Surprisingly strong demand for a $10,000 state tax credit to help Californians buy new never-occupied homes prompted legislation Wednesday to triple the amount of funds for the buyer credit to $300 million.

The state's home building industry is sponsoring the legislation after a financial perk designed to clear out thousands of finished but unsold homes has fared better than expected. Only 11 weeks into the $100 million tax credit program, 5,668 buyers have already applied for $54.9 million in credits, the Franchise Tax Board reported Wednesday. The relatively simple credit is available with no income limits, and buyers must live in the house at least two years.

"We had no idea it would be this successful. At this pace, the credit will run out this summer," said Assemblywoman Anna Caballero, D-Salinas, author of Assembly Bill 765. A similar bill is planned in the state Senate.

Sacramento and Roseville stand among California's top 10 cities for tax credit requests so far, with 139 and 138, respectively, tax officials said. At $10,000 apiece, that's nearly $2.8 million in homebuyer tax breaks – up to $3,333 off state taxes annually for three years. First-time buyers can also combine the state tax credit with a new $8,000 federal tax credit.

Fresno-area new-home buyers lead the state with 321 applications for the credit. Other top cities for applications: Bakersfield, San Jose, San Francisco, Los Angeles, San Diego and Corona, the Franchise Tax Board said.

Building industry representatives said Wednesday the tax credits have moved buyers off the fence, partially soaked up their excess unsold inventory and spurred new construction starts and jobs. Builders contend that still more credits will help stir a housing recovery to jump-start the larger economy and boost government treasuries. A pair of lawmakers made the same case Wednesday.

Caballero and the bill's co-author, Assemblyman Jose Solorio, D-Santa Ana, said Wednesday that each $10,000 tax credit adds $16,000 to state government revenue and $3,000 to a local government treasury. The contention stems from a June 2007 study – "The Housing Bottom Line" – by Sacramento's Blue Sky Consulting Group for the California Homebuilding Foundation. The foundation is a research arm of the state building and construction industry.

The two lawmakers and builders cited those revenue impacts – and a larger benefit to a tottering state economy – in countering questions about providing more tax breaks while the state budget is in shambles. The group cited the same benefits when asked about complaints by some who rent and own existing homes about having to subsidize new-home buyers. "It's a time of crisis, a time when we're struggling with trying to figure out how to keep home prices stable," said Caballero. "They have a vested interest in seeing that their home values don't decline and the market stabilizes." Caballero said it's also vital to build out stalled newer neighborhoods.

Solorio, responding to a question about encouraging more residential construction when the state is awash in vacant homes, called the tax credits a "strategic program to create jobs. A stronger economy lifts all boats."

Builders' once-booming industry has lost seven in 10 jobs since the housing bust set in and slowed construction starts to their lowest levels since the mid-1950s.

Industry lobbyists are pressing lawmakers to approve the $200 million expansion "within a few weeks," saying potential buyers are again wavering for fear they won't close escrow in time to get the first round of credits.

The legislation, if passed, is likely to be signed by Gov. Arnold Schwarzenegger. Though he hasn't specifically indicated support, his spokeswoman Camille Anderson said Wednesday, "The governor aggressively pushed for the (original) $10,000 tax credit in the budget and always wants to explore ways to stimulate the California economy and promote homebuying."

Schwarzenegger and lawmakers approved the first round of tax credits as part of a deal in February to woo a Republican vote for budget plans to close a $42 billion deficit. Senate Bill X2 15 passed by wide margins with bipartisan support, 62-11 in the Assembly and 37-1 in the Senate.

Call The Bee's Jim Wasserman, (916) 321-1102. Read his blog on real estate, Home Front, at www.sacbee.com/blogs.