Photo: US Department of Agriculture

The $8,000 tax credit for new home buyers — which was wracked by fraudulent claims after its creation as part of the nation’s economic recovery effort — is on the verge of a significant expansion by Congress.

Just how much will the tax credit mushroom thanks to the deal reached in the Senate? As the New York Times explains, it’s time to take the "new" off of the credit’s name:

The homebuyers’ credit … would be extended to cover homes
under contract by April 30. Also, it no longer would be limited to
first-time buyers; people who have owned a home for at least five years
could get a $6,500 credit on a new residence. Income limits for
eligibility would be raised, making many more people qualify.

Extending and expanding the credit would cost an estimated $11 billion, on top of the $10 billion spent so far.

As Ryan pointed out earlier this week, the higher rate of home ownership in suburbs tilts the credit’s benefits notably away from urban areas. But that’s nothing new for the federal government, which has lavished subsidies on home buyers while paying much scanter attention to improving rental affordability.

In the fiscal year that ended October 1, Washington’s support for home ownership totaled $230 billion, while parallel support for home renters was $60 billion, the non-partisan Congressional Budget Office (CBO) reported yesterday. That nearly four-fold gap is visible in the below chart:

Image: CBO

Even as federal lawmakers keep promoting home ownership as the "American dream," rental rates rose to one-third of the country in 2008, in part due to low-income and minority residents who were forced into default on risky mortgages. For many of those residents, as well as city dwellers in general, rentals tend to be the only housing option that offers access to affordable transportation — but help from Washington has been perilously slow in coming.

And it may not come for a while yet. Legislation updating the Section 8 voucher program for rental housing was approved over the summer by the House Financial Services Committee but has yet to see floor time in the full chamber, let alone the Senate.

Meanwhile, the larger home buyers’ credit is currently attached to a long-sought
extension of unemployment benefits, making its approval a political fait accompli (though one much-delayed by partisan bickering).