by Dawn Wotapka and Jessica Holzer, The Wall Street Journal, 06.02.2010

The nation’s private home builders, crippled by a lack of access to construction financing, have turned to taxpayers for help building more homes.

Three Democrats in the House recently introduced legislation that would require the Treasury to guarantee $15 billion in construction loans. Backers say the program will give builders a boost until the housing market recovers.

The measure, which would be open to all builders, addresses what has become a big divide within the building industry: While the downturn forced many private players to halt construction and suspend land acquisition, publicly owned builders have been able to soldier on–while losing money–benefiting from the advantage of selling stock to raise money and financing debt long-term. Public players have also reaped monetary windfalls, thanks to a new law letting companies apply losses from 2008 or 2009 against the previous five years, instead of two.

“The big builders have already received their backstop. What they got was their lifeline – the five year look back. We’re just looking for own,” says Craig Perry, president of privately-owned, Florida-based Centerline Homes Inc.

Rob Bowman, president of privately held Lancaster, Pa.-based Charter Homes & Neighborhoods, agrees. “The playing field is certainly not level when it comes to financing,” he says. “We have to find a way to compete from a capital standing.”

Under the proposal, the government would guarantee the loan, meaning it would pay only if the builder defaults. Still, the legislation faces a tough battle because Congress may be loathe to subsidize more home construction, given the overhang of unsold and foreclosed homes already weighing on prices. Independent housing analyst Thomas Lawler estimates there are 1.5 million more vacant homes than normal............read more