California builders lobby for tax credit extension for new home buyers

 

Remember the $10,000 California tax credit for newly built homes that state buyers exhausted earlier this year in only about four months? Well, new-home activity is down since that money ran out, and state builders are calling for an extension of the credit, according to today's news release from the California Building Industry Assn.

“Since the discontinuation of the popular home buyer tax credit, we have seen a significant drop in traffic these past few months, which continues to drag down new-home construction, and in turn, job creation,” said Liz Snow, CBIA’s president and CEO. “We applaud the Senate for taking swift action in passing the tax credit extension, and we hope the Assembly follows suit.”

According to statistics compiled by the Construction Industry Research Board (CIRB), home builders pulled permits for 2,920 total housing units in September, down 1% from August. When compared to September of last year, production in 2009 was off by 36%. Permits for single-family homes totaled 2,150, down 2% from the previous month and down 12% from September 2008, while multifamily permits totaled 770, up 0.5% from August but down 63% from September of last year.

The builders' stance is that more home building means more jobs and work for Californians, which would benefit the state's overall economy. Because things slowed once the credit funds were exhausted, this doesn't seem to have much staying power as a strategy, although it did help reduce unsold inventory. Will an extension help fuel an economic recovery or just drag out the process?

-- Lauren Beale

Thoughts? Comments?

Photos: Construction workers build a new home in Millbrae, Calif. Credit: Russel A. Daniels / Associated Press 

Comments

[Jay]

We need to move beyond this obsession with housing. What good is building new homes going to do when there is already an oversupply (even though many are being kept off the market by the banks) of existing homes (foreclosures) in need of buyers?

[Shawn]

New home construction is down because the market is flooded with inventory, making it much cheaper to buy existing home than to build. Why pump tax money into increasing that inventory and further driving home prices down?

[al]

There's a strong counterargument to the builder's lobby:

1. California's government is desperately in need of more tax revenue. Granting a tax credit at this time will decrease revenue, not increase it.

2. There are already too many expensive houses and condos. We don't need a greater supply of high priced homes, which is mostly what the new home builders are creating.

[michael]

corrupt, corrupt, corrupt. leaving this state soon I hope.

[Move 2 CA]

These tax credits don't help home buyers at all. Rather, all they do is artificially inflate demand and encourage people who can't really afford a house or wouldn't otherwise be interested to buy one. This artifically inflated demand bumps up the price much more than the amount of the credit, which ultimately leaves the buyer in a much worse position than if no credit had been offered at all. If we are going to subsidize builders and sellers, then be honest about it, but this is just a fraud on the buyers. Nothing more.

[Pasadena'ed]

California needs more housing inventory like it needs more cars and trucks clogging the freeways.

[Laker]

California needs to lower the property tax rate to help new home owners that are buying average houses but pay premium taxes. That is huge burden on the economy. At the same time, chop prop 13 from commercial RE, and let them pay a fair share!
For ex., an 30 unit apartment building owner that bought in 1970 pays LESS taxes than joe 6-pack that bought a 3 bedroom 2 bath 1200 sq ft house in Pasadena.
It doesn't make sense that one has to pay $10,000-14,000 per year in property taxes...cut that in half!

[Gus]

I concur/agree with all of the comments here -- if you haven't done so already, I would urge everyone to contact their so-called representatives at the state and federal levels and request that they stop throwing good money after bad; i.e., lining the pockets of the banks and residential real estate lobby at the expense of our state and country.

If the legislature is hell-bent on wasting more money (assuming they aren't already), why don't we do something more productive with that money? Subsidies for residential real estate is dead money with minimal multiplier effect, short duration and a narrow benefited class -- at least public infrastructure projects have a longer-term beneficial impact on productivity and overall quality of life for everyone.

[Schigolch]

Isn't there any way that us taxpayers can fight back against this sort of exploitation?

[Rich]

"The builders' stance is that more home building means more jobs and work for Californians, which would benefit the state's overall economy"

But it sure is hell on the environment.

At some point we will reach the stage of overpopulation and resource exhaustion (the country, not just the state of California) where people will realize that the fiscal conservative's dream of endless economic expansion and the Wall Street dream of endless profit increase are unsustainable; we need a model for a steady-state economy. Public sector economics is an important component of a steady-state economy, depositing modest tax revenues into the paychecks of public employees who do critical work (police, fire, teacher, etc.) and who return all those dollars to the local economy.

Unfortunately for the building industry, there's no sane or rational mechanism for winding down their unnecessary activity other than the brutal forces of market decline, because the players inevitably get themselves mired in debt due to speculation...

[Brian]

Why do the home builders want to get bailed out by tax payers? They themselves involved in the housing bubble that pushed the housing price to the sky. The builders pocketed a lot of money during that time. We know how much it costs to build a house (when you buy home insurance, they tell you how much your house costs to rebuild). We want the house price go down so we can afford it. It's ridiculous that in CA, a couple working full time couldn't afford to buy a condo.