Homeowners ask Obama to Press Congress to Extend “Dough for Dwellings” Tax Credit

AHGA says “act now” in letter to President Obama.

Following on recent letters to key Congressional leaders asking them to pass an extension of the expiring first time home buyers’ tax credit, the American Homeowners Grassroots Alliance has asked President Obama to step up and assume a leadership role in this critical effort. In our letter to the President, AHGA noted that “your administration’s ongoing efforts to address the recession and the mortgage crisis are greatly appreciated by all of us. Many challenges still remain, but the recession would still be a lot worse and home values a lot less today were it not for your efforts.”

Despite those admirable efforts, ominous clouds are still hanging over the housing market. Home values continue to decline in many areas. Almost seven million homes will ultimately be foreclosed on, according to the Amherst Securities Group. That is the equivalent of almost a year and a half of typical housing sales. Such a large inventory is a major barrier to the recovery of home values, and will continue to drive down home prices. This staggering amount of nonperforming assets continues to threaten the viability of many mortgage lenders.

In addition the subprime mortgage crisis has expanded into a prime mortgage crisis. Homeowners with excellent prior credit histories are increasingly in trouble. At the beginning of 2007 only about 2% of fixed rate or adjustable prime mortgages were in foreclosure or more than 90 days delinquent. By the end of this past June, 9% were at that point. Meanwhile the share of the remaining subprime mortgages that were in foreclosure or more than 90 days delinquent has grown from 8% to 27% over the same period. One in eight American homeowners with a mortgage were in foreclosure or behind on their mortgage payments by the end of June.

The growth in troubled prime mortgages is no doubt due in large part to increased unemployment. Many former creditworthy homeowners will be out of the housing market for many years to come due both to trashed credit and lack of cash. Economists are predicting a relatively jobless recovery in an economy where the jobless rate is approaching 10% and may go higher. There are few factors that are likely to increase demand for homes over the next several years, and numerous factors that, left unchecked, are very likely to further drive down home values.

The current situation would be substantially worse were it not for the current first time buyers tax credit. An estimated 350,000 first time buyers will have used it before it expires on December 1, according to several independent estimates, and the entry of these new homeowners into the market has played a significant role in staving off further declines in home values. These new buyers are also having a multiplier effect, enabling many existing home sellers to sell their home and move up the housing food chain. The expiration of the credit will likely result in another round of significant drops in home values and a jump in foreclosures, and a major challenge to our still fragile economic recovery.

The most helpful step President Obama could take to prevent a further meltdown in housing values, and a resulting new wave of foreclosures, is to undertake an immediate major effort to encourage Congress to extend, increase, and expand eligibility for the first time home buyers tax credit. A number of pending Congressional measures would extend the existing tax credit for another year, and several would also expand the eligibility and increase the cap on the credit.

The biggest challenge to the extension is the federal tax revenue loss that would result from various versions of the credit’s extension, which range as high as $38.5 billion. The size of the federal deficit is a concern to all of us, and this is a lot of money. One of the few bright spots on the economic horizon is the expected repayment of some of the TARP funds loaned to financial services firms. Since many of those firms are involved in the mortgage market, they would benefit from stabilization of home values. For that reason, it would make sense to earmark those repayments to cover the revenue losses from the home buyers’ tax credit’s extension.

In addition to supporting the most robust possible tax credit extension, AHGA believes that other steps are also necessary to prevent substantial further declines in home values. The Administration has made ceaseless efforts to work with mortgage lenders and mortgage servicers to encourage them to modify mortgage terms when it is in the mutual best interest of their stockholders and distressed homeowners. Sadly, those efforts have born little fruit despite the massive amounts of taxpayer subsidies already provided those companies, and the recent additional tax incentives they are being offered to subsidize mortgage modification costs.

AHGA’s take is that many of the lenders are ungrateful for these taxpayer bailouts and are now playing a game of chicken with the Administration, Congress, American homeowners, and other taxpayers. They know further drops in home values will put millions more homeowners on the street. They’re counting on the Administration and Congress to cave in and pay off the full amount of those nonperforming mortgages in order to stop the bleeding. Large bonuses to financial services executives will surely follow. There is however, a better solution.

House Financial Services Committee Chairman Barney Frank has taken stock of this situation and recently announced that he will seek reconsideration of bankruptcy reform legislation if lenders and loan originators don’t step up their efforts to modify mortgages. Since lenders are not willing to take actions to correct the problem that they caused, it is important that the President also strongly back Mr. Frank’s renewed efforts to pass bankruptcy reform legislation to enable bankruptcy judges to restructure mortgages when it will help both homeowners and the mortgage lender’s stockholders.

A remaining challenge is the reform of management practices in the financial services sector. The Administration also deserves credit for continuing to prod Congress to pass financial services reform legislation. House Financial Services Committee Chairman Barney Frank shared draft legislation with his colleagues during the last week of September, and held the first in a series of hearings on September 30.

The management decisions that lead to the mortgage crisis reflect the abdication of financial services sector managers’ fiduciary duty to prudently manage their stockholders’ assets. Also largely missing is a sense of duty to help our country in this crisis. We bailed them out, and offer them subsidies to use that money to restructure mortgages when it is in their own interest. AHGA admittedly has no inspired ideas for legislative provisions that could restore good judgment and a sense of moral character to the financial services sector, but such provisions are surely needed.

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Promote Telework, Homeowners Tell Federal Communications Commission

AHGA President Bruce Hahn (left) thanks Virginia Governor (and DNC Chairman) Tim Kaine for supporting Virginia’s August 3 Telework Day.

Teleworking tax credit, other incentives will help the environment, homeowners, and business.

In response to a request for comments from the Federal Communications Commission, the American Homeowners Grassroots Alliance (AHGA) on September 22 suggested a variety of new policies to promote teleworking. “Homeowners are welcoming telework for many reasons”, AHGA President Bruce Hahn told the FCC Commissioners: “With the dramatic growth in two income families, time-starved parents find that teleworking helps them cope with the many responsibilities of child-rearing. As commuting distances and times lengthen due to suburban sprawl, teleworking also provides a way to recapture precious hours lost to traffic jams. Surveys consistently show that telecommuting programs are among the most popular employee benefits. A recent survey of members of the American Institute of Architects revealed that home offices are the most popular special function room of new home buyers for the third year in a row.”

According to IDC, a national research firm, there are now between 34.3 million and 36.6 million home office households in the United States. At least 18 million are home-based businesses, according to U.S. Census figures. They include millions of internet-centric service businesses such as website designers, consultants, real estate agents, eBay Power Sellers and other Internet auction-based merchants who derive all or most of their income from Internet commerce. The rest are telecommuting employees of businesses of all sizes or employees of the federal, state or local governments.

In September Virginia Governor Tim Kaine announced that 2,286 federal and private sector employees as well as 1,765 state employees participated in Telework Day in Virginia. Those teleworkers saved approximately $113,000, avoided driving 140,000 miles and removed 75.89 tons of pollutants from the air through participation in Telework Day on August 3, 2009. If all eligible employees teleworked one day per week for a year, teleworkers in the Commonwealth would collectively avoid driving 602 million miles, remove 360,800 tons of pollutants from the air, and save $807 million in commuting costs. Over the course of a year this would equal a $1,822 annual raise for every teleworker in Virginia, and save 46 hours a year in commuting. A survey of Virginia's teleworkers also showed that 69 percent felt they accomplished more than a typical day at the office and 91 percent said that they would be more likely to telework again as a result of their experience.

Home-based technology-centric businesses (we call them telehome businesses) benefit society in many ways. Telehome business owners and telecommuters are helping to reduce rush hour traffic jams and defer the need for state and federal transportation infrastructure expansion and maintenance investments. No vehicle gets better mileage during rush hour than one that remains in the driveway. A study by TIAX LLC determined that a full time telecommuter who lives 22 miles from her office would save 320 gallons of gasoline and reduce CO2 emissions by 4.5 to 6 tons per year. The shift to teleworking is thus helping reduce environmental pollution and global warming.

To encourage faster growth in telework, AHGA made the following policy recommendations:

a. Provide federal and state tax credits to encourage teleworking. A home office requires a substantial expenditure of money for hardware, software and broadband access by a home-based business owner, a telecommuter and/or the telecommuter’s employer. The recent $4,000 Cash for Clunkers program shows tax credits can be a very effective stimulus, and the current $8,000 first time home buyers tax credit is helping to pull the housing industry out of a steep decline. If we can provide Cash for Clunkers and dough for dwellings, why not a similar effort to encourage teleworking? The federal government currently provides a $2,000 federal tax credit for hybrid vehicles purchases. An important justification for the tax credit is that hybrid vehicles greatly reduce air pollution, especially that caused by commuters and rush hour traffic jams. Because it would achieve an even better outcome (no vehicular air pollution from cars in the driveway and less air pollution because of fewer/shorter traffic jams), AHGA recommends a similar $2,000 tax credit for technology expenses used in teleworking (hardware, software, broadband access, cell phones, etc). Whoever paid for the products/services (telehome business owner, telecommuter, and/or his/her employer), would be eligible for the tax credits.

b. To stimulate telehome businesses, help the environment, and reduce state and local transportation infrastructure costs, Congress should prohibit state sales taxes on Internet transactions. State and local governments exempt consumers from sales taxes for a variety of economic activities anyway (sales of prescription drugs and tax holidays on back to school expenses, etc.). An Internet commerce sales tax exemption is equally deserving. It would encourage Internet commerce, substantially reducing automotive pollution since the products will be delivered by the US postal carriers, and FedEx/UPS trucks that go up and down their streets anyway. It would reduce state and local government costs of maintaining and expanding transportation infrastructure. Such a policy is strongly supported by voters. Last year, Parade Magazine asked its readers “Should You Pay Sales Tax on Internet Shopping?” Based on 3,125 responses, 85% opposed taxing Internet sales.

c. Reform depreciation laws affecting technology products. Technology products (computers, peripherals cell phones, etc.) become outdated very quickly. To encourage employers/telehome businesses to maintain technological competitiveness, their depreciable lifespan should be reduced to 2 years. Recordkeeping should also be simplified and liberalized for home offices, and limited personal use of computers, Internet access services, cell phones, etc., should be exempt from taxable liability.

d. Since broadband access is essential to teleworking, the $7 billion+ in stimulus funds allocated for expanding service to the unserved and underserved should be focused on the unserved. Further, it should focus on those unserved areas which will not soon be served by other private/public sector broadband deployments already in process or planning over the next few years. This will maximize the number of additional homes that can receive broadband as a result of the effort.

e. Adoption rates are important. Not all unserved rural communities are alike. Some remain essentially farming communities with shrinking populations of older residents, mostly farmers. Others are growing, have more new, younger, and technologically oriented residents whose demographics more closely reflect suburban populations. Such communities with a high percentage of “ruburbian” residents (rural residents with urban/suburban demographic characteristics) exist across the country and are good candidates for broadband deployment from an ROI standpoint.

AHGA also recommended several tax incentives to encourage businesses to invest in telecommuting programs and help broadband service providers both strengthen their networks and expand the availability of broadband services in unserved areas. The complete text of the American Homeowners Grassroots Alliance’s FCC submission is here.

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I fall for colors: “Turn! Turn! Turn!”

A tribute to the fall colors by Blue Grass, Virginia author Curtis Seltzer.

The best show this side of the Northern Lights started this week in our back pasture on the north-facing bank of Key Run, a bratty little stream that feeds the Potomac River.

Curtis Seltzer is a land consultant who works with buyers and helps sellers develop marketing plans. He is author of How To Be a DIRT-SMART Buyer of Country Property available at www.curtis-seltzer.com, where his weekly columns are posted. He also writes weekly for www.LandThink.com.

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American Homeowners and 160 other organizations participated in the effort.

Over 160 organizations, including the American Homeowners Grassroots alliance, participated in efforts of the US Broadband Coalition to provide constructive suggestions to the FCC to help it develop a comprehensive national broadband strategy. The coalition’s membership was very diverse, including consumer groups unions, trade associations and corporations from many segments of the technology sector. The 18 month effort culminated in a report which was presented to the FCC on September 24.

At the time we began this effort in early 2008, very few groups were calling for a national broadband strategy. Many of the current members of the Coalition were not convinced that such a strategy was necessary, and those that were did not necessarily agree on its basic elements. Agreement on the overall framework for a national broadband strategy, much less specific policy options, seemed a long way off.

Two months after we issued our Call to Action, Congress and President Obama enacted the Stimulus Act, providing for federal support of the development, adoption, and use of broadband infrastructure and requiring the Federal Communications Commission to develop a National Broadband Plan by February 17, 2010. Our work gained added relevance.

For the last nine months, our issue groups have worked hard to identify key policy issues and priorities, and to develop as much agreement on them as possible. The American Homeowners Grassroots Alliance participated in several of the groups..We have reached consensus on many of the principles, values, and ultimate goals that are likely to underlie the National Broadband Plan. As discussed in our report, we have also generated a wealth of new ideas, many of them worthy of serious consideration and further discussion. We have not, however, reached consensus on specific policies. That is not surprising, given the magnitude of the challenge we undertook and the many different perspectives and interests represented by our group.

In the end, the main value of our effort may lie in what it has confirmed about the benefits of good-faith and constructive engagement. Individuals representing groups that have historically been at odds have had an opportunity to exchange ideas that often get lost in typical debates about broadband policy, to participate in serious discussions with a wide range of individuals whom they seldom get to know well, and to obtain a better understanding of the many sides of the important broadband-related issues confronting our nation. In particular, we have made considerable progress in understanding how and why we disagree. On at least some issues, this could lead to even more progress in the future.

Many policy challenges on the road to universal broadband availability lie ahead. Some of differences have been narrowed because of the coalition’s efforts. The challenges will no doubt be more easily resolved, and resolved sooner as a result of the US Broadband Coalition’s efforts. For a copy of the complete report go to www.bb4us.net

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