Presidential Veto Kills Pro-Homeowner Bills

If you're a politician looking for a good idea, then take a look at making bond-financed loans available to first-time homebuyers, or encouraging renovation of historic homes. What's not to like? Unfortunately in Washington, good ideas sometimes get lost in the political tug-of-war between the President and Congress, and that's what happened to these and other key housing provisions in the tax bill that President Clinton recently vetoed. Those provisions died quietly, drowned out by all the political posturing and fanfare over taxes and spending.

One major provision would have increased the availability of a discount-rate mortgage program to approximately 65,000 to 70,000 middle-income, first-time homebuyers. Those bond-financed loans, financed by private lenders in cooperation with state and local housing finance agencies, are extremely important in some areas of the country. The demand is high and the waiting list long for these popular loans. 130,000 families a year take advantage of the low, fixed interest rates; lower down payments, and flexible requirements regarding credit history and debt-to-income ratios. The bonds earn interest on a tax-free basis that helps to create the favorable mortgage terms. But unfortunately, the supply of mortgage money is restricted, and now the proposed expansion won't happen for 65,000 to 70,000 borrowers.

Another obscure but noncontroversial provision would have expanded the use of federal tax credits for renovating rental apartments and houses. An additional 28,000 units per year were to be renovated under the program for lower and middle income families. That idea also fell to the wayside despite bipartisan Support in both houses of Congress.

Historical renovations were to receive a boost, too, under the doomed tax bill. Buyers, owners or renovators of homes located in historic districts could qualify for a tax deduction for 50 percent of the cost of renovating or preserving their homes. That would have been a major incentive to preserve thousands of the nation's historic residences, according to the National Trust for Historic Preservation.

Yet another positive measure would have changed tax rules that discriminate against military, Foreign Service, and private employees who sell their homes after spending years abroad. Under the current rules, sellers can exclude from capital gains tax up to $500,000 for married couples and $250,000 for single filers when they have occupied a primary residence for two out of the five prior years. Overseas personnel typically have little control over the timing and duration of their assignments. The provision would have made it easier to qualify for the two-year/five-year exemption. But that provision died, as well.

On the bright side, large majorities of the House and Senate sponsored these provisions, so their chances of passing at some time in the future are good, if Congress and the President get their act together.

Sources used to create this article include writer Kenneth Harney and The Washington Post.