Washington, D.C.-- Today, U.S. Representative Mike Coffman (R-CO) was joined by his colleagues, Rep. Sean Patrick Maloney (D-NY) and Rep. Barbara Comstock (R-VA), for the bipartisan reintroduction of H.R. 2802, the ‘First-Time Homebuyer Savings Account Act’.
As the American dream of homeownership is getting further away from many Americans due to the lack of affordable housing, the ‘First-Time Home Buyer Savings Account’ Act, seeks to help those trying to buy their first home. H.R. 2802 would amend the federal tax code to create 529-style savings accounts for first time homebuyers. The goal is to take the highly successful 529 plan model, which provides parents a tax-advantaged means to save for their children’s college education, and apply it to another area where savings are equally important: buying a first home.
Coffman’s Congressional district, Colorado’s 6th, is an example of the difficulties young people currently face saving for a down payment. According to the Joint Center for Housing Studies at Harvard University, the 6th Congressional district is rated as in a ‘renters’ crisis, meaning that half of all renters in the district spend at least 30% of their income on rent. In fact the situation in the district is arguably even more serious because 25.9% of renters in the 6th district spend half of their income on housing. With such high rents, saving for a down payment just can seem impossible.
The bill mirrors legislation that received bipartisan support as it was signed into Colorado law in 2016 and is similar to state laws in Virginia and Montana. Coffman’s bill will allow individuals to deposit up to $14,000 per year and married couples filing jointly up to double that amount per year, after taxes, into a first-time homebuyer account with a maximum lifetime investment of $50,000. The investment can grow up to $150,000 tax-free and there is no time limit on how long the funds may remain in the account. All limits are adjustable for inflation. The account is only available for use to make the down payment and pay the other fees and costs associated with the purchase of a first home. In addition to this bill, Coffman also supports and co sponsored Rep. Maloney’s ‘First-Time Homeowner Savings Plan Act’ (H.R. 2808), which compliments this bill by increasing the amount that may be withdrawn, without penalty, from a retirement plan for purposes of assisting a first-time homebuyer in purchasing a principal residence from $10,000 to $25,000. This increased distribution is adjusted annually for inflation.
Upon introduction of the bill, the Representatives offered the following remarks:
“The American dream of homeownership is getting harder and harder to attain for those starting out on their own these days, especially Millennials, because of the challenges involved in saving up for the down payment.” said Coffman (R-CO). “The First-Time Homebuyer Savings Account Act is a straightforward and bipartisan solution to this problem. If we can help Millennials attain homeownership, this would not only be a wise financial move for them, but would have broader positive financial impact for our economy as a whole”
“With higher rents, student loan debt and a changing economy it is harder than ever for folks in the Hudson Valley – especially young people – to save for their first home,” said Representative Sean Patrick Maloney (D-NY). “Buying a home is one of the best ways to lift people into the middle class and keep them there, which is why this bipartisan legislation is so important - it gives first time home buyers the tools they need to save and buy their first house.”
Representative Barbara Comstock (R-VA) said, “We have many young families settling into Virginia’s 10th Congressional District and the bipartisan First-Time Homebuyer Savings Account Act will help young families purchase their first home by making the down payment of a first-time purchase more affordable. This legislation will help more families achieve the American dream of homeownership.”
Supporting this legislation is also the National Association of Realtors (NAR) and the Colorado Association of Realtors. After reviewing the bill, they added:
“Home prices are rising around the country, and putting a down payment forward is no easy task,” said NAR President William E. Brown. “First-time buyers are often the most affected. Even buyers with good credit and strong incomes aren’t immune to the pressures of student debt, rising rents, and other factors that make saving money so difficult. The First-Time Homebuyer Account is an innovative tool that will encourage people to save while putting the dream of homeownership closer in reach. The National Association of Realtors supports this legislation and appreciates the leadership Congressman Mike Coffman has shown on this issue.”
“Home affordability in Colorado and across the nation has been declining recently as real estate prices rise at a faster rate than income," said Colorado Association of Realtors Chairman, Mark Trenka. “We believe savings accounts that help buyers save money for a down payment, closing costs and other expenses associated with buying their first home are a great step toward solving this problem.” Trenka further stated, "despite all of the positive conditions and elements of homeownership across the country, affordability for first time homeowners continues to be a significant barrier for too many states’ residents. This bill would help provide a very important financial savings resource for many people to achieve their dream of homeownership. We applaud and support Congressman Coffman's efforts to address this vital issue."
Additionally, the First-Time Homebuyer Savings Account Act:
- Create a 529-style savings account for first-time home buyers.
- Individuals can put up to $14,000 per year into a first-time home buyer account with a lifetime investment amount of $50,000.
- The investment can then grow tax-free up to $150,000 until it needs to be taken out for a down payment on a first home.
- The investment amounts are pegged to inflation
- There is no time limit on how long funds may remain in the account.
- The designee of the account can be the account holder, a child, a grandchild, a spouse, etc. and can be modified during the life of the account.
- The account may be used for a down payment on a first-home and associated closing costs and fees.