Bipartisan invoice goals to supply financial savings accounts for down funds

Sens. Doug Jones, D.-Ala., and Cory Gardner, R.-Colo., on Tuesday introduced the American Dream Down Payment Act, a bill that would allow states to offer prospective first-time homebuyers a savings account that provides a tax benefit while helping the account holder save up to a 20% down payment, the amount traditionally required for home loans.

Many government mortgage programs today allow lower down payments, but putting a full 20% down helps to put consumers in a good position to obtain a home loan at a favorable rate.

Two-thirds of renters have identified the inability to save for a down payment as an obstacle to homeownership, according to the Urban Institute.

The bill would let states establish and manage down payment accounts, which would be similar in structure to 529 college savings plans. While contributions are not deductible, those plans grow and allow money to be withdrawn federal tax free so long as the money is used for certain eligible expenses.

In the case of a 529 plan that could include not only college but also $10,000 a year per beneficiary on elementary or secondary education schooling, student loan payments, or expenses associated with apprenticeships. In the case of an American Dream account, the money could be used not only for a down payment, but for closing costs paid or incurred to purchase a principal residence.

“Getting this legislation introduced with bipartisan support is good for us. With these accounts, people can put this money aside until they are ready and able to buy a home,” said Donnell Williams, president of the National Association of Real Estate Brokers.

NAREB has long advocated for the creation of a tax-advantage savings account for home mortgage down payments as a means of helping the Black community build wealth through homeownership, Williams said. While Black homeownership recently rose to a 16-year high, at 47%, it still is far lower than the overall homeownership rate of 68%.

The National Association of Realtors and Habitat for Humanity also are supporting the bill.

Sen. Sherrod Brown, D.-Ohio, is an original co-sponsor of the legislation and is the ranking member of the Senate Banking Committee.

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