First-time homebuyers of any income level could get up to $50,000 in federal funds for a down payment on a house, under a newly proposed bill introduced in the Senate this week. The Homeownership Promise Act, introduced Wednesday by Oregon’s Senator Jeff Merkley, a Democrat, and co-sponsored by another Oregon Democrat, Senator Ron Wyden, would allow U.S. homebuyers to open "Homeownership Promise Accounts" and save on their first-time home purchase. Newsweek contacted Merkley and Wyden’s offices for comment by email on Friday and is awaiting responses.
The dream of homeownership has slipped out of reach for millions of Americans over the last few years, especially after home prices and borrowing costs skyrocketed in the wake of the COVID-19 pandemic. While housing affordability has been strained for all households, with rising property taxes and homeowners insurance premiums, first-time homebuyers have taken the brunt of the crisis. After years of price hikes, less than 40 percent of non-homeowner households in the U.S. are now able to afford a typical starter home, a traditionally affordable option for first-time buyers, according to a recent LendingTree analysis.
Their struggles to break into the housing market are reflected in recent data by the National Association of Realtors (NAR) showing that, last year, the share of first-time homebuyers dropped to a record low of 21 percent and the typical age of first-time buyers climbed to an all-time high of 40 years. That was up from 33 years in 2019. Affordability was supposed to improve modestly this year thanks to expected declines in mortgage rates.
But despite falling to 5.98 percent in late February, borrowing costs actually started rising again after the start of the war in Iran, and are now above 7 percent. Being unable to step onto the property ladder has clear, financial consequences for young Americans. An analysis by Realtor.com found that purchasing a home by age 30 yields a 22.5 percent higher net worth (roughly $119,000 more) by age 50 compared to buying a home by age 40.
The proposed bill would establish a new standard for first-time homebuyers in the U.S. For any one dollar saved, the federal government will contribute $5. Essentially, any first-time homebuyer who saves can get a five times matching down payment grant, up to $50,000.
This matching down payment grant would be set up by the U.S. Secretary of Housing and Urban Development (HUD) and will be called a "Homeownership Promise Account." These accounts must be opened at participating Community Development Financial Institutions (CDFIs) certified by the Treasury Department. Under the draft, employers and nonprofits would also be able to contribute on an individual’s behalf to help them achieve their savings goals even faster.
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