Housing Committee
Taxation & Government Finance Committee
Legislative Committee

Jan. 15, 2010

Governor's proposed homebuyer tax credit legislation in 2010

This material is for discussion purposes only and has not been approved by the Housing, Taxation & Government Finance, Legislative, or Executive Committees, or the Board of Directors.


Issue:
Should C.A.R. play an active roll in the housing tax credit legislation proposed by Governor Arnold Schwarzenegger in his January "State of the State" message?


Action:
It is necessary for C.A.R. to revise its current position (i.e., sponsoring a state tax credit for purchasers of an REO property as a principal residence - SB 206) if it wishes to pursue a proactive course of action sponsoring legislation proposed by the Governor in January to create a state tax credit for homebuyers of ALL properties that are purchased to be the principal residence of the purchaser(s).


Options:
1. Continue C.A.R.'s current position of sponsoring SB 206 (Dutton) to create a tax credit for purchasers of an REO property as the purchaser's principal residence and not take a position on the Governor's proposed tax credit legislation until it is introduced.

2. Revise C.A.R.'s current position of sponsoring SB 206 to also include sponsoring the Governor's proposed tax credit for the purchase of new or existing homes as the purchaser's principal residence, if a reliable source of funding is identified and a bill to create such a tax
credit is introduced.

3. Other

Status/Summary
Governor highlights $10,000 Homebuyer Tax Credit proposal in his California jobs initiative
The homebuyer tax credit is seen by the Governor as one of the key factors in providing a much-needed economic boost for the California economy by generating more home sales and creating jobs in an industry that so desperately needs them. He sees a boost to the housing picture as being one of the key pieces of his job creation initiative. He is proposing to extend the current state $10,000 tax credit, due to expire in March, to purchasers of new and existing homes. He proposes to set aside $200 million for these tax credits. He is seeking to "get people off the fence and move them into homes." He also believes this proposed tax credit will help reduce the inventory of foreclosed homes, an action that is crucial to the recovery of the housing economy in California.

Discussion
As we are all painfully aware, the state's budget picture is very "murky" at best. The reason C.A.R. is sponsoring SB 206 to provide a tax credit to purchasers of REO properties as principal residences, funded by federal dollars and not state funds, is that finding $200 million in state general fund monies to apply to any housing tax credit is a major challenge in this current fiscal environment. The State has a $20 billion deficit projected through the 2010-2011 fiscal year. Setting aside $200 million for the proposed tax credit will be a "hard sell" in the Legislature. If the Governor succeeds in this effort, however, the boost to the housing economy will be significant.

Should C.A.R. take an aggressive and active (i.e., Sponsorship) role in the Governor's effort to create his proposed tax credit for ALL purchasers of new and existing homes that are purchased to be the principal residence of the purchaser(s)?