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The Return of DC’s First-Time Buyer Tax Credit?

by Shilpi Paul

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Earlier this week, Congresswoman Eleanor Holmes Norton introduced the District of Columbia Incentives for Business and Individual Investment Act which, if passed, would bring back the $5,000 first-time home buyer tax credit.

The credit was first enacted in 1997 as a way to stabilize the District and bring back residents who were fleeing the city. It was renewed year after year until 2011 when Congress allowed the credit to expire.

Now that the bill has been introduced, what does it mean and why is it happening? Here is a quick Q&A primer. (UrbanTurf had hoped to speak directly with Rep. Norton today, but her schedule didn’t allow for an interview. When we speak with the Congresswoman, we will update this article.)

DC’s housing market seems strong, and people keep moving here. Why do we need this sort of initiative now?

According to Rep. Norton’s statement when introducing the bill, there are a couple reasons.

Firstly, while there are many new residents, the percentage of homeowners is still fairly low. “The city’s residential tax base remains well below the Washington metropolitan region and the nation, where it trails all 50 states,” the statement read. “In 2012, the homeownership rate in D.C. was 45 percent, compared to the national rate of 65.4 percent.”

Additionally, though many neighborhoods throughout the city have been revitalized, others have not. Norton is particularly concerned with the neighborhoods east of the Anacostia River and in certain sections of Northeast, which, she noted, are “on the brink of developing economically.”

From the statement:

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.

Would all first-time home buyers in the District be eligible?

No. The credit is mainly directed at low- and middle-income residents. When the credit was in place, only those making up to $70,000 were eligible for the full $5,000. Those making between $70,000 and $90,000 were eligible to a portion of the credit proportional to their income.

Will first-time buyers who purchased earlier this year be eligible for the credit retroactively?

Yes. According to Rep. Norton, the credit will be retroactive for 2012 and any portion of 2013 before the bill becomes a law, and will be active until the end of 2015.

What is the timeline for passage of the bill?

Rep. Norton introduced the bill on July 31st. Presumably, it will wind its way through Congress over the next few months. We’ll keep you updated if it seems to be moving forward in any way.

This article originally published at http://dc.urbanturf.com/articles/blog/the_return_of_the_5000_first_time_home_buyers_tax_credit/7402

14 Comments

  1. anon said at 5:00 pm on Thursday August 1, 2013:

    Sadly, if you make $70-90k, you probably can’t afford much in DC that’s worth buying. And the credit phases out to practically nothing in the upper end of that range anyhow.

  1. Loganer said at 6:30 pm on Thursday August 1, 2013:

    I will never understand the incentive to home buying for people with “low- and middle- income” and no incentives for people who could actually afford a place in DC.  At some point, you’ve priced most low- and middle- income folks out of home buying in most of the city with these income restrictions.  Why not help someone who makes more also buy their first home.  Sure they are less likely to need the help, but perhaps more likely to buy or buy sooner by having some incentive to do so.

  1. C said at 8:06 pm on Thursday August 1, 2013:

    I thought the first-time homebuyer (previous version not the version that Norton has on the table currently) was open to everyone, without any (e.g., income) restrictions on the incentive.

    To address the point of not understanding why an incentive might be granted to low- and middle-income buyers and not to people who can “afford” to buy homes.  Living in city centers will cost you because of location of amenities (I’m not talking about only DC).  In order to maintain or to encourage diversity across the board, economic incentives are probably put in place by politicians to create and/or establish diversity.  The obvious thinking would be that low- and middle income people would need assistance, especially in city centers that are pricey.  It is easy to argue today that people who make more than the maximum for these RE incentives need assistance more because they are sort of caught in the middle, many people looking from the outside in to said income earners probably have a hard time understanding or seeing how they can not afford homes or are being priced out of the some cities.  That said, everyone’s circumstances are different and you may never really understand why someone in the middle (above the maximum for such incentives but not enough to be able to buy home without compromises) may have a hard time being able to afford housing in a city and time such as DC right now.  DC is a pretty expensive city, not the most expensive city on the planet, but expensive enough.

  1. Kate said at 11:27 pm on Thursday August 1, 2013:

    One thing to note is that the relevant threshold for tax credits is generally not income, but adjusted gross income which is not the same as your salary.  So that’s income after things like pre-tax retirement and health insurance premiums.  So a single GS-12 probably would still qualify for some of the credit.  Lots of people I know bought houses or at least condos at that level.

  1. Jason said at 9:27 am on Friday August 2, 2013:

    One of the main reasons cited for bringing this tax credit back was to revitalize the ‘fringe’ neighborhoods of, say, Anacostia, Deanwood, Congress Heights, etc… For that reason I think it is appropriate to target the low/middle income range. Most folks at the upper end of the income bracket want neighborhoods such as C.H., Bloomingdale, H st, Cap Hill etc that are already booming. While I know it is another city that most of you don’t know, there is PLENTY of affordable housing in the less developed neighborhoods east of the river, so I think the income restriction is appropriate here.

  1. Loganguy said at 10:05 am on Friday August 2, 2013:

    I miss the days when you could buy a condo. over looking Logan Circle for under 100K.

  1. mona said at 12:52 pm on Friday August 2, 2013:

    Loganguy - you failed to mention what you would be looking at in Logan Circle back in the days when a condos was under 100k

  1. EnserNG said at 12:55 pm on Friday August 2, 2013:

    This is a great idea.

    To help keep DC moving in the right direction, smart legislation, such as this and the solar initiatives, sponsored by DC Sun, are what we need, now, more than ever.

    Home ownership helps folks settle and spread roots - surely renters can, also, do this, but it is added incentive.

    Keep up the great work, Madame Eleanor!  Now, if we can just get some additional buy-in on statehood…  wink

  1. Loganguy said at 2:45 pm on Friday August 2, 2013:

    Mona, Most one bedrooms in the whole city were under 100K 15 years ago.  Do the research.  You all can stay here and pay crazy home prices while I buy a home in cash at the beach.  smile One and two Logan, two bedrooms, brand new went for 250k back in 1998.  Row houses in move in condition were going for under 300K. fixer uppers for less than that.

  1. Bill Panici said at 10:03 am on Sunday August 4, 2013:

    I would encourage the first time home-buyer credit proposed by Del. Norton but with the following stipulations:
    1) increase the income levels
    2) limit the locations where the credit can be used.
    Core Logic compared affordability in many cities in the US and declared DC as “technically unaffordable”.  Homes in some neighborhoods of the city are being bid up by tens of thousands of dollars by people who not only want to live there but also can’t find enough homes to choose from.  That said, other neighborhoods of the city remain somewhat stagnant. Price, of course, drives the market, no matter where.
    To raise the income levels to qualify for the credit would allow some borderline home buyers (not necessarily low or moderate income earners) the opportunity to get into the market and invest in designated neighborhoods as a way to revitalize them.
    So let’s do it, Del. Norton.  And push for statehood while you are at it.

  1. C said at 9:06 am on Monday August 5, 2013:

    Bill Panici, you make good points.  The only question I have is that by doing what you suggest, you would be artificially directing or re-designing the RE market, which so heavily depends upon location, location, location.  Of course, location, is determined by variables that change and can be somewhat unpredictable to predict in the first place.

  1. Jenny said at 12:20 pm on Monday August 5, 2013:

    I just think that builders are making these home living for rich people.  These new homes in DC are not for low-mid income families.  They are just making them too expensive.

  1. Nat said at 2:22 pm on Wednesday August 28, 2013:

    Personally I’d love if this came back. I’m one of the so-called non-existent middle-income condo purchasers who would really benefit from this. I purchased a small one bedroom condo in a great neighborhood a couple of months ago, but had to compromise and get a rather run-down place. This kind of credit would allow me to start revamping my unit—which would be spent mostly at local businesses and allow me to develop better roots in my community. I also take issue with the idea that no one in my income bracket can afford to buy a place in DC—I lost out on 5 places before my current condo because I was outbid by buyers in similar circumstances.

  1. Candace Sledge said at 4:00 pm on Wednesday November 13, 2013:

    Any updates on this?

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