Legislation Would Incentivize Saving for Down Payments
Newburgh, NY – (RealEstateRama) — Following reports of homeownership dipping to its lowest level since 1965, Representative Sean Patrick Maloney has renewed calls for passage of legislation he introduced last year to make it easier for first-time homebuyers to save for a down payment. Current law allows first time homebuyers to make penalty-free withdrawals from their IRA to go toward the purchase of a home. However, the current limit of $10,000, which was enacted nearly 20 years ago and not indexed to inflation, has not kept up with rising costs and stagnating wages. Rep. Maloney’s bipartisan First Time Homeowner Savings Plan Act would help the law catch up, by increasing the limit to $25,000 for first time homebuyers.
“Sky-high rents, stagnating wages, and crushing student loans have put the American Dream of homeownership even further out of reach for most families,” said Maloney. “Instead of putting more obstacles in the way, we should give every American who works hard, saves up, and makes smart choices the chance to buy their own home. Period.”
“We support homeownership because we know homeownership is the foundation of every community,” said Faith Moore, Executive Director of the Orange County Rural Development Advisory Corp. “The First Time Homeowner Savings Plan Act will offer access to money for renters to transition into a safe, affordable home. Housing counselors can use this new provision within their tool box of assistance, sharing this opportunity during first-time homebuyer education classes and one-on-one consultations.”
“We strongly support Congressman Maloney’s First Time Homeowner Savings Plan Act,” said Co-Executive Director, Dianne Chipman, of the Putnam County Housing Corporation. “Putnam County Housing Corporation’s Housing Needs Assessment (January 2014) prepared by the Center for Housing Solutions, Pattern for Progress revealed, ‘Eighty-eight percent (88%) of owners and renters in Putnam County, regardless of income level, are living in Unaffordable and Severely Cost Burdened Housing. This bill would assist more young individuals and families in realizing the dream of owning a home in their community.”
“This legislation would be a great benefit to potential homeowners in the Hudson Valley area, where home prices tend to be substantially higher than in other regions of New York State,” said Hudson Gateway Association of Realtors President Drew Kessler.”
“This will give more first-time homeowners the opportunity to acquire the necessary funds – – without penalties — to make a viable down payment on a home.” added Hudson Gateway Association of Realtors CEO Richard Haggerty.
“Many would be first-time home buyers are getting shut out of the market by rising rents and student loans, which limit a borrower’s ability to save for down payment. Buying a home when you are ready – and many are if not for rising hurdle of down payments – means asset-building well into the future, including the ability to ride out market downturns and benefit from long-term asset appreciation. This bill can help young families, and help us reverse the decline of first-time homeownership,” said Doug Ryan, Director of Affordable Homeownership for the Corporation for Enterprise Development.
“Allowing savers greater access to their IRAs for the purchase of a home will allow more households to take advantage of an existing and underutilized vehicle that allows for tax-deferred wealth building. It could encourage young households to start saving at a younger age, because of the increased resource available for a home purchase from an IRA. NHC believes this legislation is one important tool, among many, that promotes affordable homeownership,” wrote Chris Estes, President and CEO of the National Housing Conference.
“The bill introduced by Rep. Maloney would be a great benefit to Americans pursuing the dream of home ownership,” said Jules Gaudreau, president of the National Association of Insurance and Financial Advisors. “Saving for retirement and purchasing a first home can both contribute to the long-term financial security of American families. Penalty-free IRA withdrawals, in amounts high enough to be meaningful in the current market, will make all the difference for many families struggling to come up with down payments.”
A recent study by the Joint Center for Housing Studies of Harvard University found that more than half of all renters in the lower Hudson Valley are suffering from “severe cost burdens” associated with housing. The study defines cost burdened households as those which pay at least 30% of their monthly income on rent alone. If more than half of renters in a given area are cost burdened, the areas is considered “severely cost-burdened.” Rising rent costs have made it increasingly difficult for young people and middle and low income-earners to save enough to make a down payment on a home. Under current law, a first time homebuyer can withdraw up to $10,000 from an IRA before retirement without incurring a penalty if the funds will be applied to a down payment on a home. The First Time Homeowner Savings Plan Act would raise the penalty-free withdrawal rate to $25,000. The change would further incentivize taking proactive steps to save to buy a home.
The bill has been endorsed by the National Association of Realtors, National Association of Home Builders, Mortgage Bankers Association, American Land Title Association, National Association of Insurance and Financial Advisors, National Association of Real Estate Brokers, Corporation for Enterprise Development, and the National Housing Conference. It’s also been endorsed by a number of groups in the Hudson Valley including Orange County Rural Development Advisory Group, the Hudson Gateway Association of Realtors and the Putnam County Housing Corporation.
