. Through Nov. 30, the credit had cost the U.S. government about $8.5 billion in lost revenue. That works out to about a $28 per person burden that will have to be foisted onto taxpayers. We spent $3 billion on Cash for Clunkers, which bailed out an industry far less vital to the average family's well-being than housing. And that $8.5 billion is only about one-seventh of what we've "invested" in General Motors to keep it something resembling afloat.
The point is that for the additional $28 per year in taxes, we can provide a powerful incentive and opportunity for renters to become homeowners. For a young family buying its first home for $150,000, an $8,000 tax credit is enough to provide 27% of a $30,000 down payment.
Helping first-time buyers achieve the dream of home ownership with a tax credit is one way of reducing the need for the creative financing that led to the current financial crisis. There is considerable evidence to suggest that increased home ownership driven by prudent financing has meaningful social benefits for communities. (The National Association of Realtors, which admittedly is hardly objective, has put together a decent summary of that evidence here.) And helping people afford their own homes helps them built net worth, which reduces the odds of their becoming dependent on government assistance later in life.
Allowing the first-time homebuyers tax credit to expire in April could jeopardize our chances at achieving a sustainable rebound in housing and will make home ownership unaffordable for a significant number of families. Giving that up to save $28 per American per year just doesn't make much sense at all.