Sen. Jeff Merkley introduced legislation Wednesday that would provide first-time homebuyers with a $5 federal match for every $1 they save toward a down payment, with government assistance capped at $50,000.
By yourNEWS Media Newsroom.
First-time homebuyers could receive as much as $50,000 from the federal government toward a down payment under legislation introduced Wednesday by Sen. Jeff Merkley, D-Ore., as lawmakers continue debating ways to address high home prices and borrowing costs.
The Homeownership Promise Act, cosponsored by Sen. Ron Wyden, D-Ore., would establish federally supported savings accounts for people preparing to purchase their first homes. For every $1 an eligible participant saves, the federal government would contribute $5, up to the $50,000 federal maximum. Merkley’s office confirmed the legislation was introduced Sept. 23.
Under the proposal, a buyer who personally saved $4,000 would qualify for another $20,000 in federal matching funds, according to Axios.
The legislation would direct the Department of Housing and Urban Development to establish what it calls Homeownership Promise Accounts for first-time buyers purchasing a principal residence priced at or below the applicable median home price.
Merkley’s office said the accounts could contain as much as $60,000 in total contributions: up to $10,000 combined from the buyer, employers and nonprofit organizations, plus as much as $50,000 from the federal government.
The federal match would apply to money saved by the buyer rather than money added by an employer or nonprofit organization.
Unlike many means-tested housing programs, the proposal would not impose an income ceiling on first-time buyers seeking the match, according to Axios. Eligibility instead would be constrained in part by the price of the home being purchased.
Participants would be required to place their savings with a Treasury-certified community development financial institution, or CDFI. Such institutions include qualifying banks and credit unions that specialize in serving communities and borrowers that historically have had more limited access to conventional financing.
Merkley framed the measure as an attempt to help households accumulate the upfront savings necessary to enter the housing market.
“My new Homeownership Promise Act would restore the promise of homeownership—one of the foundations that working families need to thrive—by allowing all Americans to save for a home and live that piece of the American Dream,” Merkley said.
He also said rising barriers to buying a first home have prevented younger Americans from building equity through homeownership.
“Working families should be able to afford a decent home in a decent community,” Merkley said. “For millions of young Americans, homeownership remains further out of reach than ever before, keeping them from establishing the foundation that has enabled middle-class families to build equity for generations.”
The proposal arrives as elevated mortgage rates and home prices continue to complicate affordability for prospective buyers.
Congress approved a bipartisan housing measure earlier this year focused substantially on expanding housing supply and construction. Merkley’s legislation takes a different approach by directing federal assistance to potential buyers attempting to accumulate a down payment.
That distinction is significant because economists and housing-policy analysts have long debated whether demand-side subsidies improve affordability when the supply of available homes is limited.
Supporters of down-payment assistance argue that upfront costs can prevent households that otherwise could afford monthly mortgage payments from purchasing a home.
Critics counter that putting additional purchasing power into buyers’ hands without a corresponding increase in housing supply can intensify competition and potentially push prices higher, reducing some of the benefit provided by the subsidy. Axios noted that concern in its report on Merkley’s proposal.
The federal government has previously used incentives to assist first-time buyers.
During the financial crisis, Congress created a first-time homebuyer tax credit that was later expanded to provide qualifying buyers with as much as $8,000.
Merkley’s proposal would be considerably larger for eligible participants and would operate as a savings match rather than the same type of tax credit.
The Homeownership Promise Act enters Congress with Republicans holding majorities in both the House and Senate. The Senate currently has 53 Republicans, 45 Democrats and two independents who caucus with Democrats, while Republicans also control the House.
That means the Democratic-sponsored legislation would require support beyond its current sponsors to advance through Congress.
The proposal also adds another housing policy to the agenda ahead of November’s congressional elections, when both parties are emphasizing affordability and the cost of living.
If enacted, the measure would create a federal savings-match system in which a first-time buyer could turn $10,000 in personal savings into as much as $60,000 available toward an eligible home purchase when the maximum federal contribution is included.
Whether that approach would primarily expand access to homeownership or also place upward pressure on home prices is likely to remain a central issue as lawmakers consider the proposal.
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