Lawmakers Plan Another Housing-Related Stimulus Bill

Top Democrats intend to take up a second stimulus package focused on housing-related issues - a potent political issue this year.
By: Sarah Lueck: The Wall Street Journal Online
A tax break for home builders and higher caps on state mortgage-revenue bonds are among the proposals Senate Democrats plan to take up this month to address the troubled housing market.

With one economic-stimulus bill now signed into law, top Democrats said they intend to turn to a second package focused on housing-related matters -- a potent political issue this election year.

It is unclear how far the bill might get, although it may at least provide fodder for political finger-pointing. Despite the bipartisan aura that sped passage of the first stimulus bill, some parts of this one are likely to draw criticism from Republicans, especially a change in bankruptcy law that would allow judges to alter the terms of certain mortgages. The House Judiciary Committee passed a similar proposal late last year, and the banking industry has lobbied hard against it. The White House has resisted a second stimulus bill.

The first stimulus bill "was absolutely necessary, but it isn't sufficient," said Sen. Richard Durbin (D., Ill.), the majority whip. Senate Majority Leader Harry Reid of Nevada said he would bring the bill to the Senate floor the week after next.

In the House, nonhousing measures such as an extension of unemployment benefits have drawn interest. "We all have our ideas," said House Speaker Nancy Pelosi (D., Calif.) when asked about the Senate proposal. "But I don't think we should confine it to just that tactic."

Some of Senate Democrats' proposals are popular in both parties, such as a tax break allowing companies with operating losses this year or the two previous years to apply them to past years for a refund. That could please home builders, who attacked the first bill. "As far as we are concerned, Congress hasn't done enough to help the housing market," said Jerry Howard, chief executive of the National Association of Home Builders. This week the group cut off congressional campaign donations.

The group is also pushing for a tax credit for home buyers. A similar measure in the 1970s helped clear a glut of unsold new homes, said David Seiders, its chief economist. Sen. Johnny Isakson (R., Ga.) is pushing a tax-credit proposal, but it doesn't yet have traction with Democrats.

In a move that could help attract Republicans, Mr. Reid said the revenue lost to the tax break wouldn't be offset, as normally required under House and Senate budget rules. He said he hoped to get Republican support for the package.

A spokesman for Senate Minority Leader Mitch McConnell (R., Ky.), said Republicans "look forward to this discussion" and want to make sure "we don't tax and spend our economy into a dangerous slowdown."

Another provision would allot an additional $10 billion in bond authority so housing-finance agencies can give more help to people refinancing subprime loans or first-time buyers. President Bush recently backed this idea.

The bill also includes $4 billion in block grants so localities with high foreclosure rates can buy and rehabilitate unoccupied property and $200 million for pre-foreclosure housing counselors.

-Damian Paletta contributed to this article.