House eyes homeowner tax breaks

House Democrats yesterday introduced a plan to help ease the housing crisis that would offer tax breaks for first-time home buyers and homeowners facing foreclosure.

The measure comes as the Senate continues debate on its own housing bill that is more business friendly but is opposed by the White House, which says it would “do more harm than good.”

The House proposal, introduced by House Ways and Means Committee Chairman Charles B. Rangel, New York Democrat, would provide a 10 percent tax credit — up to $7,500 — for first-time home buyers earning less than $70,000. Participants would be required to repay any amount received under this provision within 15 years.

The bill also would provide homeowners a tax break of up $350 for individuals and $700 for couples who claim the standard deduction on state and local real property taxes. The provision, which would apply only for 2008 tax returns, would cost an estimated $1.17 billion over 10 years.

“We need to provide relief to the buyers and families themselves, not just the banks and builders,” Mr. Rangel said. “The House bill puts families first.

The legislation is designed to complement another measure proposed last month in the House Financial Services Committee that would expand the Federal Housing Administration’s (FHA) loan program to provide up to $300 billion to insure and guarantee refinanced mortgages with lower interest rates.

The Senate measure includes similar provisions to reform and expand the FHA loan program, which typically carries lower interest rates. The bill also would provide $4 billion in grants for local governments to buy foreclosed homes, $100 million for foreclosure counseling programs, and tax breaks to Gulf Coast residents rebuilding homes destroyed by Hurricanes Katrina and Rita in 2005.

Some 15 to 20 amendments are pending, including a plan by Sen. Benjamin L. Cardin, Maryland Democrat, to give a temporary $7,000 credit to first-time home buyers. Sens. Bill Nelson, Florida Democrat, and Norm Coleman, Minnesota Republican, also have offered a plan that would allow homeowners who are late on their mortgage payments to withdraw money penalty-free from their retirement accounts to avoid foreclosure.

A final vote on the Senate bill is expected as early as today.

But the measure, which was introduced last week after weeks of partisan bickering, has been criticized for doing more to help lenders and home builders than struggling homeowners.

The bill — before amendments were added — called for giving $25 billion in tax relief to money-losing businesses but just $3 billion to homeowners, the Joint Tax Committee said.

The White House yesterday said that although President Bush approves of the FHA reforms, “the bill still retains many other provisions that we don’t like,” such as tax credits and grants for the purchase of foreclosed property.

“This is not a bill that we could support,” White House spokeswoman Dana Perino said. “We have serious concerns that these elements and others would do little to help homeowners avoid foreclosure or reduce housing inventories.”