Amid mounting speculation over the future of the $8,000 first-time home buyer tax credit, Congress moved today to give American service members another 12 months to claim the popular incentive. The House of Representatives voted 416 to 0 to pass the Service Members Home Ownership Tax Act of 2009, which pushes the credit's current November 30 deadline back an additional year for members of the military, Foreign Service, and intelligence corps who served at least three months of qualified overseas duty in 2009. "This bill makes sure that the brave men and women who put their lives on the line every day get to enjoy the same benefits as every other American who benefits from their service," said Rep. Charles Rangel, the New York Democrat who introduced the bill. "By extending the first-time homebuyer tax credit for service members overseas, we give these families more time to utilize the benefit, while also helping our economy continue its recovery." Here are five things you need to know about the development:
1. Missing out: The $8,000 first-time home buyer tax credit was part of President Barack Obama's $787 billion economic stimulus package, which he signed into law in February. The incentive has since been popular with home buyers; Mark Zandi, the chief economist at Moody's Economy.com, expects the program to generate as many as 400,000 additional new and existing home sales by the end of November, when the program is set to expire. But since many American service members have been living overseas, it has been difficult for them to take advantage of the program. "If you are in a conflict zone, you don't have time to get together with your spouse and family to go house shopping," says Rep. Ron Kind, a Wisconsin Democrat. Rep. Dave Camp, a Republican from Michigan, expressed similar concerns. "A lot of service members get called overseas at a moment's notice," Camp says. "And because of the time limit on the legislation now, they can't always take advantage of it, not because of anything that they did or didn't do but because of the unique nature of serving in our armed forces." The legislation the House passed today provides American service members with additional latitude to take advantage of the credit.
2. Impact: Robert Dietz, the director of tax issues for the National Association of Home Builders, estimates that the new legislation will result in an additional 10,000 home sales. (Kind projected a similar outcome.) And while these additional sales are unlikely to affect the real estate market at the national level, since service members tend to live in clusters—around Army bases, for example—the extension could end up benefiting some individual housing markets more profoundly, Dietz says. "Ordinarily, I would say 10,000 [additional home sales] is not a big deal," Dietz says. "But in this case, in certain communities—since housing is local—it could be a decent [boost]."
3. Costs: The housing tax credit components of the bill are projected to trigger a $77 million loss of federal revenue over the next 10 years. Other parts of the bill, however, generate enough new income—by raising penalties associated with late filings of certain partnership and corporation documents, for example—to ensure that it will not add to the government's yawning budget deficits. "It's revenue neutral," Camp says. "It was fully paid for.
4. Political outlook: From here, the action now moves to the Senate, which must also pass the measure before it can be signed by the president. "I would expect it is going to receive wide bipartisan support," Kind says. "It's the least that our government can do for our service men and women." Scott Talbott, a top lobbyist for the Financial Services Roundtable, agrees. "It probably has even better odds in the Senate," he says. "Service men and women need it as much as anyone."
5. Extension for all first-time buyers: The development comes as lawmakers step up their efforts to extend the tax credit for all first-time homebuyers. The issue was raised yesterday during a meeting at the White House between congressional leaders and President Obama." We need to continue working toward ensuring that more families can stay in their current homes and continue efforts to strengthen the housing market by extending the homebuyer tax credit," Senate Majority Leader Harry Reid, a Democrat from Nevada, said after the meeting. Senator Johnny Isakson, a Republican from Georgia, has introduced legislation that would extend the credit for an additional year. Reid, meanwhile, has endorsed a bill introduced by Maryland Sen. Ben Cardin, a Democrat, pushing the deadline back for six months. Talbott says the six-month extension is "very likely" to become a reality. "It threads the needles of politics and costs," Talbott says. "The U.S. economy and the housing market desperately need it."