By Ben Meyerson and Sarah Gantz

7:03 AM PST, February 9, 2009

Reporting from Washington — The Senate's proposed $15,000 tax credit for home buyers would boost the ailing housing market but do little to help low-income people who need it most, experts say.

The measure, which is part of the $827-billion economic stimulus plan that the Senate is due to vote on Tuesday, would offer the credit to anyone who buys a primary residence. But to take full advantage of the credit, buyers would have to earn enough to use it and spend at least $150,000 on a home.

As many as 1 million home sales could result from the tax credit, according to Mary Trupo of the National Assn. of Realtors. "By increasing demand and decreasing inventory, it'll help to stabilize home values and result in fewer foreclosures," she said.

But low-income people will not benefit, said Linda Couch, deputy director of the National Low Income Housing Coalition. "The bill is focusing a lot more of its resources on higher-income households and home ownership than it is on the lowest-income people and people really teetering on the edge of homelessness."

Since the money comes as a deductible tax credit spread over two years, home buyers must earn enough to have $7,500 in income taxes -- $81,900 per year for a family of four to get the full benefit, according to the housing coalition.

But if the home costs less than $150,000, the deduction is only worth 10% of the house's value, meaning that those buying the cheapest homes wouldn't receive the full benefit.

Alma Jill Dizon, a Realtor from Riverside, agreed that there wasn't much in the measure for low-income Americans. "From what I can tell, it's really going to benefit people who already have enough salary" to buy a house, said Dizon, who said she sells homes from $150,000 to more than $1 million.

Dizon said her market is dominated by older, three-bedroom, one-bath homes in need of repair. Those houses sell for about $150,000 to first-time buyers who don't have the savings to make a deposit on something larger.

"You have to owe enough in taxes in the first place" to take advantage of the rebate, Dizon said. "That's why it benefits people who earn more money and earn more on taxes."

But the tax credit could greatly help the housing market by making the more expensive homes in the area more appealing, she said. What once were multimillion-dollar homes in Riverside now are priced between $500,000 and $1 million, she said. With a tax credit, those homes -- many of which are on the brink of foreclosure -- are beginning to look more attractive to buyers.

"This isn't actually going to get a lot of people buying houses at the very bottom," Dizon said. "Who is going to start buying more houses is people in the middle and upper range. That can be good as far as staving off more trouble in those ranges, in those better neighborhoods."

But halfway across the country, in Cleveland, another Realtor, Ralph A. Vaneck could use a hand selling nicer homes. There, the median income is half of Riverside's -- $27,007 compared with $54,099.

"The non-foreclosure market is where the major help is needed -- that's the dead part of the market," said Vaneck, president of Westway Realty. Those homes are priced between $95,000 and $120,000.

People are more interested in purchasing foreclosed homes because they can get them for as little as $35,000, he said; 85% of his business comes from selling foreclosed homes.

The Senate measure expands an incentive approved last year -- a $7,500 credit for first-time home buyers that had to be repaid later. The House's version of the economic stimulus package renewed last year's provision and eliminated the payback requirement.

But the Senate bill goes further, making the credit available to anyone buying their primary residence, and doubling the eligible amount to $15,000.

Once the Senate passes its version of the stimulus package, a conference committee will resolve differences between it and the House bill. Then both houses will be asked to vote on the compromise.

Trupo of the National Assn. of Realtors sees hope in whatever the housing credit turns out to be, although Realtors favor the higher amount.

"If it's $15,000, $7,500 or somewhere in the middle, there is going to be a significant impact to the market," she said.

Helping the housing market get back on its feet is in the interest of everyone, said Jerry Howard, president and chief executive of the National Assn. of Home Builders.

"Until you stabilize house values, you won't be able to stabilize -- let alone stimulate -- the economy," he said. "This is the kind of stimulus that ought to get buyers off the sidelines and into the housing market."