Coffman Introduces Savings Account Legislation for First-Time Homebuyers
Washington, DC – (RealEstateRama) — U.S. Representative Mike Coffman (R-CO) today introduced the First-Time Homebuyer Savings Account Act (H.R. 5575) along with U.S. Representative Sean Patrick Maloney (D-NY) and U.S. Representative Barbara Comstock (R-VA). The act 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.
“The American dream of home ownership is getting harder and harder to attain for those starting out on their own these days because of the challenges involved in saving up for the down payment.” said Coffman. “The First-Time Homebuyer Savings Account Act is a straightforward and bipartisan solution to this problem.”
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. This is a factor in why, according to the Commerce Department, in the second quarter of 2015, homeownership rates hit its lowest level since 1967.
Coffman’s introduced this bill as part of his ongoing efforts to help first-time homebuyers. Earlier this year, Coffman introduced another bipartisan bill with Maloney, which allows first-time homebuyers to draw some money from their IRA accounts for a down payment.
Seeking additional ideas to help homebuyers, Coffman saw the Colorado legislature pass its version of the First-Time Homebuyer Saving Account Act, which was signed into law in Colorado earlier this month, and is similar to laws enacted in Virginia and Montana. Seeing another good idea to encourage home ownership, Coffman decided to introduce the bill at the federal level because state laws can only provide for tax-advantaged savings from state taxes, and federal tax rates are much higher.
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.
The designee of the account can be the account holder or any designated beneficiary and can be modified at anytime. Additionally, the bill includes a provision that allows divorcees who were previous co-owners on a principal residence, to use the funds in a first-time homebuyer savings account after a three-year waiting period.
“High rents, student loans and a changing economy have made it harder for my neighbors in the Hudson Valley – especially young people – to buy their first home,”said Representative Sean Patrick Maloney (D-NY). “Buying a home is one of the most critical tools for lifting folks into the middle class and keeping them there, so I’m thrilled to introduce bipartisan legislation to empower first time home buyers and give them a fair shot at the American dream.”
“This smart, bipartisan legislation will help young families in Virginia’s 10th Congressional District purchase their first home,” said Representative Barbara Comstock (R-VA). “With many young Americans living paycheck to paycheck, theFirst-Time Homebuyer Savings Account Act will bring a policy we already have in Virginia to the national stage by creating a 529-style savings account so families can afford the down payment and other associated fees when they buy their first home.”
“Home affordability in Colorado and many other states has been declining recently as real estate prices rise at a faster rate than income,” said 2016 Colorado Association of Realtors Chairman, Alan Lovitt. “We believe that savings accounts that help buyers put money away for a down payment, closing costs and other expenses associated with buying your first home are a great step toward solving this problem.”Lovitt 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.”
“Potential homebuyers are up against a lot when trying to save for a down payment,”said National Association of Realtors® President Tom Salomone. “Many already face a significant debt burden, and with home prices on the rise, people need every opportunity to put aside a little extra money. Creating a tax free First-Time Homebuyer Account is a smart approach to empowering more potential buyers with the tools to overcome those challenges and achieve the dream of homeownership. The National Association of Realtors® supports this legislation and thanks Congressman Mike Coffman for introducing it in the House of Representatives.”