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Create fed housing bonds and spur market.

Wake up Bill and Hilary!

There's a way to resuscitate the drippy economy without resorting to tax-and-spend strategies.

It's called "U.S. Housing Bonds." Housing Bonds will provide the capital for Americans presently locked out of the first-time new home market with the access to below-market rate mortgages, while encouraging Americans to save for their children's future ability to afford their own homes.

More importantly, Housing Bonds will create jobs in the construction and home building industries, which traditionally have led this country out of recession. The home building industry's poor performance in the current recovery is a major factor in the sluggish national economy. Housing Bonds would be issued in denominations and at interest rates comparable to the current Savings Bonds program. The difference is that the capital raised from Housing Bonds would be dedicated to first-time newhome buyers. Purchasers could buy the bonds and redeem them when their children are ready to enter the home market.

Bond holders would gain the same tax-deferred benefits and freedom from local taxes now enjoyed by savings bond holders. And just like savings bonds enjoy special tax exemptions when applied toward college tuition, housing bonds would be free of taxes when applied to a home purchase.

The value of this proposal is that it would be funded out of the voluntary savings base it would help to create. The government would be lending the bond capital at a lower spread than the banks, but nevertheless the spread would cover the costs of the program, and may even be applied toward some of the up-front losses of deferred taxes on the bonds.

The government could generate a positive revenue flow from the resulting payroll taxes from construction workers. This in fact should more than offset deferred tax benefits, while we are helping make the American dream of home ownership available to a group of people who now are shut out of the market.

Needless to say every dollar put into play through home construction will help the furniture industry, increase local government tax ratables, stimulate other retail businesses, etc. This truly is a win-win situation for everyone.

In the coming weeks and months I will be presenting my proposal on Housing Bonds to Congressional representatives. It is my hope and expectation that the real estate industry will also close ranks behind it.
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Title Annotation:More Mid-Year Review & Forecast; evaluation of U.S. Housing Bonds as method of stimulating economy
Author:Katz, Ric
Publication:Real Estate Weekly
Article Type:Column
Date:Jul 7, 1993
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