Return of the $5,000 first-time homebuyer tax credit to DC?

$5,000_tax_credit_dc
Photo by PoPville flickr user Mr. T in DC

From a press release:

“Congresswoman Eleanor Holmes Norton (D-DC) today introduced the District of Columbia Incentives for Business and Individual Investment Act to reauthorize the federal tax incentives for investment in economically distressed areas in the District of Columbia, commonly known as the D.C. empowerment zone, and the $5,000 first-time homebuyer tax credit in D.C., both of which expired at the end of 2011. The D.C. tax incentives, for the first time, were left out of the most recent congressional extension of temporary tax provisions, known as “tax extenders,” in the American Taxpayer Relief Act (ATRA). Norton, in her statement introducing the bill, said, “It would be tragic to single out the nation’s capital as the only empowerment zone city not to be renewed just as the eastern sections of the city are about to take off.”

The D.C. tax incentives have been an essential ingredient in stabilizing and reinvigorating the District following the near collapse of its economy in the late 1990s. Norton got these District-only tax provisions to incentivize residents to stay and new residents to come, to make the city more attractive to businesses, to encourage the employment of D.C. residents, and above all, to secure a sustainable economy for the only city in the country without a state backstop. Until the D.C. first-time homebuyer tax credit was enacted by Congress in 1997, the city’s tax base was rapidly dissipating. The D.C. tax incentives have always had bipartisan support. In 1996, the Republican Party Platform first proposed making D.C. an empowerment zone.

Experts widely agree that the D.C. tax incentives have been a significant factor in stemming residential flight and in stimulating economic growth and development in the city. In particular, the $5,000 first-time homebuyer tax credit has been notably successful in stemming the flight of taxpayers. However, the goal of increasing the residential tax base by 100,000, set by Alice Rivlin, the chair of the D.C. Financial Control Board, for D.C. to reach self-sustainability, has not nearly been reached.

Norton, in her statement introducing the bill, said, “Now, the city’s low-income neighborhoods east of the Anacostia River and in Northeast are on the brink of developing economically, similar to the development experienced in other parts of the District such as NoMa and Capitol Riverfront. The new headquarters for the U.S. Coast Guard will open in August, the first in a complex of buildings Congress has authorized for the federally owned West Campus of the St. Elizabeths hospital. The tax incentives have demonstrated that they can revitalize the eastern half of the nation’s capital. Particularly after the recent recession, the business and homebuyer tax incentives are essential for these neighborhoods to see the revival that the incentives have contributed to in downtown and near-in neighborhoods. Withdrawing these incentives, particularly after they have proven effective elsewhere in city, leaves the nation’s capital with essentially half of a revival, and would be tragically timed just as the lower-income parts of the District, which need the incentives most, are ready for residential and commercial redevelopment.”

35 Comment

  • Ugh, I hope not.

    I am a raging blue voter, but this $5,000 first time homebuyer credit has no place in the modern District.

    When DC was the murder capital of the nation and population was falling preciptiously, the credit had a place. But DC is economically stronger now than at any time since WWII. Population has surged, and is rising 2% a year. Our incomes are up, unemployment down. These credits only serve to distort the market further than it is, and earn the ire of Congress who is funding it.

    If the DC City Council wants to use city tax money to pay for it, that would be one thing (still a mistake), but with the city already thriving on uncle sam’s scraps, and pulling in 400 million dollar budget surpluses in the depths of a major recession when every other major city is seeing double digit budget deficits, there is no way Congress is every going to authrorize it again.

    • ah

      +1 to this. There is no need for it at this point.

      About the only thing going for it is that it’s a subsidy to DC homeowners paid for by everyone else in the United States. (Of course, they get theirs in many other ways).

  • What’s the likelihood that this would apply to homes purchased in 2012? I was aghast to learn that the credit I’d been promised wouldn’t actually come through. It’s on me, of course, as I should’ve done my homework a bit more thoroughly (and it wasn’t the reason I bought a home in 2012 – just a perk I was expecting) but it sure would be nice to get that cash in my next filing.

  • This line confuses me.

    “Withdrawing these incentives, particularly after they have proven effective elsewhere in city…”

    It isn’t as though the $5K incentive only pertained to first-tme homebuyers in NW. Home sales will continue to rise, as social issues are addressed. Better utilize this tax revenue by pumping monies back into the neighborhoods which need it the most. If, and I mean IF, the credit can be attributed to the stabilizing of the District, I say it has done it’s job.

  • andy

    I have also heard rumors of the return of the mack . . . does anyone have any news?

  • From the full press release:

    “This bill would reauthorize the tax incentives through the end of 2015, and would be retroactive for 2012 and any period in 2013 during which they remain lapsed, consistent with similar empowerment zone legislation. The empowerment zone incentives include a special capital gains rate, expanded tax-exempt bond financing, additional expensing for equipment purchases and a wage credit of up to $3,000.”

  • Much like the various other bills sponsored by Eleanor Holmes Norton, this stands absolutely no chance in being passed.

  • This incentive is totally BS in order to qualify your MAGI has to be under $70,000.00 After that the incentive decreases to nill if you make more than $90,000.00 I did the math before when i bought my place if I made $89,999.99 I would get $5 dollars back. I got $0 I guess making over $90k makes you a 1% in this district despite the fact that if you want a decent place NW you really need to make that kind of money or have spouse or someone paying rent. I was actually counting on this money when I bought my place. I depleted my savings when I bought my place. I needed that $5,000.

    • ah

      That doesn’t make it *totally BS* – why should relatively high income people be getting handouts to buy houses?

    • binpetworth

      There are quite a few of us on this blog that have MAGIs well below $70K. That said, when I was buying my condo a few years back, the (then federal) $8K tax refund was merely a nice bonus; it did not figure at all into how much home I could afford/put money down on. If someone is relying on that $5K to purchase, they probably don’t have the means to purchase to begin with.

      • Yup, sub-$70,000 MAGI here. (And yes, girding my loins for the possibility of comments to the effect that this is surely the result of some sort of personal or moral failing on my part.) That said, a $5,000 tax credit probably can’t make homeownership magically affordable, but that’s not what an incentive does. An incentive is a little bonus to convince someone to buy in an area where they might not otherwise buy. Like, buying in DC instead of in Maryland, or buying in one DC neighborhood instead of another. Anyone know if there are geographic/neighborhood restrictions on the proposed incentive? The press release suggests that, but maybe it’s just for the business investment incentives.

  • I literally just bought in NE at the beginning of 2013. So if this passes that would be amazing!

  • Going nowhere. Not a great policy.

  • Because no one ever states the actual incentive. plus this isn’t a high income i consider medium low for the NW corridor.

  • Better yet, do it for Detroit.

  • loool @ return of the Mack. Needed that laugh.

  • It’s at least mostly BS. 70k may be relatively high income, but it’s not enough to easily afford a 500k house, which is fairly low for NW. And if you’re making significantly less than 70k, a 5k tax rebate isn’t going to make a 1/2 million dollar house affordable. So who is really benefiting?

  • I agree with you and I’m a renter who would qualify for this!

    What a boondoggle. The last thing real estate needs is more subsidies. I’m sure the developers and real estate industry professionals of DC are salivating over this/wrote the bill.

  • This could help a low income individual or young family in Anacostia get into a 2BR over in SE for less than $200K.

    This program really isn’t for aspirational NW renters, since we make too much and the real estate is too expensive ’round these parts. It’s to help people in the low income/high crime areas of NE and SE DC buy their own place. Which is probably the only thing that’s going to turn those areas around, eventually.

  • I’m laughing at all the “THIS WON’T HELP ME BUY A $500k+ HOUSE IN NW D.C. — which is apparently the only place in this town that has houses for sale — BECAUSE I EARN MORE THAN $70k!” comments. Don’t ever change PoParazzi. Don’t ever change.

  • +1 @SLS That made me chuckle but spot on.

  • I’m sorry the rest of us have aspirations and don’t work in pie factory. My father grow up poor and worked hard to provide me with a better life. So I guess I should re pay him by aiming low in my financial aspirations and not provide the best oppurtunity for my children.

  • This would be a boon for sellers. At a time when inventory in the city can’t satisfy demand. Wouldn’t this push more people into the real estate market – driving up prices?

  • This is exactly right. The tighter the supply — and the less responsive it is to prices — the more the subsidy just gets capitalized into home prices. That means we’re basically paying $5,000 to a bunch of people who WOULD HAVE BOUGHT A HOUSE ANYWAY. What are we trying to accomplish here, exactly?

  • $90,000 puts you in the top 25% income-wise for the district. The median income is about $52,000. I guess you don’t realize how much better off you are than the vast majority of the residents here.

  • It’s already income restricted. If you’re buying in a good neighborhood, you’re likely making too much to qualify for the credit.

  • I have aspirations, an advanced degree from a name brand university (as if that really mattered on what I’ve learned in life) and have respect for people who may or may not earn more than $70,000.

    Your comment veers into sketchy “I am such a tool” territory.

  • I think the program should be scrapped. The real estate market in DC is strong. Downpayment assistance programs are a better route to helping first time homebuyers.

  • The $5,000 first time home-buyer would not tip the scales in favor of buying a home in most situations where a buyer wouldn’t otherwise purchase., However, if $5,000 were to tip the scales and make a home purchase affordable and enable a person to qualify for a loan when s/he otherwise wouldn’t the policy would allow people who weren’t creditworthy to take out loans. Given experience of an sharp recession that started from the subprime mortgage market we ought to think twice about policies that create a path for people to take out a mortgage who wouldn’t be able to in the absence of policies like this.

  • The program isn’t meant to help those who make $70,000 buy a $500,000 house. You can only afford a $500k house on $70,000 a year if you put a whole lot of money down first. That means saving…for a long time. In the meantime, if you make $70,000 or less, you can still buy something in your precious NW neighborhood — just not a house, or a 2 bedroom condo, or even your ideal place. You can buy your FIRST place; which is what this incentive is for. I do wish that this incentive was not just for 1st time buyers but also for any buyer willing to purchase in a neighborhood that, dare I say, hasn’t gentrified yet.

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