[Congressional Record Volume 149, Number 58 (Thursday, April 10, 2003)]
[Senate]
[Pages S5201-S5203]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. KERRY (for himself, Mr. Santorum, Mr. Sarbanes, Mr. 
        Allard, Mr. Daschle, Mr. Kennedy, Ms. Stabenow, and Mrs. 
        Clinton):
  S. 875. A bill to amend the Internal Revenue Code of 1986 to allow an 
income tax credit for the provision of homeownership and community 
development, and for other purposes; to the Committee on Finance.
 Mr. KERRY. Mr. President, owning your own home is the 
foundation of the American dream. It encourages personal 
responsibility, improves child development, provides economic security 
and gives families a greater stake in the development of their 
communities. Communities where homeownership rates are highest have 
lower crime rates, better schools and provide a better quality of life 
for families to raise their children.
  However, too many low- and moderate-income families living in urban 
and rural areas across our nation have not been able to share in the 
dream and benefits of homeownership due to the lack of available 
housing or the high cost of what housing is available.
  Today, I am introducing the Community Development Homeownership Tax 
Credit Act, along with Senators Santorum, Sarbanes, Allard, Daschle, 
Kennedy, Stabenow and Clinton to encourage the construction and 
substantial rehabilitation of 500,000 homes over the next ten years for 
low- and moderate-income families in economically distressed areas.
  The bill will increase the supply of affordable homes for sale in 
inner-cities, rural areas and low- and moderate-income neighborhoods 
across the United States. It will bridge the gap that exists today 
between the cost of developing-affordable housing and the price at 
which these homes can be sold in many low-income neighborhoods by 
providing investors with a tax credit of up to 50 percent of the cost 
of home construction or rehabilitation.
  By facing the mounting challenge of producing affordable housing, I 
strongly believe we can help provide critically needed economic 
development low- and moderate-income communities across our country and 
provide an important stimulus in the development of our nation's 
economy. The production of new homes provided in this legislation will 
create both construction and construction-related jobs which will both 
increase economic growth and lower the unemployment rate. New Economic 
activity can revitalize many inner-city neighborhoods and rural areas 
where unemployment and crime have been a fact of life for too long.
  Buying a new home also leads to the purchase of new appliances and 
furnishings. Average new homebuyers spend almost $5,000 on appliances 
and

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furnishings during the first year of living in their new home. This 
will help stimulate the manufacturing section of our economy. It is 
clear that building new homes creates jobs and moves our economy 
forward.
  Over the past decade, we have made substantial progress in increasing 
the homeownership rate in the United States. In 2000, the U.S. 
homeownership rate reached a record high of 67.1 percent with some 71 
million U.S. households owning their own home. However, many working 
families have been struggling to find an affordable home in our 
nation's cities. Over the past two generations, many families have 
moved out of cities and into the suburbs, which has depressed the 
development of housing in the inner-city. In 1999, the homeownership 
rate in the central-city areas was 50.4 percent, this is more than 20 
percent lower than the suburban homeownership rate of 73.6 percent.
  Working families with low- and moderate-income have also had 
difficulties buying a home. Currently, 83.3 percent of households with 
family income higher than the median family income are homeowners, 
while only 52.4 percent of households with family income below the 
median income are homeowners.
  Too many communities face a lack of available homes because 
developers are concerned that the new houses may not be sold for the 
cost of construction. Many properties or sites that could be developed 
into affordable homes now sit vacant, and neighborhoods remain 
undeveloped because the gap between development costs and market prices 
has not been filled. The lack of affordable single-family homes affect 
many urban and rural areas where a majority of residents earn less than 
the median income.

  Today, too many minority families face barriers in their attempts to 
reach the American Dream of homeownership. According to Census data for 
the fourth quarter of 2002, non-Hispanic whites have a 74.8 percent 
homeownership rate, while minority groups have just a 55.4 percent 
homeownership rate. African Americans have only a 47.5 percent 
homeownership rate, and Hispanics have a 49.5 percent homeownership 
rate in the same study. The gap between white and African American 
homeownership rates has been approximately 25 percent to 30 percent for 
most of the last century. These numbers are simply unacceptable.
  Despite our efforts at the federal level to promote homeownership, 
many minorities also face higher than average denial rates for mortgage 
applications. A recent study by the University of Massachusetts shows 
that racial and ethnic lending disparities continue in Boston. For 
example, African Americans were 2.73 times as likely as whites to be 
denied in their mortgage applications. Latinos were 2.25 times as 
likely as whites to be denied in their mortgage applications. Finally, 
Asians were 1.55 times as likely as whites to be denied in their 
mortgage applications.
  Along with a lack of available homes in urban and rural areas, our 
nation is also facing an affordable rental housing crisis. Thousands of 
low-income families with children, the disabled, and the elderly are 
finding it difficult to obtain or afford privately owned affordable 
rental housing units. Recent changes in the housing market have limited 
the availability of affordable housing across the country, while the 
growth in our economy in the last decade has dramatically increased the 
cost of the housing that remains. Constructing new housing will help 
many families move out of rental housing and help increase the number 
of available rental housing units and help ease the affordable housing 
crisis we now face.
  The story of Benjamin and Rita Okafor shows how working families in 
Massachusetts have great difficulty obtaining a decent home of their 
own. For many years, the Okafor's and their two young children were 
forced to live in a one-bedroom apartment. Benjamin Okafor, who worked 
full time as a cab driver in Boston, spent days and months looking for 
a bigger apartment for his family. However, the lack of affordable 
housing in the Boston area made it impossible for him to find anything 
appropriate. When his wife Rita became pregnant with their third child, 
the Okafor's knew something had to change in their living situation. 
Luckily, Ben was accepted into the Habitat for Humanity program and 
worked 300 sweat equity hours constructing a house. In August 2000, the 
Okafor family moved into a new home of their own in Dorchester. Ben 
says that this new home gives them the hope and stability they need. 
Yet, there are still far too many working families living a substandard 
housing and many more families that desperately need assistance to 
become homeowners. A new tax incentive for developers to build 
affordable homes in distressed areas will help working families like 
the Okafor's to afford a home for the first time.
  The benefits of owning a home can bring families financial rewards 
and personal satisfaction with a deep sense of security. Real estate 
values have historically risen over time. Homeowners may deduct 
mortgage interest and property taxes as an expense against income. Real 
estate has generally been seen as marketable, allowing for property to 
be sold at a predictable price to a dependable group of available 
buyers.
  We know that owning a home instead of renting leads to a better 
quality of life for its residents, but we are now learning more and 
more about the impact homeownership has on the cognitive and behavioral 
outcomes for children. A recent study by Ohio State University shows 
that children of families who own their home have fewer behavioral 
problems and are able to learn more effectively. Specifically, a 
child's cognitive abilities are 9 percent higher in math and 7 percent 
higher in reading for children living in their own homes. The study 
also shows that these children also experienced up to 3 percent lower 
behavioral problems than other children. This study proves that the 
national goal of homeownership has an added benefit of helping 
America's children learn and behave better, which helps our schools 
produce better citizens and will help our economy develop in the long 
term.

  The Community Development Tax Credit Act, which I am introducing 
today, bridges the gap between development costs and market value to 
enable the development of new or refurbished homes in urban and rural 
areas to blossom. The tax credit would be available to developers or 
investors that build or substantially rehabilitate homes for sale to 
low- or moderate-income buyers in low-income areas. The credit would 
generate equity investment sufficient to cover the gap between the cost 
of development and the price at which the home can be sold to an 
eligible buyer.
  The tax credit volume would be limited to $1.75 per capita for each 
State and allocated by the States themselves. Credits would be claimed 
over 5 years, starting when homes are sold. I believe this legislation 
will result in approximately 50,000 homes built or refurbished 
annually, assuming about $40,000 per home.
  The maximum tax credit equals 50 percent of the cost of construction, 
substantial rehabilitation, and building acquisition. The eligible cost 
may not exceed the Federal Housing Administration single-family 
mortgage limits. The minimum rehabilitation costs is $25,000. Eligible 
building acquisition costs are limited to one-half of rehabilitation 
costs. States will allocate only the level of tax credits necessary for 
financial feasibility of individual projects. Ten percent of the 
available credit will be set aside for nonprofit organizations.
  The eligible areas for the tax credit are defined as Census Tracts 
with median income below 80 percent of the area or state median. Rural 
areas that are currently eligible for USDA housing programs will be 
eligible for the tax credit. Indian tribal lands will be eligible for 
the tax credit. State-identified areas of chronic economic distress 
will also be eligible for tax credit, subject to disapproval by the 
Department of Housing and Urban Development.
  Those eligible to buy homes built or refurbished using the tax credit 
include: individuals with incomes up to 80 percent of the area or state 
median and up to 100 percent of area median income in low-income/high-
poverty Census Tracts.
  Individual states will write plans to allocate the available tax 
credits using the following selection criteria: contribution of the 
development to community stability and revitalization; community and 
local government support; need for homeownership development in the 
area; sponsor capability; and the long-term sustainability of the

[[Page S5203]]

project as owner-occupied residences. Then individual developers along 
with investors can apply to the state to be awarded a tax credit for 
developing a property in a low- or moderate-income area. If chosen by 
the state, investors can start to claim the tax credit as the homes are 
sold to eligible buyers. They can continue to claim the tax credit for 
five years. Investors are not subject to recapture. If the home owner 
sells the residence within five years, a scale would determine the 
percentage of the gain that would be recaptured by the Federal 
Government. In the first two years, 100 percent of the gain and 80, 70 
and 60 percent in the third, fourth, and fifth years, respectively, 
would be recaptured.
  The Community Development Homeownership Tax Credit Act that I am 
introducing today will positively affect the lives for approximately 
500,000 families over the next 10 years, help resolve the affordable 
rental housing crisis we face, and help create jobs and grow our 
economy. I ask all of my colleagues to help expand the foundation of 
the American Dream by supporting this new tax incentive to encourage 
the construction and rehabilitation of homes for low- and moderate-
income families in economically distressed areas.
  This legislation is supported by the U.S. Conference of Mayors, 
Fannie Mae, Freddie Mac, the Enterprise Foundation, Local Initiatives 
Support Coalition, Mortgage Bankers Association of America, National 
Association of Home Builders, National Low Income Housing Coalition, 
National Association of Local Housing Finance Agencies, National 
Association of Realtors, National Council of La Raza, National Hispanic 
Housing Conference, Habitat for Humanity International and 
others.
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