Low-income home buyers lose out on (tax credit) break

[sabra]

Source: Chicago Trib



WASHINGTON — The Senate's proposed $15,000 tax credit for home buyers would boost the ailing housing market but do little to help low-income people who need it most, experts say.

The measure, which is part of the $827 billion economic stimulus plan that the Senate is to vote on Tuesday, would offer the credit to anyone who buys a primary residence. But to take full advantage of the credit, buyers would have to earn enough to spend at least $150,000 on a home.

As many as 1 million home sales could result from the tax credit, according to Mary Trupo of the National Association of Realtors.

"By increasing demand and decreasing inventory, it'll help to stabilize home values and result in fewer foreclosures," Trupo said.

But low-income people will not benefit, said Linda Couch, deputy director of the National Low Income Housing Coalition. "The bill is focusing a lot more of its resources on higher-income households and home ownership than it is on the lowest-income people and people really teetering on the edge of homelessness," Couch said.

Read more: http://www.chicagotribune.com/news/chi-housing_monfeb09,0,2347832.story

[Zywiec]

1. How do they lose out?

When the home costs less than $150,000 the deduction is still worth 10 percent of the house's value, meaning those buying lower-cost homes would receive the benefit.

You buy a house for $140,000, you get $14K tax credit.

It's a percentage, not an absolute amount.

[rollingrock]

51. What is to stop the banks or the seller from raising the price another 10 or 15k?

and pocketing the savings that should have gone to the buyer?

[Baby Snooks]

2. Don't you just love the change?

As always, Congress votes to help the people who need help the least while ignoring those who need help the most.

No doubt after he signs it, Obama will talk about how the economy "trickles down." Change apparently "trickles down" as well.

I look out over a "park" each morning, a vacant lot that the homeowners keep tended and use as a dog park, and watch as people walk their dogs. Totally oblivious to the man who created a "home" for himself behind some shrubbery. They don't care about him. No one cares about him.

He is unfortunately the face of the new America. The one Barack Obama doesn't care about either.

I see this man in the morning. Hiding from the world that hates him. We hate our homeless in this country. Reality. We wish they would all just go away. Out of sight, out of mind.

I see this man at night. Sitting beneath this magnificent 100+ year old oak tree. Finding some solace in a world that offers no solace to anyone.

[JayMusgrove]

3. "Low income" people ...what is the definition you are using?

People who make $50K a year or less? Who can buy a $150K house making less than that, which is 1/3 of house value?

I just want to know how we are defining things here.

[Gormy Cuss]

5. The point is that those benefitting most from the credit aren't low income.

An example is providing in the text:

Because the money comes as a deductible tax credit spread over two years, home buyers must earn enough to have $7,500 in income taxes or $81,900 per year for a family of four to get the full benefit, according to the housing coalition.

[Gormy Cuss]

4. As the NLIHC director stated, because they don't have high enough income to take full advantage

of the tax credit, few low income people will benefit. She's pointing out that this isn't a vehicle for housing of low income households but we're in a time when addressing the housing needs of low income people should be front and center.

[high density]

6. Do we want people who are "really teetering on the edge of homelessness" ...

to be purchasing a new house? I seem to recall that people buying homes they couldn't afford is part of our problem.

[NashVegas]

25. People Making $30k-$50k Per Year Shouldn't Be On the Verge Of Homelessness In the First Place

What's ridiculous is that $150k-$200k is the average cost of a new starter home, as if everyone MUST have frigging granite counter-tops, Wolf appliances and cathedral ceilings.

[apnu]

41. When I made that kind of cash I never dreamed of buying a home.

I rented, and was thankful for it. It wasn't easy finding a decent landlord, but given enough time and research it can be done. In fact, the best landlord I ever had came from the time I worked the 3rd shift at a gas station in 1994.

Seriously, if someone is earning $30k to $50k home ownership probably isn't a good idea. The debt load would crush them.

[NashVegas]

44. When You Made That Kind Of Cash ...

Was it not possible to find homes to buy where the mortgage payments were less than what you were paying for rent?

Before the housing bubble, it wasn't difficult at all in the city I live in. Now? Forget it.

And people want their "investments" propped up.

on edit: I see you are in Chicago. There are other cities all across the US that have seen the price of a typical first home go from a range of $60-$95k, to $150-$200k between 1999-2006. While housing prices have doubled and trebled, income for the average person has remained stagnant. The economy is not going to correct itself until some type of balance returns.

[Fire_Medic_Dave]

52. I talked to I guy in my department he makes $37k and just bought a house.

Sounded like a great idea to me. His payment is $425.00 a month including taxes and insurance. Can you rent a 3 bedroom 2 bath house with a 2 car garage for $425.00?

David

[ClarkUSA]

7. Um, low-income people "teetering on the edge of homelessness" shouldn't be owning homes, period.

People who can't afford to own homes without a tax credit should be owning them, period.
Enough fools went for sub-prime loans and look where that got them.

Sorry, but some folks need to have enough sense to rent if that's all they can truly afford.

[undeterred]

31. And what kind of help are renters getting?

Zilch, even though they face the same economic pressures as everyone else.

[Zhade]

32. THANK you.

The landlords get the credit while our rent keeps going up? Yeah, that's real fair.

[bertman]

8. I think Zywiec is correct. I am looking at a summary of the proposal that says it is

for "All principal residences (single-family detached, multifamily condos, townhouses, etc.). And it's for "The lesser of $15,000 or 10 percent of the purchase price of the home.

How does this not apply to low-income home buyers?

Buy a home for $89,000 and you get a $8,900 credit. Basic math.

[we can do it]

22. I Agree with You - It Benefits Loe End Home Buyers the Most

Some people just want to be mad at anything.

[stray cat]

9. Can't touch a condo for that in the NYC region -

[2Design]

10. Reading the remarks in this thread shows how people know math

but have no common sense -
1. To get the full $15,000 you would need to buy a $150,000 home because it is percentage
2. If it was instead $15,000 for any home for first time buyers, then they could buy a $80,000 home and get the $15,000 off and it would be affordable
3. This new scheme helps investors, banks, and realtors but not homeowners who need real relief for affordable housing.
4. This new scheme will only continue to inflate prices of home out of the reach of the median income person
5. Median income in usa is $35,000 to $50,000 which means the house they should buy is in the $70,000 to 100,000 range
6. This scheme will increase prices on houses to above the range of the median income person

[Zywiec]

12. Can you please provide your link showing the US median income is $35K - $50K

I think it's considerably higher than that especially in several coastal states, but maybe the Census Bureau is wrong. Here's what they say it is in the top 20 states:

State Rank Median household income (2007 dollars)
Maryland 1 68,080
New Jersey 2 67,035
Connecticut 3 65,967
Alaska 4 64,333
Hawaii 5 63,746
New Hampshire 6 62,369
Massachusetts 7 62,365
California 8 59,948
Virginia 9 59,562
Minnesota 10 55,802
Washington 11 55,591
Colorado 12 55,212
Utah 13 55,109
Nevada 14 55,062
Delaware 15 54,610
District of Columbia 16 54,317
Illinois 17 54,124
Rhode Island 18 53,568
New York 19 53,514
Wyoming 20 51,731

[Tandalayo_Scheisskopf]

17. Point of Order:

That figure of "median income" for NJ is without a doubt, one of the most abysmally deflective numbers on the planet. With communities like Alpine, Bernardsville/Basking Ridge, Summit/Millburn, and several in Hunterdon County(where the bigoted rich go to get away from those with more melanin in their skin then them...) and other enclaves of the filthy rich, this skews the number up grotesquely. The fact is that poverty is growing by leaps and bounds in NJ, the western parts of the state are getting hit the worst and do not have any effective advocates in Trenton and so, get ignored, and on balance, pay for most jobs here is pathetic and getting worse.

[NashVegas]

27. And NY Is Inflated By Downstate

In Albany, median household income is more like $33k

[FreeStateDemocrat]

33. Same distortion in Maryland, most wealth concentrated Washington, D.C, suburbs = Federal hog trough.

[WriteDown]

36. How exactly would those communities...

affect MEDIAN income?

[Rockholm]

38. Do you own a home or rent?

And why do you hate people that have made money. You know, there are some wealthy Democrats out there. Why does it seem that the only way to be considered an equal around here sometimes, one must either work at Whole Foods or some coffee house. Jeez.

[Tandalayo_Scheisskopf]

39. It's easy.

I have seen the wreckage caused by greedy bastards. I live in it. I have spoken to former Wall Street Highest-Flyers who now openly admit that they were part of a sociopathic system that has brought this country to its knees.

I know who the rich are and what they are about. I know that a lot of them fear for their physical future. And that, I think, is a very appropriate fear. The smarter amongst them know that in their race to own all the money except $1, they have made mistakes that could well be fatal to them.

[Rockholm]

45. Right.

[Tandalayo_Scheisskopf]

47. Well, maybe you don't know the people I do.

And maybe you just don't care.

[Rockholm]

53. I used to live in Madison.

Know plenty of people in North Jersey. You paint with a very wide brush. I am not disagreeing with some of what you post, but not everyone is how you describe them.

[NashVegas]

26. Agree 100%.... For Some Reason, DC Thinks It's Right to Turn Home Ownership Into a Ponzi Scheme

JFC.

[ohio2007]

49. ZERO % DOWN was mentioned last night by Obama

"It never should have happened"

[jkappy]

11. What exactly is a tax-credit??

If you purchase a 100,000 house and get 10k credit over two years, how is this credit applied. Say this persons tax bill for year one is 150.00...does this mean the credit is for that amount, and the other 4,850. is lost or what??

[No Elephants]

13. Typical "bi-partisan" FU to folks without lots of $. The whole housing credit is a

joke anyway. No one who can possibly stay in their homes will put a home on the market with prices this low.

[LostinVA]

14. 150K wouldn't even get you a meth shack around here -- and that's even in this market

And, you'd still pay 4K a year in property taxes on the meth shack.

I wished they ahd this credit when we got our house last summer.

[superconnected]

29. Many places in the US have houses under 150k. Not in my area though.

[biopowertoday]

15. this editoral speaks of this issue also: “flip your house to your brother” provision:

February 9, 2009
Op-Ed Columnist
The Destructive Center
By PAUL KRUGMAN

What do you call someone who eliminates hundreds of thousands of American jobs, deprives millions of adequate health care and nutrition, undermines schools, but offers a $15,000 bonus to affluent people who flip their houses?


.......



On the other hand, the centrists were apparently just fine with one of the worst provisions in the Senate bill, a tax credit for home buyers. Dean Baker of the Center for Economic Policy Research calls this the “flip your house to your brother” provision: it will cost a lot of money while doing nothing to help the economy.

All in all, the centrists’ insistence on comforting the comfortable while afflicting the afflicted will, if reflected in the final bill, lead to substantially lower employment and substantially more suffering.

But how did this happen? ..........

[Whosis]

16. So investors will

sell the 150000 houses for 165000.

[Belial]

18. The tax credit does not add any value to the home..

[Whosis]

28. No but I am sure

the banks or the investors will figure out a way to get the tax credit out of you if you go to buying the house.

[OhioChick]

19. Where's that "change?" n/t

[bain_sidhe]

20. If I'm understanding the article correctly...

The credit that this is replacing (from the House version) was only half that, but it also only applied to first-time home-buyers, which actually expanded the ownership of homes.

This credit applies to "flippers" as well as first-time home buyers, and to receive the full benefit, you have to make enough to owe that 15,000 in taxes, which is about $81,000 for a family of four. (Not counting other deductions - if you have stock-market losses or other deductions you'd have to be making even more to owe that much in taxes.)

[DoctorMyEyes]

21. I don't know that they're understanding the difference between a credit and a deduction

A "credit" is straight up. A deduction is a reduction from the taxes you would be paying. My understanding is that this is a CREDIT, and that any home buyer who qualifies (first time, etc) gets 10% of the purchase price of their home, or a maximum of $15,000 in addition to any refund they're expecting.

[jkappy]

23. No credit given if no taxes owed--thus low income shut out

The credit is deducted from one's tax amount. So most low-income will gain very little from this. If I owed 500.00 in taxes and purchased a home for 100k the other 4,500 in credits wd not be realized---only the 500. wd be saved. So the 15,000 credit for the average low-income person/family would be something like 1,000 or 2,000--could ba bit more or nothing at all. This according to the current Senate bill.

[Thickasabrick]

24. Does this apply to refinancing your current home?

[jkappy]

30. no, not in its current state.

it's only for those buyers of new homes who have not purchased a home in 3 years. and it cannot be a second home.

but it, of course, may change.... so stay tuned.

[Thickasabrick]

34. Thank you - I'm hoping they try to help and encourage people

to get out of all those bad ARM mortgages (or whatever they are called) and keep the houses they are in. I really get confused with the details on this stuff.

[closeupready]

35. This, on top of the fact that the existing mortgage interest deduction is the largest item in the fe

federal budget aside from interest on the federal debt.

[Rockholm]

37. Nice this turned into a bash-real estate thread.

[cottonseed]

40. Help housing. Wait no, don't help housing. No, help the housing market.

This is one portion of the bill. Not the entire bill. There are many billions more going to many folks in many different income situations. I just don't see how this is a bad thing. It might just help put a bottom on the housing market. This is not a huge tax deduction, and if Bill Gates and Warren Buffet decide that they'd rather not purchase a $150,000 house for their primary residence then there is not worry that the rich will benefit from this.

It just confuses me. There are multitudes of issues and once a proposal is put forward to help, some other side finds fault.

[KakistocracyHater]

42. Their God forbids that low-income Americans become

middle class, so it seems....

[slackmaster]

43. Someone who is "teetering on the edge of homelessness" needs subsidized rent

Not help buying a home they can't afford.

[Zorra]

46. Sounds like lots of rich folks will get tax credits for buying vacation homes

and rental properties.

Yeah, I know it stipulates primary residences, but money buys loopholes, too.

[ohio2007]

48. Urban Detroit in the summer. ...not a good choice ino nt

[rollingrock]

50. Banks will just raise the price another 10 or 15k

and pocket the money that should have gone to the buyer