Rising defaults on subprime home loans are boosting the inventory of unsold homes and driving sale prices lower, which is cutting into housing-related revenues from building-permit fees, taxes on contracting and recording property transfers, and even sales taxes, the Wall Street Journal reported today. As a result, legislators in Florida, which was at the forefront of the housing boom, plan a special session this month to consider deep budget cuts to offset a projected $1.5 billion funding gap. California forecasts a shortfall of at least $5 billion in next year’s budget. And Chicago faces a $217 million gap in its $5.6 billion budget for 2008. In many cases, budget officials knew that the fast pace of housing-related revenue growth in recent years wasn’t sustainable, but they claim that the extent of the slowdown has sometimes surprised them. Among other effects, the housing slump has caused a decline in revenue from real estate transaction taxes, which are based on sales prices.
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