By Helen Chernikoff
NEW YORK, March 26 (Reuters) - The state of Kentucky's House of Representatives will decide on Thursday or Friday whether to pass the state Senate's homebuyer tax credit, the latest in a series of moves at the state level to stimulate the battered housing industry.
The Kentucky bill would give first-time homebuyers a $5,000 tax credit on the purchase of a primary residence purchased between May 15, 2009 and May 15, 2010, according to the text of the bill. It would follow the March 19 signing into law by Utah's governor of a $6,000 homebuyer grant.
Meanwhile, the Home Builders Association of Illinois and an ally in the Senate are pushing a tax credit capped at $5,000, or 1 percent of the purchase price of the home, said Bill Ward, an executive vice president of the association. In February, California passed a $10,000 homebuyer tax credit.
The efforts come as the homebuilding industry's political arm recovers from its disappointment with the federal stimulus bill. Just before passage, the homebuyer tax credit was cut to $8,000 from $15,000.
Now, several other states are pursuing an alternative strategy, trying to follow Missouri's lead in enabling homebuyers to immediately tap the federal government's tax credit as a down payment.
'It is a kind of movement afoot,' said luxury homebuilder Toll Brothers Inc Chief Executive Bob Toll, who said the proliferation of state-level initiatives could boost sales across the industry in the near-term.
The homebuilding industry is mired in a prolonged slump, triggered by risky lending and speculation during the boom years and exacerbated by the current recession.
Florida and California experienced the boom's biggest highs and have now been hit hard by the bust. Arizona and Nevada also took a beating, but homebuilding association officials say those states' legislatures are too focused on passing their budgets to consider stimulating the housing industry.
'They've heavily fixated on the loss of revenue,' said Monica Caruso, spokeswoman for the Southern Nevada Home Builders Association. 'We're in pretty bad shape. They're focused on that.'
STATES EYE MISSOURI MODEL
Other states have opted to try to replicate a program offered by Missouri's state housing agency that allows homebuyers to receive the federal government's tax credit when they close on their homes instead of waiting for their tax refund.
The program works by loaning the homebuyer up to 6 percent of the home purchase price, which is then used for down payment and closing costs. The homebuyer then files for the federal tax credit and uses the credit refund to pay off the loan from the state.
Colorado, Ohio, Pennsylvania and Tennessee are close to implementing Missouri's program and Idaho, Nebraska, South Dakota and Texas are moving in that direction, said Garth Rieman, who directs housing advocacy at the National Council of State Housing Agencies, a non-profit based in Washington, D.C.
Builders have struggled to help buyers come up with a down payment since the October elimination of a federal program known as 'seller-funded down payment assistance,' which allowed them to pay a percentage of a home's sale price.
The conversion of the federal tax credit into a form of down payment assistance is probably more effective at stimulating demand and reducing excess supply than a tax credit that buyers must wait to receive, said Fox-Pitt analyst Rob Stevenson.
'Anything that can be done on the front end is more helpful than something on the back end,' he said.
(Reporting by Helen Chernikoff; Editing by Bernard Orr) Keywords: HOMEBUILDERS/KENTUCKY (helen.chernikoff@thomsonreuters.com; +1 646 223 6127; Reuters Messaging: helen.chernikoff.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
NEW YORK, March 26 (Reuters) - The state of Kentucky's House of Representatives will decide on Thursday or Friday whether to pass the state Senate's homebuyer tax credit, the latest in a series of moves at the state level to stimulate the battered housing industry.
The Kentucky bill would give first-time homebuyers a $5,000 tax credit on the purchase of a primary residence purchased between May 15, 2009 and May 15, 2010, according to the text of the bill. It would follow the March 19 signing into law by Utah's governor of a $6,000 homebuyer grant.
Meanwhile, the Home Builders Association of Illinois and an ally in the Senate are pushing a tax credit capped at $5,000, or 1 percent of the purchase price of the home, said Bill Ward, an executive vice president of the association. In February, California passed a $10,000 homebuyer tax credit.
The efforts come as the homebuilding industry's political arm recovers from its disappointment with the federal stimulus bill. Just before passage, the homebuyer tax credit was cut to $8,000 from $15,000.
Now, several other states are pursuing an alternative strategy, trying to follow Missouri's lead in enabling homebuyers to immediately tap the federal government's tax credit as a down payment.
'It is a kind of movement afoot,' said luxury homebuilder Toll Brothers Inc Chief Executive Bob Toll, who said the proliferation of state-level initiatives could boost sales across the industry in the near-term.
The homebuilding industry is mired in a prolonged slump, triggered by risky lending and speculation during the boom years and exacerbated by the current recession.
Florida and California experienced the boom's biggest highs and have now been hit hard by the bust. Arizona and Nevada also took a beating, but homebuilding association officials say those states' legislatures are too focused on passing their budgets to consider stimulating the housing industry.
'They've heavily fixated on the loss of revenue,' said Monica Caruso, spokeswoman for the Southern Nevada Home Builders Association. 'We're in pretty bad shape. They're focused on that.'
STATES EYE MISSOURI MODEL
Other states have opted to try to replicate a program offered by Missouri's state housing agency that allows homebuyers to receive the federal government's tax credit when they close on their homes instead of waiting for their tax refund.
The program works by loaning the homebuyer up to 6 percent of the home purchase price, which is then used for down payment and closing costs. The homebuyer then files for the federal tax credit and uses the credit refund to pay off the loan from the state.
Colorado, Ohio, Pennsylvania and Tennessee are close to implementing Missouri's program and Idaho, Nebraska, South Dakota and Texas are moving in that direction, said Garth Rieman, who directs housing advocacy at the National Council of State Housing Agencies, a non-profit based in Washington, D.C.
Builders have struggled to help buyers come up with a down payment since the October elimination of a federal program known as 'seller-funded down payment assistance,' which allowed them to pay a percentage of a home's sale price.
The conversion of the federal tax credit into a form of down payment assistance is probably more effective at stimulating demand and reducing excess supply than a tax credit that buyers must wait to receive, said Fox-Pitt analyst Rob Stevenson.
'Anything that can be done on the front end is more helpful than something on the back end,' he said.
(Reporting by Helen Chernikoff; Editing by Bernard Orr) Keywords: HOMEBUILDERS/KENTUCKY (helen.chernikoff@thomsonreuters.com; +1 646 223 6127; Reuters Messaging: helen.chernikoff.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.