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TAX CREDIT FOR FIRST-TIME HOME BUYERS KEY TO ECONOMIC GROWTH PLAN

TAX CREDIT FOR FIRST-TIME HOME BUYERS KEY TO ECONOMIC GROWTH PLAN
 WASHINGTON, Dec. 10 /PRNewswire/ -- With President Bush mulling a variety of proposals to stimulate the ailing economy and the House Ways and Means Committee holding a series of hearings on the topic, perhaps no remedy is so critical and cost-effective to the nation's long-term economic health as a six-month tax credit of $2,000 for first-time buyers of newly built homes.
 "Such a tax credit would stimulate construction of 180,000 new homes and create about 325,000 new jobs," said Mark Ellis Tipton, president of the National Association of Home Builders (NAHB). "Federal tax revenues generated by this additional growth in employment would total $3 billion, more than offsetting the $600 million cost of the program."
 At a time when the administration and Congress are struggling to shore up the economy in the near-term without harming it over the longer run by further adding to the federal deficit, the tax credit proposal is a revenue neutral plan that would stimulate new jobs, bolster consumer confidence and help to jump start today's anemic economy.
 "The plan is not only good economic common sense, but makes good political sense as well," said Tipton. "The key to economic recovery lies in the president and Congress working on a bipartisan package to promote economic growth and ease the credit crunch. The tax credit proposal has support on both sides of the political aisle. The time to act is now."
 Traditionally, housing has led the nation out of recessions. Indeed, a full 38 percent of the increase in total Gross National Product in the third quarter was from single-family housing ($9.3 billion of $24.2 billion). However, total housing starts for 1991 are expected to be about 1 million, the lowest level since 1945. New home sales remain relatively flat, hovering near 500,000 (on an annual basis) since February of this year and the number of unsold new homes on the market has fallen to 288,000, the lowest level since the early 1980s.
 With the economy floundering and consumer confidence plunging, NAHB is calling on Congress and the administration to jump start the economy by enacting a bipartisan economic growth package that would:
 -- Establish a tax credit for first-time home buyers.
 -- Allow tax- and penalty-free withdrawals from IRAs and similar retirement programs for down payments on homes.
 -- Repeal the passive loss restrictions for real estate practitioners.
 -- Extend the low-income housing tax credit and mortgage revenue bond programs (Congress extended these provisions for six months before adjourning for the year).
 -- Provide for a capital gains tax.
 "The GNP figures confirm that housing is poised to lead the economy out of the recession," said Tipton. "Passage of this growth package will provide the necessary shot in the arm to revive the economy and bring it out of recession."
 Any remedy that promotes economic growth must also address the credit crunch in order to be successful, Tipton added. "Credit is the lifeblood of the economy and constricting the flow of credit chokes off all sectors of the economy. We can't generate an economic recovery if entrepreneurs and businesses are denied access to working capital."
 This is why, Tipton added, the upcoming Dec. 16-17 meeting of the nation's senior bank examiners in Baltimore is the next critical step in the administration's efforts to resolve the credit crunch. The meeting is being held to discuss methods of implementing the Oct. 8 guidelines for banks and examiners issued by the White House and the subsequent Nov. 7 clarifications released by the Treasury Department. Key policy changes announced by the White House and the President on Oct. 8 included the following:
 -- Bankers should work in an appropriate and constructive fashion with borrowers who may be experiencing temporary difficulties.
 -- Income producing property loans are to be assessed on the income-producing capacity of the properties over time. Examiners should take into account the lack of liquidity and cyclical nature of real estate markets. Liquidation appraisal values are to be used only if the property is to be liquidated.
 -- Banks with real estate concentrations should not automatically refuse new credit to sound real estate developers or refuse to work with existing borrowers.
 -- Regulatory agencies do not have rigid rules (or percentages) on asset concentrations.
 -- Institutions attempting to raise capital by shrinking assets should avoid actions such as the sale of high-quality assets. Such actions by themselves, or the refusal to make sound, new loans, fail to achieve an important goal of improving the quality of the institution's loan portfolio.
 -- Bankers and examiners should not lump all real estate together; distinctions should be made. For example, credit for a residential builder should not be automatically penalized by local oversupply conditions in commercial office development.
 "Hopefully, the Baltimore meeting will give a sense of urgency to efforts to solve the credit crunch and will help to speed implementation of the administration's banking guidelines among examiners in the field," Tipton said. "It is absolutely critical that banks make credit available for sound construction and development to rekindle confidence in the banking system and stimulate new construction, new jobs and a revived economy."
 -0- 12/10/91
 /CONTACT: Jay Shackford of National Association of Homebuilders, 202-822-0406/ CO: National Association of Homebuilders ST: District of Columbia IN: SU:


TW-MK -- DC024 -- 1163 12/10/91 15:53 EST
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Date:Dec 10, 1991
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