The ongoing slump in the real estate market continues to plague the building materials industry in New Jersey. It was recently reported that pending sales of New Jersey homes dropped by the greatest margin since February 2009 – when the U.S. economy shed more than 726,000 jobs.
While this is an alarming statistic for my colleagues with the New Jersey Building Materials Dealers Association (NJBMDA), I was pleased to learn that our state Legislature in Trenton is equally concerned about how this recession is ravaging our state’s building industry.
Through the steady urging of the NJBMDA, of which I am President, and other active trade organizations in New Jersey, our state Legislature recently passed a $100 million program that would give homebuyers a tax credit on their home purchase for 5 percent of the price they paid or $15,000, whichever is less.
The bill now sits on the Governor’s desk, awaiting his signature into law. A spokesman for Gov. Chris Christie has expressed the bill is expensive in light of the state’s economic woes.
But I see it as a smart investment. It has been estimated that the tax credit would generate $208 million in state and local taxes, according to published reports. For every new home that’s built, there’s sales tax that goes into the materials that go into the construction of the home, payroll taxes to the employees working to construct the home, income tax for the employees and the builders themselves and sales tax for all of the furnishings and home improvement.
Most of the program’s money – $75 million – would be set aside for new homes, but $25 million would be reserved for resold homes. Unlike the federal tax credits, the proposed state tax credit would have no income limits and not be limited to first-time homebuyers.
The legislation, with 50 sponsors in the Senate and Assembly, stipulates that the house must be the taxpayer’s principle residence for three consecutive years following the purchase. The homeowner would then receive the tax credit, to be divided into equal amounts over the three consecutive taxable years.
Not only would this legislation create an excellent opportunity for those who may have missed out on the tax credit for first-time homeowners, which expired April 30, but it also gives families who haven’t been able to afford a home in New Jersey the chance to do so.
In addition, such legislation would jump start the anemic building industry. There were only 12,000 home-construction permits issued this year, compared with an average of 38,000 a year in the 1980s and 1990s.
Home affordability is a critical issue in New Jersey and one that must be resolved before we can expect the building industry to improve. There are now sweeping demographic shifts in New Jersey that are driving down average income.
New Jersey is facing a brain drain, in which the population has remained relatively flat, but the typical high-paying jobs available here have been moving elsewhere. What they are being replaced with are jobs at the lower economic scales.
The people filling such jobs dream of home ownership in New Jersey, but have no choice but to rent.
When someone can’t move into a home at the bottom of the ladder, it means that those who live in that home can’t move up to the next rung. And it goes right up the line, with homes that can’t be bought and sold throughout the economic tiers. Homes that are now on the high end, costing more than $2.5 million, represent a four-year supply at today’s sales pace.
Meanwhile, New Jersey has the highest business and personal taxes in the nation, as well as the second highest housing costs. This perfect storm drastically affects the housing market, driving down prices and limiting new construction. Prospective home buyers need a break.
It is my hope the Governor signs this bill into law, as New Jersey desperately seeks a method to stimulate the building industry.
Bryan Jaeger is president of Jaeger Lumber, with locations in Union, Bernardsville, Belmar, Madison, Middlesex, Point Pleasant Beach, Stirling and Lakewood. He is president of the New Jersey Building Materials Dealers Association.
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