Exclusive: New proposal would give up to $50,000 to first-time home buyers
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First-time homebuyers could get as much as $50,000 for a down payment on a house, under a draft bill to be introduced Wednesday by Sen. Jeff Merkley (D-Ore.) and cosponsored by Sen. Ron Wyden (D-Ore.).
Why it matters: It's a big number and comes as the real estate market is beset by multiple woes, including rising mortgage rates pricing buyers out of the market.
Zoom out: Congress passed a landmark bipartisan housing bill earlier this year. But that law came with no dollars attached and was mostly focused on encouraging more home building.
- Just giving people money for down payments could encourage more home buying.
- The bill "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 in a statement.
Reality check: While this bill likely won't go anywhere in a Republican-controlled Senate and House, it is a hint at where Democrats might be moving if they regain control of Congress after the midterms.
- And housing has proven a popular cause for both parties.
How it works: The Homeownership Promise Act would give any eligible first-time homebuyer who saves money for a down payment and meets some other requirements a 5-to-1 federal match.
Zoom in: For each dollar a person saves, the federal government would contribute $5 up to a total limit of $50,000. So someone who saves $10,000 would have a total of $60,000 for a down payment.
- Employers and nonprofits can also make contributions on an individual's behalf — but that money would not be matched.
- There's no income limit on getting the match. But buyers would be limited to homes that are priced at or below the median home in their area.
- They would have to save the money at participating financial institutions certified by the Treasury Department as a Community Development Financial Institution, like a community development bank or credit union. These institutions focus on serving lower-income customers, typically in underserved communities.
Flashback: A first-time buyer tax credit — $8,000 — was one of the most popular things the federal government did in the wake of the financial crisis amid the meltdown in housing.
Between the lines: A big infusion of cash into the housing market could wind up increasing home prices as it juices up demand and more people are competing for the same modestly priced homes.
