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NAHB: Budget Deficit Leading to Bankruptcy : Home Builder Board of Directors Opposes Administration, Congressional Tax Proposals

October 06, 1985|DAVID M. KINCHEN | Times Staff Writer

Reducing the nation's massive budget deficit should take precedence over tax reform, according to John J. Koelemij, president of the 135,000-member National Assn. of Home Builders.

The deficit situation is "leading down the road to national bankruptcy," he said here last week at the end of a five-day meeting of more than 1,700 directors of the home building organization.

Citing a Los Angeles Times Poll showing that three out of four persons surveyed favor congressional attempts to restrict imports, Koelemij said that a serious attempt to reduce the deficit--including lowering the value of the dollar--would be the best solution to the trade deficit.

The home builders are taking tax reform seriously, he said, adding that "the reports of the death of tax reform proposals are greatly exaggerated." It is possible that a conference committee report on tax reform will be ready early next year, he added.

"There is widespread support for tax reform in the nation and President Reagan--the best communicator since FDR (President Franklin D. Roosevelt)--is doing all he can to get the public behind tax reform," Koelemij said at general session of the board.

The builder group finds little to like in tax reform measures from either the Reagan Administration or from the House Ways and Means Committee, he added.

Current tax reform proposals, he said, would increase the after-tax cost of owning a home, raise rents significantly and reduce housing construction by 325,000 units in the first year following enactment of the Administration's proposal.

The Ways and Means Committee proposal is better, because it would preserve tax-exempt financing, allow a limited deduction of local property taxes and provide a more favorable depreciation for low-income housing, Koelemij said.

On the other hand, he added, it would also stretch out depreciation for real estate to 30 years on a straight line basis and set a precedent for capping interest deductions that opens the door to the possibility of an eventual cap on interest deductions on primary homes--a precedent that the builders loathe.

The association has revised its projection of 1985 housing starts upward from 1.65 million at the beginning of the year to 1.72 million, Koelemij said. This is only slightly under the 1.75 million starts recorded nationally last year, but the housing recovery is very spotty.

"The Northeast--Boston, New York, New Jersey and Philadelphia--is having its best housing year in a decade, but the Farm Belt and South are down and California is doing slightly better than last year," Koelemij said.

He also criticized recent moves by the Federal National Mortgage Assn. (Fannie Mae) that will make it very difficult for buyers to obtain conventional mortgages with 5% down payments. Last year about 300,000 buyers used these loans to buy houses, he said.

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