Mo. poised to create $1,250 tax rebate for many 2010 homebuyers

If you want to buy a house, the state of Missouri wants to give you $1,250.

And if you make the place more energy-efficient, it will give you $500 more.

State officials are poised to pass a measure next week that would give a sizable break on property taxes to most people who buy a house in 2010. It is Jefferson City’s latest bid to boost the state’s weak housing market, and the newest item on a growing menu of sweeteners to make buying a house more appealing, sweeteners that some warn could eventually cause a hangover.

The measure was pitched last month by Gov. Jay Nixon and state Treasurer Clint Zweifel as a way to spur housing sales and spur the state’s economy.


"This is so vital to our state’s economic growth," Nixon said. "We want to do everything feasible to encourage people to buy homes."

So next Friday, they will ask the Missouri Housing Development Commission — which Zweifel chairs and to which Nixon appoints most of the members — to set aside $15 million of its reserve funds for one-time property tax reimbursements for Missourians who buy a home in 2010. To qualify, St. Louis-area households must earn $95,060 or less; if they do, they can get up to $1,250 in property taxes reimbursed by the state.

Home buyers who add energy-saving appliances, new windows or other "green" improvements, can qualify for another $500. With a $15 million cap for the program, the state expects to write between 9,000 and 11,000 such checks — roughly one for every 10 homes sold in Missouri this year.

It comes on top of the $8,000 federal tax credit for first-time home buyers, which many economists say has helped prop up home sales this year. Last month, Congress voted to extend that program through April and expand it to include $6,500 for some repeat buyers. States from California to Delaware have thrown in their own incentives, too, and in January the Missouri housing commission launched a program to give an advance on the $8,000 credit, a program more than 1,200 people have used so far. Illinois launched something similar in July.

Now, Missouri plans to up the ante. If the housing commission approves, the agency will put much of its reserve funds — separate from the state’s cash-strapped general budget — toward the waivers.

"This hopefully is another tool in the toolbox," Zweifel said. "It’s important to put our dollars to work."

Still, given Missouri’s record-high foreclosure rates and a job market that is giving pause to many would-be buyers, some housing advocates wonder if the $15 million might be better spent in other ways.

"In terms of the level of need, it strikes me as a little strange," said Chris Krehmeyer, president of Beyond Housing, a St. Louis-based group that provides mortgage counseling and builds affordable housing. "We’re not seeing folks who are buying homes saying ’I wish someone would pay my taxes next year.’ People are saying, ’I need help to stay in the home I own.’"

Typically, the state’s housing commission finances affordable housing projects and will issue nearly $100 million in tax credits for those projects in early 2010. But, Zweifel said, the broader housing industry is a big pillar of Missouri’s economy, and supporting it, too, means creating jobs. This provides a fast way to do it.

"The goal was partially to spur home purchases, but also to find a way to quickly put $15 million to work for Missourians," he said. "We wanted to create a program that helps spur economic development and job creation, not something that’s permanent in nature."

The temporary nature of this and the $8,000 federal tax credit has some housing economists warning of trouble when the programs end. Such props must be taken down eventually, and critics point to a plunge in auto sales after the end of the government’s "Cash for Clunkers" program as a warning for what might happen to the housing market.

Then there’s the question of just how much impact it will have. Most people aren’t going to make a decision on whether to move based on $1,250, said Carlos Garriga, an economist who studies housing at the Federal Reserve Bank of St. Louis.

"It’s just kind of a bonus," he said. "Even at the margins, how many people will move because of this? It’s not that big."

Still, said Mark Stallmann, chief executive of the St. Charles County Association of Realtors, it’s the sort of thing that makes it easier to buy a house. And with the real estate market as weak as it is right now, every little bit — even a $1,250 check from the state — helps.

"Anything that reduces the cost of homeownership, that’s an incentive to help families get in a home, that’s a good thing."