American Dream Downpayment Act

The American dream of homeownership has never been a walk in the park. Just like other success stories, it comes with its hurdles. One of the cosmic limitations that prevent many people from achieving the American dream of homeownership is down payment. For ages, the down payment requirement has been the difference between owning a home and paying rent.

Arecent survey by the Urban Institute shows that more than two-thirds of renters termed down payment as the major barrier to owning a home. Saving the money required for the down payment is a hurdle to many low-tomiddle income Americans.

However, there is hope! 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 significantly help prospective home buyers save for a down payment. The Act would help home buyers save for a 20% down payment by creating special tax-advantaged savings accounts that Americans can use for down payments and other specific housing costs. The accounts would work in the same way as the popular 529 Plan accounts that help people save post-tax money for future educational expenses.

“As the coronavirus pandemic continues to devastate our nation’s economy, it is getting even harder for many folks in Alabama and across the country to

AMERICAN DREAM DOWNPAYMENT ACT: A Bill that could potentially revive the American Dream of Homeownership

put money away in savings and to work toward the American dream of owning a home,” Senator Jones, a member of the Senate Banking & Housing Committee stated. “Down payments are the biggest barrier to homeownership for first-time homebuyers, especially among low-income and minority Americans, and make it harder to build generational wealth that is often tied to homeownership. Our legislation would provide a new path to help make the dream of buying a home a reality by making it easier to save money for down payments and other housing-related costs.”

Once passed, the American Dream Down Payment Act would:

Let individual states establish American Down Payments Accounts, which will be managed the same way as the 529 plan accounts. Allow Americans looking to become homeowners to save up to 20% of the housing cost today. This amount would be indexed for inflation and used eligibly for down payment and other housing costs. Encourage long-term savings for the down payment and allow contributions from family and friends. Allow homebuyers through their American Dream Down Payment Account savings and earnings to use those funds tax-free at withdrawal for eligible expenses.

To ensure maximum protection of the American Dream Down Payment Account holders, the Securities and Exchange Commission (SEC) would be required to set standards for the investments of eligible accounts and allowable fees.

The Down Payment Act has support from the National Association of Realtors, National Association of Real Estate Brokers, and the Habitat for Humanity.

SIGNIFICANCE OF THE DOWN PAYMENT ACT

Becoming a homeowner is the critical factor in building and passing wealth on to your next of kin. Unfortunately, achieving this has always been a problem for many Americans due to the difficulty in saving for a down payment. With the rapidly rising cost of living, it can take years for a middle-class American to save for a 20% down payment.

Due to this, some Americans have resulted in believing that they will never own a home. On the other side, we should not turn a blind eye on the existing racial disparities in homeownership rates. The gap of homeownership among people of color, especially African-Americans, is significantly wide compared to the whites.

However, the American Dream Down Payment Act aims to make homeownership accessible to all Americans, regardless of their race. The saving facilitation from the Act will see many people, especially middle-class Americans, become homeowners within a short period.

Works cited.

https://www.jones.senate.gov/ newsroom/press-releases/senatorsdoug-jones-and-cory-gardnerintroduce-the-american-dream-downpayment-act-of-2020.