Effects of D.C.'s First-Time Home-Buyer Tax Credit
The Washington Post writes on a new report [PDF] released by the Fannie Mae Foundation about the success of the D.C. First-Time Home-Buyer Individual Income Tax Credit. The tax credit of $5,000 is available to first-time home-buyers in D.C. making less than $70,000 per year for singles and up to $130,000 for married couples filing jointly.
Fannie Mae’s report highlights the multiple successes of the tax credit which include: boosting the numbers of low-income residents purchasing their first home; significantly contributing to appreciated housing values in the District; and contributing to the stabilization of the D.C. population by retaining District residents and attracting residents of the suburbs to buy in D.C.
The Fannie Mae report notes that 38.7 percent of those claiming the tax credit were low-income, earning between $30,000 and $50,000 per year – which is only 42 to 69 percent of the metro area median income. One adverse effect of the tax credit, however, according to the report, is the effect on rental prices which affects many low-income residents. In fact, Fannie Mae estimates that 2,800 District renters were displaced because of rent burdens in 1998.
From 1997 to 2001, first-time homebuyers claimed a total of $76.7 million using the tax credit, which represents a direct loss in income tax revenue for the District. However, some of this loss is offset by a subsequent increase in property tax revenues. Fannie Mae estimates that the tax credit contributed to a growth in home equity wealth estimated at over $2 billion from 1998 to 2002, which led to an increase in the city’s property tax revenue of over $50.2 million over that time period.
Read the full Fannie Mae Report here [PDF].