The Housing Industry and Federal Taxation

Written by: Kelly L. Hunter

It is now common knowledge that our country is in the midst of an economic crisis. The Housing Industry may be one of the hardest hit by our current economic struggles. Banks and lenders are going bottoms up at a very rapid pace; causing many American’s to lose their homes to foreclosure. The National Association of Home Builders (NAHB) is an organization that may know better than any one, the harsh effects being felt by not only homeowners, but builders and contractors alike. “NAHB closely monitors new issues affecting housing, as well as long standing subjects like affordable housing and Smart Growth” (NAHB, 2009).
Interest deduction and the real estate tax deduction are areas of the federal tax code that are of great importance to homeowners. “The deductions promote home ownership and reduce tax liabilities for home-owning taxpayers” (Dietz, 2006). It has been said that itemizing taxpayers may lead to deductions on the state and local tax levels as well. All real estate and land taxes are levied on the consumer (homeowner) and not the producer (builder/contractor). Charlotte County, Florida, is located in the southwestern region of the state and currently we are ranked in the top five for having the highest unemployment rate throughout the entire state. If individuals do not have access to adequate paying jobs or in this case, have zero jobs to apply for, then how are they expected to pay their mortgages?
Supply and demand are tremendously affected by all of this and it is obvious to the eye when driving through the streets of Charlotte County. You can tell which houses have been foreclosed upon by how tall the grass is. Some houses, you can barely see in the windows and in the summer time that is a real hazard when it comes to mosquitoes. Sell-ability becomes a major issue and it is nearly impossible to sell a property when it is presented in this kind of condition.
According to the Herald Tribune (2009), a local newspaper, “Florida's growing foreclosure problems are wreaking havoc with the budgets of homeowner, condominium and community associations, according to a new survey by an industry trade group” (¶ 1). More homes than not sit empty and where jobs used to fill the pages of the classified section, hundreds of tax deed announcements have made themselves comfortable instead. Reports indicate that taxes will have to be raised in order to make up the losses felt on the local and state levels. Things are so rough economically now, the libraries cannot even afford to stay open more than four days a week. The Herald Tribune (2009) reports that “More than 60 percent of the nearly 500 associations surveyed said that banks and mortgage lenders holding title to foreclosed homes or units are not paying regular fees or other assessments” (¶ 3).
The equilibrium of price and quantity are widely affected because prices have gone down but people are still not investing in real estate. It seems that the American people have had a wake up call and the individuals with money no longer have faith in the market and the rest of us simply do not have the money to purchase a home. Prices in all other industries have sky rocketed due to the financial strain being experienced on all levels of corporate America which makes it close to impossible to afford to purchase anything, especially a home. “More than 40 percent said that foreclosed homes or units have been vacant for more than six months, with one in five saying vacancies have lasted more than a year, reported CALL, which represents 4,000 associations and cooperatives” (Herald Tribune, 2009, ¶ 4).
Florida is extremely susceptible to several tropical storms each year and in some cases, hurricanes have been known to make landfall during Hurricane Season which spans from June through November. According to David Muller, CALL’s co-executive director, “As the 2008 storm season approaches, strains on many community association budgets from the downward-spiraling mortgage foreclosure crisis could leave many communities vulnerable and ill-prepared to cover storm damage costs and rising insurance rates in the coming months” (Herald Tribune, 2009). In Charlotte County alone, more than 1,800 homes were foreclosed during the month of March, 2008. Those numbers are astonishing and reality that will continue to get worse over the next few years unless something is done and even then it still may been too late.
In conclusion, taxation on any level, whether it be local, state, or federal is necessary in order to help pay for certain things within our communities. However, a rise in property taxes and other real estate related taxes has caused many individuals to panic during these tough economic times. Yeline Golin, another CALL co-executive, states that “The Governor's HOPE task force and Florida state legislators need to address in particular the growing number of vacant mortgage-foreclosed units and homes and declining revenue collection that undermines the ability to maintain the health and general welfare of millions of Florida community association residents statewide” (Herald Tribune, 2009). The real task is finding a solution to this growing economic problem.




Reference(s)

Dietz, R., Ph.D. “Local Use of the Mortgage Interest and the Real Estate Tax Deductions”. HousingEconomics.Com. (2006). www.nahb.org. Retrieved January 8, 2009.

“Foreclosures cause woes for Property Appraiser”. The Herald Tribune. (2009). http://www.ccapraiser.com/record.asp. Retrieved January 10, 2009.

The National Association of Home Builders. NAHB. (2009). www.nahb.org. Retrieved January 8, 2009.