- The Washington Times - Monday, December 6, 1999

Members of Congress used to talk about the District as a sort oflaboratory for ideas. They wanted to try things here that could provideexamples for other parts of the nation.

In 1995, then-House Speaker Newt Gingrich even envisioned the District as an "urban jewel," where Republican-led reforms would hasten the turnaround of what was then an ailing city awash in debt.

That dream died in prolonged budget battles in Congress, but one idea that has been implemented does provide an example worth following. It also shows how Congress can use a tax break to stimulate a revival.

The federal tax credit of up to $5,000 for first-time home buyers in the District has been at work since August 1997. Scheduled to expire this month, the credit was extended to the end of 2001 as part of a bill President Clinton signed into law last month.

"It has had a very substantial effect on home ownership in the District," said Philip Dearborn, who co-authored a study of the tax credit for the Greater Washington Research Center.

The study estimated that 70.1 percent of those who bought homes in the District in 1998, or 3,495 buyers, used the credit. One in five of those buyers moved into the District from suburban addresses while a roughly equal number came from outside the region entirely.

For a city that had been losing population steadily in recent years, those numbers add up to a substantial infusion of new residents. Because those residents own homes, they have a stake in the future of their neighborhoods and the District at large. They are the foundation upon which the administration of Mayor Anthony A. Williams plans to rebuild.

Sharon Grindle, marketing director for the nonprofit D.C. Housing Finance Agency, said the tax credit is attracting interest from both low-income buyers already living in the District and suburban buyers.

"It's starting to attract people from other areas who work in the District but live in Maryland and Virginia," Ms. Grindle said.

Some of those buyers make substantial incomes. Single buyers can take a portion of the tax credit if they make up to $90,000. Couples buying together can get some of the credit if they make up to $130,000.

The ability to subtract up to $5,000 from your federal tax bill is a powerful enticement.

Why do these buyers deserve a break unavailable to buyers in other parts of the region and country? Because their decision to move into the city is in keeping with public goals such as concentrating growth in areas connected to public transit and keeping urban areas from decaying. The tax credit is a simple way to fight traffic, crime and the erosion of the District's tax base.

The tax credit is only one of many incentives in place to attract home buyers to the city. The D.C. government and nonprofits, such as the Housing Finance Agency, also offer low-rate loans and help with down payments to buyers who qualify.

Many of the District's home sales, which saw the fastest rate of growth in the nation last year, would likely have occurred without the tax credit. Cities in general appear to be poised for a revival.

A survey by the Brookings Institution and the Fannie Mae Foundation released last year found that all but one of 21 cities said they expect their downtown populations to jump by 2010.

The District is expected to rebound from its 11 percent population loss in the last five years by adding about 95,000 residents, or 18 percent, by 2020, according to U.S. Census Bureau figures.

Another factor that affects the District's desirability as an address is overall change in the attitude of the city, marked by the departure of the administration of Mayor Marion Barry and the work of a federally created control board. Three years of budget surpluses have inspired confidence.

Pardoe Real Estate broker Constance Maffin estimated 60 percent of her 50 buyers this year qualified for the home tax credit, but said that is only one factor in what remains a hot D.C. real estate market.

The credit has to be considered "along with the leadership of the city being perceived as really a professional government and what the control board has done and crime rates being way down," she said. "It's all just working and I hope it continues." But while the tax credit is only a piece of what is fueling the return of residents to the District, Mr. Dearborn said it provides a significant example to states looking for ways to spur residents to move back into cities. He suggests states could use income tax breaks much as Congress used the federal credit.

It is about time that something happening in the District is held up as an example worth following. It is reassuring to see an idea that is working get an extended period of time to do its job.

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