On August 4, 2020, Senators Cory Gardner (R-CO) and Doug Jones (D-AL) introduced the American Dream Down Payment Act of 2020. This bipartisan legislation will help prospective home buyers save for a down payment. The down payment is one of the biggest obstacles that prevent many Americans from buying a house, so this act would be valuable for anyone trying to save to become a homeowner.
What Is the Down Payment Act?
The American Dream Down Payment Act would create tax-advantaged savings accounts that Americans can use for down payments and certain other housing costs. The senators who introduced the act suggested that the accounts be similar to 529 plans, which help people save for future educational costs. Each state would be responsible for establishing and managing the accounts, but the Securities and Exchange Commission would set standards.
The act would allow tax-free withdrawals from the savings account when used for eligible housing expenses. This will help prospective homeowners save more efficiently and lose less of their savings to taxes, speeding up the home buying process.
Why the Act Matters
Homeownership is the key to building wealth and passing wealth on to your family. Unfortunately, saving for a down payment is incredibly difficult for many Americans today. The average cost of rent has increased much faster than wages have, and many people also have to make massive student loan payments each month.
Saving for a 20 percent down payment when the cost of living is so high can take years, and some Americans believe that they’ll never be able to afford a home. According to the Urban Institute, two-thirds of renters cite saving for a down payment as a barrier to homeownership.
This problem affects Americans of all backgrounds, but there are clear disparities in homeownership rates by race and ethnicity. Rates of homeownership are significantly different between white Americans and people of color, especially Black Americans. People of color face additional economic and social barriers that may make saving for a down payment even more challenging. The goal of the American Dream Down Payment Act is to make homeownership more accessible to all Americans.
This act can also aid in economic recovery after the COVID-19 pandemic. Millions of Americans have suddenly found themselves unemployed or underemployed. Some have had to deplete their savings accounts to stay afloat, and some are barely making enough to get by. Many people who had hoped to buy a home in the next year will now be unable to because of this massive setback. The Down Payment Act could be a valuable resource in a time of such economic uncertainty.
Ashby & Graff Real Estate is proud to support the American Dream Down Payment Act of 2020. Buying a home is a major milestone that everyone should be able to reach, and this legislature supports Americans who are working hard to save up for a down payment.