While many economist, real estate agents and news anchors have commented both positvely and negatively about the recent passage of the American Recovery and Reinvestment Act of 2009, I feel that any plan that promotes buyers, especially first time home buyers who need the money the most to get started, will have a positive effect on the market; allowing them to invest in their future. The homes that they buy will create new move-up buyers in the market that first needed to get their home sold. To ultimately stimulate and stablize the economy, housing recovery legislation is the most important first step.
Below is the summary of the housing sections of the American Recovery and Reinvestment Act of 2009, as published on the National Association of Realtors website www.realtor.org:
The “American Recovery and Reinvestment Act of 2009,” passed the House on February 13, 2009, by a vote of 246 – 184 Later that day, the Senate also passed the bill by a vote of 60 – 38. The President signed the bill on February 17, 2009. The bill is a $780 billion package, with roughly 35% of the package devoted to tax cuts (mostly for 2009) and the rest to spending intended to occur in 2009 and 2010.
Congress and the President have announced that a finance and housing package (including tax provisions) will be the next “big” initiative, so Congress has by no means finished its work as it affects the housing industry and REALTORS®.
The bill includes the following provisions:
- Homebuyer Tax Credit
- FHA, Fannie Mae and Freddie Mac Loan Limits
- Neighborhood Stabilization
- Commercial Real Estate
- Rural Housing Service
- Low Income-Housing Grants
- Tax Exempt Housing Bonds
- Energy Efficient Housing Tax Credits & Grants
- Transportation Investments
- Broadband Deployment
Homebuyer Tax Credit – The bill provides for a $8,000 tax credit that would be available to first-time home buyers for the purchase of a principal residence on or after January 1, 2009 and before December 1, 2009. The credit does not require repayment. Most of the mechanics of the credit will be the same as under the 2008 rules: the credit will be claimed on a tax return to reduce the purchaser’s income tax liability. If any credit amount remains unused, then the unused amount will be refunded as a check to the purchaser. Chart Highlighting the Major Modifications to the First-Time Homebuyer Tax Credit
Rural Housing Service – The bill provides an additional $500 million to existing USDA Rural Housing programs. The RHS provides both a guaranteed loan program and a direct housing loan program for those meeting the program’s eligibility criteria. The direct loan program will receive $270 million while $230 million will be allocated for unsubsidized guaranteed loans. It has been reported that this level of funding would provide for an additional 192,000 homeowners.
Low Income Housing Grants – Allow states to trade in a portion of their 2009 low-income housing tax credits for Treasury grants to finance the construction or acquisition and rehabilitation of low-income housing, including those with or without tax credit allocations.
Tax-Exempt Housing Bonds – Tax-exempt interest earned on specified state and local bonds issued during 2009 and 2010 will not be subject to the Alternative Minimum Tax (AMT). In addition, financial institutions will have greater capacity to purchase tax-exempt state and local bonds.
Energy Efficient Housing Tax Credits & Grants – To promote green jobs and energy independence, ARRA invests significantly in efforts to make homes and buildings more energy efficient. The bill provides state and local governments with $6 billion in energy efficiency and conservation grants for energy audits, retrofits and financial incentives. Through 2010, homeowners will be able to claim a 30% tax credit (up from 10%) for purchases of new furnaces, windows and insulation. Another $5 billion will be available to modernize the nation’s electricity grid and install smart meters on homes that help to save consumers money. There is also $5 billion for weatherization assistance for low income households and $2 billion for federally assisted housing (section 8 ) efficiency efforts.
Transportation Investments – The bill provides $46.7 billion to states and localities for capital investment for surface transportation projects including highways, bridges, transit, and rail projects. NAR policy supports increased spending on the types of transportation infrastructure addressed in the bill with the exception of Amtrak and high-speed inter-city rail where NAR has no policy. These investments will tend to moderate traffic congestion and support a variety of transportation alternatives which will improve the quality of life of American communities and bolster the value of real estate.
Broadband Deployment – The bill creates $7.2 billion in grants to promote broadband deployment in unserved and underserved areas and for mapping the availability of broadband service in the U.S. Any entity is eligible to apply for a grant including municipalities, public/private partnerships and private companies as long as they comply with the grant conditions. The grants are subject to “network neutrality” requirements to ensure that broadband networks be free of restrictions on content, sites, or platforms, on the kinds of equipment that may be attached, and on the modes of communication allowed.
The bill also charges the FCC is with developing a national broadband plan that shall seek to ensure that all Americans have access to broadband capability and shall establish benchmarks for meeting that goal.
These provisions are important victories for REALTORS because increased broadband access promotes economic growth and expands opportunities for home sales. A 2006 Commerce Department report determined that property values are 6% higher in communities where broadband is available.