It's Time to Stop the Home-Buyer Bailout
Why renters are fed up with the government's efforts to boost housing.
Congress included an $8,000 tax credit for first-time home buyers as part of the stimulus package passed last winter. As many as 40 percent of all home buyers this year will qualify for it, and it's expected to cost the government $15 billion -- more than twice the original forecast -- thanks to its popularity.
The tax credit is scheduled to expire on November 30. Not surprisingly, the real estate industry, including the 1.1 million-member National Association of Realtors, wants Congress to extend the credit at least through next summer, and to expand it to $15,000 and allow all buyers to qualify. The cost: $50 billion to $100 billion.
This is a redistributed tax from renters to buyers. As a proud renter, I've had enough. I didn't flip houses as investments, nor did I buy one I couldn't afford. So why must I pay for others to speculate and swim in risk?
For too long the American religion of home-ownership has cast its spell on our society and packed the pews of Congress. "Owning a home lies at the heart of the American dream," President Bush declared in 2002. But look where that dream has led us: subprime housing and unsustainable suburbanization and near-depression.
Considering its role in fostering the economic collapse, providing tax credits to prop up the housing system is sort of like offering a recovering addict his drug of choice. What's more, with Fannie Mae (FNM), Freddie Mac (FRE), Ginnie Mae, and the FHA involved in 85 percent of all mortgages, renters -- as well as everyone else -- are paying to prop up real estate prices. To top it off, the Fed has its $1.45 trillion mortgage purchase plan.
The Tax Policy Center, a joint venture of the Brookings Institution and the Urban Institute, called the original tax credit one of the worst provisions of the stimulus package, saying the money was a give-away for people who would buy a house anyway. It believes extending the credit to all buyers is even worse.
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