Unemployment Compensation Extension

Floor Speech

BREAK IN TRANSCRIPT

Mr. MERKLEY. Mr. President, I rise today to address one particular aspect of the bill before us, the Home Ownership and Business Assistance Act of 2009.

Home ownership is addressed in this bill through an extension of the $8,000 credit to first-time home buyers. There are some adjustments to that credit encapsulated in the bill, but I will not get into that. I want to address a different aspect. This is an idea that hasn't been fully debated in the Senate. I think it is an appropriate time to put it forward.

We need a permanent $5,000 tax credit for first-time home buyers. Folks may say: But we have a mortgage interest deduction, and that is a major home ownership program in America. Why should we have a downpayment tax credit for first-time home buyers on an ongoing basis?

In the bill before us, the tax credit is designed to stimulate the economy, stimulate the housing market. But I put this idea forward from a different direction--the direction of empowering our working families through home ownership.

Why is that so important? I will tell you and I will give you a few vignettes.

I spent years working as director for Habitat for Humanities, working with low-income families trying to become homeowners. The community made it affordable and possible by donating land and materials and participating in the construction of the home. Habitat sold the homes to the individuals on a zero interest mortgage. Those families participated in the construction, which is often called ``sweat equity.'' They were out there hammering nails, putting up walls, pouring foundations, putting on roofing, putting their own labor and sweat into the construction of the house.

What I saw through that experience was the profound impact of home ownership on working families. I saw families, who were unstable and had been going from living in a van to living in a basement, become stable. I saw the positive impact on the children, who had never been able to invite a friend over before--now having pride in their home and having the ability to invite friends over, having more self-respect. I saw them doing better in school. I saw parents who didn't believe they had a stake in the community. Now they had a stake in the community, and that affected the way they behaved. They became more involved in the affairs of the community.

I want to turn first to laying out the fact that studies that look at the details of home ownership impact find that indeed home ownership has an enormous impact on working families. Sociologist R. J. Bursik found that crime, unemployment, suicides, juvenile delinquency, teen pregnancy, and drug use are decreased by home ownership. The Journal of Urban Economics found that children in home-owning families tend to have higher levels of achievement in math and reading, to have fewer behavioral problems, stay in school longer, are more likely to graduate from high school, and are more likely to go to college.

A study by Alba, Logan, and Bellaire titled ``Living with Crime'' found that home ownership resulted in family members being significantly less likely to be involved in crime.

All of this is common sense. It is common sense that a family who feels part of a community is going to be less likely to be involved in crime, is going to be more involved in the community, that children who have more stable lives have more self-respect and are going to fare better in school. The stability of home ownership makes it more likely that children are going to graduate from high school. But I think it is important to document those impacts from the studies, as well as from our common sense or from vignettes.

We have a major program in America, the home mortgage interest deduction, which is designed to facilitate home ownership. It is a terrific program, but the program does not assist working families getting into their first homes.

Let me put up a chart to explain what I am talking about.

Take a working family. Maybe they are earning $40,000 or $50,000 or $70,000, and they buy a $150,000 house and put 5 percent down. Right now, mortgage rates are low, so they pay 5 percent interest. Their total interest is $7,078. That is less than the standard deduction for a year. The standard deduction is $11,400. So working families are not assisted by the home mortgage interest deduction in getting into homes.

It is still a good program. It still empowers home ownership over the long term. It certainly is beneficial in an increasing way to families who earn more.

Here is a family buying a $500,000 house. While the interest is the same, the same assumptions--5 percent down, 5 percent interest, $23,591, far exceeding the standard deduction. So if you are a family who is better off, you can buy a bigger house. The home mortgage interest deduction helps launch you into home ownership. But if you are a working family in America, it does not help much. In fact, often the interest is less than your standard deduction. So it has no impact whatsoever. This is why we should debate fully a permanent $5,000 downpayment tax credit for first-time home buyers.

Of course, we always struggle with the cost of programs and that is a very important thing to do. The cost of the home mortgage interest deduction in this last year was about $97 billion. That is the cost of the home mortgage interest deduction, with most of the benefits going to affluent families. So $97 billion is directed in ways that do not help our working families get into their first home.

What if we were to spend a fraction of that to help working families become homeowners, knowing that the externalities of home ownership--the stability for children, the lower crime rates, more likely to finish school, more likely to earn more money, you pay more in taxes, less likely to end up on public programs. All those programs are paid back to us in multiples.

What would the cost be of providing a $5,000 downpayment tax credit, a permanent one, to first-time home buyers? It would be on the order of $10 billion, assuming that every family, regardless of income, was eligible.

A $97 billion program, an important program, a good program, but it does not help working families get into homes. Why not spend 10 percent of that on a program that would help launch our working families into home ownership, which makes much better lives for them and a much better community, stronger communities for everyone else, and a much better future for their children?

I will conclude in this fashion. Home ownership has enormous value to our society--home ownership done right, not with liar loans, not with prepayment penalties, not with steering payments, not with mortgages that are basically scams. But home ownership done right has enormous returns--responsible, good, solid mortgages. We should support our working families to become homeowners, for their sake and for strengthening all of America and for the future of our children.

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