The Wall Street Journal-20080215-Builders Group Faults Stimulus Plan
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Builders Group Faults Stimulus Plan
Full Text (723 words)ORLANDO -- The National Association of Home Builders stepped up its attack on the $168 billion economic-stimulus package that President Bush signed into law on Wednesday, calling it too weak to help the ailing housing market.
Under the final bill, most taxpayers would receive tax rebates of up to $600 for individuals or $1,200 for married couples. The bill also includes measures designed to ease the mortgage crisis by temporarily raising the loan limits for Fannie Mae, Freddie Mac and the Federal Housing Administration. That will allow those agencies to help more homeowners to refinance into lower cost mortgages.
At the home builders' annual meeting here, which is attended by more than 100,000 builders, appliance makers and other housing suppliers, the industry's leaders struck an angry tone and said the package won't make a big enough difference to their battered industry.
"As far as we are concerned, Congress hasn't done enough to help the housing market," said Jerry Howard, chief executive of the National Association of Home Builders. "We feel like the concerns of our industry have been ignored."
The trade association's leaders said they are heading back to Capitol Hill in an attempt to encourage Congress to draw up more stimulus measures such as tax breaks for builders and tax credits for home buyers. Buyer tax credits, they said, would help to ease one of the biggest problems weighing over the housing sector: a huge inventory of unsold homes.
Such tax credits were enacted by the Ford Administration to help clear a glut of unsold new homes amid a recession in 1975. Those credits were worth 5% of a new home's value, up to $2,000. The tax credits would apply to home buyers who bought from a home builder's supply of completed or partially-built homes.
David Seiders, the builders association's chief economist, said the tax credits helped clear a "good deal of the inventory" by the end of 1975. Today, those credits could be valued as much as $10,000 a taxpayer, said Mr. Seiders. The builders are also proposing tax credits for first-time home buyers that could be applied to both new and used homes. "The credits could be a powerful stimulus to get people buying again," he said.
The builders also want to be able to apply their current losses against taxes paid on profits in the previous five years, as opposed to the current two-year period. The measure had been part of an earlier stimulus bill proposed by the House but wasn't included in the final plan that went to the White House. Critics said the measure would have cost too much.
The builders have been criticizing Congress all week. On Tuesday, they announced they have cut off campaign donations to congressional candidates. The builders' Political Action Committee, which has donated $1.4 million to candidates during the current election cycle, is withholding donations "until further notice."
The builders have directed 55% of their recent donations to Republicans and 45% to Democrats, but Mr. Howard blames members of both parties "for torpedoing" much of the pro-housing legislation in the last two years. "Our guys decided they are not going to give anybody any contributions," he said.
Builders may have an uphill battle in Washington. The industry reaped large profits during the boom and played a big role in the current housing malaise by selling to speculators and buyers with subprime credit and contributing to massive price run-ups.
While the trade group may be sounding an angry tone, many rank-and- file builders are just plain glum about their industry. Attendance at the convention, one of the nation's largest, is down 10% from 2007. Some builders saw a slight bump in traffic in January, after several dismal months, but few are willing to call a bottom.
"This is the worst market that anyone has seen, probably ever," said Norman Finkelstein, president of Norwood Cos., based in Farmington Hills, Mich., which has sold one home in the past six months. He used to average 70 to 80 homes a year.
For some builders who are running out of cash and are in danger of defaulting on construction and land loans, the additional stimulus may come too late. "There are 50- and 60-year-old companies that are closing their doors and probably won't reopen. If that happens, the public is going to suffer," said Mr. Finkelstein.
