US Senators Propose Up to $50,000 Federal Down-Payment Aid for First-Time Buyers

First-time homebuyers in the United States could receive as much as $50,000 in federal assistance toward a down payment under draft legislation being prepared by Democratic Senators Jeff Merkley and Ron Wyden.

The proposal, called the Homeownership Promise Act, would establish a federal matching programme in which the government contributes $5 for every $1 an eligible buyer saves, up to a maximum federal contribution of $50,000. A buyer who saves $10,000, for example, could receive a $50,000 federal match.

Employers and nonprofit organisations would also be permitted to add to a buyer's savings, but those contributions would not be eligible for the federal match.

Eligibility and conditions

The programme would be open to eligible first-time homebuyers with no income limit attached to the federal match. However, the property purchased would have to be priced at or below the median home price in the buyer's local area.

Savings would need to be held at participating financial institutions certified by the US Treasury Department as Community Development Financial Institutions. These include community development banks and credit unions that generally serve lower-income customers and underserved communities.

Affordability backdrop

The proposal arrives as affordability remains a persistent challenge in the US housing market. Elevated mortgage rates have raised borrowing costs and pushed some prospective buyers out of the market.

Congress passed a major bipartisan housing bill earlier this year, but that legislation carried no direct funding and focused largely on encouraging more home construction. The Homeownership Promise Act would instead channel financial assistance directly to people attempting to buy homes.

Merkley said the proposal would help restore the prospect of homeownership for working families by allowing Americans to save for a home.

A precedent

Federal housing policy has an earlier example of direct buyer support. After the 2008 financial crisis and the housing-market meltdown, the US government offered an $8,000 first-time homebuyer tax credit, described as one of the most popular federal housing measures of that period. The proposed Homeownership Promise Act would represent a substantially larger potential benefit, with matching assistance of up to $50,000.