April 12, 2008

Housing Credit Will Boost the Market
By U.S. Senator Johnny Isakson (R-GA)
(As appeared in Wall Street Journal)

I take great exception to the premise of your editorial ("Beltway Fun House," April 7) that the housing stimulus legislation the Senate is considering, and the $7,000 tax credit in particular, won't do much for the housing market.

Experience is a great teacher. In the mid-1970s, America faced a similar housing crisis when a period of easy credit and loose underwriting flooded the market with new construction. Interest rates rose, the economy slowed and America was left with a three-year supply of vacant homes. Congress responded by passing a $2,000 tax credit for anyone purchasing a new home for their principal residence.

I spent more than three decades in the real estate business, and I saw the positive effects of the 1975 tax credit firsthand. The results were clear and swift as buyers came back into the market, home values stabilized, housing inventory dropped and the market recovered.

In the fourth quarter of 2007 alone, 642,150 foreclosure filings were reported. Many of these properties are already vacant and becoming a magnet for crime and pushing down property values in neighborhoods across this nation. I submit this is doing more damage to the average homeowner who pays his bills on time than any tax credit. The sooner we can take down those foreclosure signs, the sooner all homebuyers will benefit.

The $7,000 tax credit is an incentive for the market to respond. It will inspire qualified buyers to get off the sidelines and enter the market. It will allow us to replace loan defaults with good mortgages, helping to stabilize housing prices for all homeowners. The tax credit for homebuyers worked in 1975 and it will work again today.

Sen. Johnny Isakson (R., Ga.)
Washington