The state of California has re-established and extended a $10,000 homebuyer tax credit.
The new law, AB 183, signed today by Gov. Arnold Schwarzenegger, allocates $200 million to the credit for homes purchased between May 1 and Dec. 31, and between Dec. 31 and August 1, 2011. That’s twice the amount allocated to a similar credit passed for purchasers of new homes last year. Those funds were quickly depleted and builders have been asking for the credit’s return ever since.
The state has extended the new credit to first-time buyers of existing homes as well as buyers of new homes. The funds will be split evenly between the two groups, and buyers will have to occupy the home for at least two years.
The legislation had the backing of the California Building Industry Association and the California Association of Realtors.
"The tax credit will help push prospective buyers off the fence, clear out inventory, and jump-start the homebuilding industry, which will help create jobs and reinvigorate the state’s economy," said Liz Snow, the building association’s CEO and president, in a statement.
"AB 183 also will significantly contribute to efforts to stimulate jobs creation within California’s housing market by helping to incentivize first-time home buyers to purchase homes that have been abandoned, foreclosed upon, and returned to the lender; or have been sitting on the market for extended periods of time," said Steve Goddard, the real estate association president, in a statement.
"It is these homes that will require substantial rehabilitation by the new owners, which will in turn generate a tremendous increase in jobs and accessory purchases connected to home improvement activities," Goddard added.
Snow said the credit would be paid out over several years and therefore lessen the blow to the cash-strapped state’s budget.
"Additionally, recent studies show that building a new home generates roughly $16,000 in state tax revenues alone, which supports the notion that the credit will more than pay for itself," Snow said.
The Franchise Tax Board concluded that losses to the state’s General Fund will equal $200 million: $6 million in 2009-10; $69 million in 2010-11; $67 million in 2011-12; $54 million in 2012-13; and, $4 million in 2013-14.
"The bill appears to represent a blending of policy goals, including: increasing demand for housing by lowering the effective purchase price; decreasing the existing market inventory of homes; and, encouraging construction of new homes. Supporters claim this bill will result in the generation of additional jobs in California. No formal jobs analysis has been conducted," according to a legislative report.
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