June 26 (Bloomberg) -- Passage of a Senate bill to reduce housing foreclosures probably will be delayed until next month after lawmakers couldn't resolve a dispute over adding energy tax cuts to the measure, Senate Majority Leader Harry Reid said.

The $300 billion rescue package stalled yesterday after Republican Senator John Ensign of Nevada demanded a vote on an amendment providing almost $7 billion in renewable energy tax breaks. Democrats, who need the assent of all 100 senators to wrap up work this week on the bill, refused, saying Ensign's proposal would sink the bill in the House.

Ensign, who said he wanted to attach the tax cuts to the first bill likely to reach President George W. Bush's desk, said today he won't back down.

``We should do absolutely everything we can at this time with high energy prices,'' to get the tax incentives ``put onto this housing bill,'' he said.

Reid, a Nevada Democrat, said lawmakers ``will'' complete work on the housing bill when they return from a week-long July 4 recess.

The impasse comes amid continuing signs of weakness in the housing industry. Home prices in 20 metropolitan areas fell 15.3 percent in April from a year ago, the most on record, according to an S&P/Case-Shiller home-price index released this week.

Home Sales

Sales of new U.S. houses fell 2.5 percent in May, signaling the real estate slump will keep weighing on the economy. Bush today urged lawmakers to work out their differences when they return from their holiday break.

``When they get off their recess, the Democratic Congress needs to act on the critical issues that they failed to address - - one such issue is housing legislation,'' Bush said. ``Congress needs to come together and pass responsible housing legislation to help more Americans keep their homes.''

The Senate plan would allow an estimated 400,000 struggling homeowners to avoid foreclosure by refinancing their mortgages into fixed-rate, 30-year loans backed by the government.

The bill would also tighten regulation of mortgage financiers Fannie Mae and Freddie Mac while allowing them to fund more loans in high-cost areas by raising their so-called conforming loan limit to $625,000. The bill includes more than $14 billion in tax breaks, including ones aimed at first-time homebuyers, and offers communities almost $4 billion to buy vacant properties.

83 Votes

The legislation received 83 votes earlier this week in a Senate test vote, indicating broad support for the plan from both parties.

Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat, said that while he supported the proposed tax breaks, the issue was ``when you do it and how you do it.''

The House won't agree to Ensign's plan because it would break the party's balanced-budget rules and add to the federal deficit, Dodd said. Still, he expressed confidence lawmakers would eventually approve the plan.

``It's not as if this is a highly controversial bill,'' Dodd said.

To contact the reporter on this story: Brian Faler in Washington at bfaler@bloomberg.net

Last Updated: June 26, 2008 16:14 EDT