From the NY Post:
NO doubt about it, the housing industry is in trouble. And as housing goes, so goes the national economy.
I’ll give you a simple solution that will eliminate the possibility of a complete meltdown in housing.
And I say this with some measure of pride as well as innate stinginess – it won’t cost us taxpayers a penny.
So, what’s this simple solution I’m advocating? Washington should change tax law so that people can use their retirement accounts to buy real estate.
By one estimate there is $6.5 trillion tied up in Individual Retirement Accounts, 401(k)s and other tax-advantaged retirement accounts. And, as anyone with one of these accounts knows, you can’t get at the money until you reach retirement age, unless you are willing to suffer a severe penalty for premature withdrawal.
The way the law is now written, I’m told, an IRA can only own real estate if it is set up as a trust or a custodial account that can be treated as a trust.
And the trustee must be a bank or a person that the Internal Revenue Service will accept as a trustee. Plus, the real estate can be prohibitively taxed.
But in hard times the government needs to make it easy for some of that $6.5 trillion to move from stocks and bonds into houses.
How should this be handled? Perhaps people should be permitted to withdraw up to 10 percent of their IRA funds, if the money is used as the down payment on a house maybe only for first-time buyers.
The premature withdrawal penalty would be waived or postponed until the house is sold and a capital gain achieved. The amount of penalty-free withdrawal could be adjusted up or down depending on how much you want to fuel the market.
And the money can be targeted, for example, with withdrawal penalties for IRA money more lenient in New Jersey, where housing needs a boost, than in New York, where it doesn’t.