May single-family home starts held their own compared to April, offering additional evidence that the state new-home tax credit is generating demand for new homes and leading to a resumption of job-generating construction, the California Building Industry Association reported today.
“This is very good news,” said Robert Rivinius, CBIA’s President and CEO. Rivinius said builders are responding to the increased traffic and corresponding demand that the tax credit has been producing statewide since it was enacted in March of this year.
“When they enacted the $10,000 tax credit back in February, the Governor and the Legislature weren’t sure it would work,” Rivinius noted. “But as this continued strength in new-home construction shows, the credit is indeed working, and working very well.”
In fact, the Franchise Tax Board – the state agency charged with administering the program – just reported that nearly all of the $100 million that was allocated to the program is gone. Rivinius said the homebuilding industry, in an effort to keep the positive economic momentum going, is working with the Governor and the Legislature to extend the tax credit so that it is able to work the full year for which it was authorized.
“After only four months, the program is nearly out of money, but the tax credit was designed to remain an active economic stimulus until March of next year. We still have eight critical months to go,” he said.
Rivinius said the tax credit is popular among legislators on both sides of the aisle not only because it generates jobs and other economic activity but because it produces critically needed state tax revenues.
“Studies show that building a new home in California generates an average of $16,000 in desperately needed tax revenues to the state treasury,” Rivinius said. “Lawmakers know that and now it’s a matter of determining how to finance the remainder of the program.”
Statistics compiled by the Construction Industry Research Board found that builders pulled permits for 2,203 single-family homes in May, down just 7 percent from April but 40 percent lower than in May 2008. On a seasonally adjusted basis, CIRB reported that May’s figures were down just 1.6 percent compared to April.
Based on the strength in the single-family market, CIRB for the first time this year has adjusted its annual forecast upward this month. The Board now expects single-family housing starts to total 24,900 and total housing starts to be 40,200 for the year.
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