President Bush Signs Housing Bill with $15.1 Billion in Tax Incentives

President Bush on July 30 signed broad-sweeping housing legislation designed to reduce the growing number of housing foreclosures, assure mortgage finance giants Fannie Mae and Freddie Mac continued access to capital and liquidity and provide tax incentives primarily for homeownership and affordable housing. The Housing and Economic Recovery Act of 2008 (P.L. 110-289) contains a $15.1-billion tax package that is fully offset by a variety of revenue-raisers.

The tax title, the Housing Assistance Tax Act of 2008, includes a refundable first-time-homebuyer tax credit and an additional standard deduction for real property taxes. The new law also simplifies and increases the low-income housing tax credit, provides a temporary increase in mortgage revenue bonds and treats certain federally guaranteed municipal bonds as tax-exempt bonds.

The largest revenue offsets in the package require information reporting on merchant payment card transactions and a delay of the worldwide allocation rules. The housing law also sets new limits on the home sale exclusion and accelerates certain corporate estimated tax payments for corporations with at least $1 billion in assets.

The president on July 23 announced he would sign the bill, reversing an earlier veto threat over a $4 billion community block grant provision (TAXDAY, 2008/07/24, C.1). White House Press Secretary Dana Perino emphasized that the White House still considers the block grants to be a bailout for lenders but recognizes that a prolonged veto battle was not in the best interest of the housing and credit markets.

"We look forward to put in place new authorities to improve confidence and stability in markets and to provide better oversight for Fannie Mae and Freddie Mac. The Federal Housing Administration will begin to implement new policies intended to keep more deserving American families in their homes," White House Deputy Press Secretary Tony Fratto said.

House Majority Leader Steny H. Hoyer, D-Md., said the new housing law is the most comprehensive action taken yet to stem the surge of foreclosures facing the nation. He predicted the law will help minimize losses to homeowners and those impacted by the slumping housing market. "Beyond an assistance and stabilization measure, this legislation is a stimulus to boost the economy, which has been badly bruised by the housing crisis and related credit crunch," Hoyer stated.

The measure has also won support from state housing authorities that are charged with administering benefits under the new law. According to the National Council of State Housing Agencies (NCSHA), a nonprofit organization based in Washington, D.C., the measure will provide new tools to stem home foreclosures, stabilize foreclosure-rocked neighborhoods and finance affordable home mortgages and rental homes.

The NCSHA is particularly encouraged by the increase in tax-exempt housing bonds and low-income housing tax credits, permanent alternative minimum tax relief for housing bonds and credits, and temporary mortgage revenue bond refinancing authority. "The really tough work lies ahead," noted NCSHA Executive Director Barbara Thompson. She said state housing agencies must now "quickly deploy these new resources in ways that have the greatest impact on some of the toughest housing challenges our country has ever faced."