Biden Down Payment Help
The Biden administration has a plan for first-time home buyer’s so they are able to afford a house: $15,000 to apply toward a down payment. First-timers might favor that proposed solution. However, it almost surely would drive house prices even higher.
The proposed First Down Payment Tax Credit is one of many housing-related proposals that Biden campaigned on. The administration has plans to help renters, address racial inequities and encourage energy efficiency. Let’s look at three campaign platform proposals that the new administration might try to implement.
Down payment assistance
For people who want to stop renting and start buying, the administration’s centerpiece plan is the First Down Payment Tax Credit. It would give qualified buyers up to $15,000 that could go toward the down payment. The money would be advanced to buyers at closing, that way they would not have to wait until filing their tax returns before collecting.
Coming up with a down payment is very hard for many would-be first-time buyers. Not having enough saved for a down payment is the main hindrance to homeownership. Low income is another challenge to owning a home.
A tax credit to supplement down payments could help those particular home buyers who don’t have enough money for the down payment and closing costs.
Housing prices increasing
The First Down Payment Tax Credit could accelerate home price growth — and prices already are skyrocketing.
There also aren’t enough homes for sale to meet the buyer demand. The tax credit would increase the number of hopeful home shoppers. Without an increase in the number of homes for sale, the result could be even faster price growth.
With supply being so low, sellers take advantage of their negotiating power over buyers. November’s median home price of $310,800 was 14.6% higher than the median price 12 months earlier.
This is not 2008
Biden’s proposed tax credit is modeled on a home buyer tax break that was in effect back in April 2008 through April 2010. It was intended to hoist the real estate industry out of the Great Recession by incentivizing people to buy homes. That tax credit addressed problems that were the opposite of those that exist today.
In the first quarter of 2008, home prices were falling, and today they’re rising. There was an 11.2-month supply of homes for sale in 2008, nearly five times the figure in November 2020.
Biden’s proposed tax credit would benefit people who can qualify for a loan based on their credit scores and debt-to-income ratios, and could use another $15,000 to put towards their down payment.
The Bush- and Obama-era tax credit bolstered homebuying when it needed a boost. However today, home buying is strong, and the nation needs more homes to be built.
Add and improve housing stock
Biden’s campaign platform calls for housing construction. These details are to be worked out. One goal is to construct 1.5 million homes and public housing units over 10 years with an emphasis on providing homes for people with low incomes.
The plan calls for establishing a $100 billion affordable-housing fund, which would pay to build and rehabilitate housing, and to make existing homes more energy-efficient. Some of the money would be allocated to communities that “encourage more affordable housing” by eliminating exclusionary zoning policies that contribute to sprawl and have been used “to keep people of color and low-income families out of certain communities.”
“Exclusionary zoning” is a term that has long been used in affordable-housing circles and that might hit the mainstream during the Biden era. It refers to land-use policies that restrict high-density or low-cost housing by requiring large lot sizes or banning multifamily housing. The Biden plan calls for using fair-housing regulations and federal dollars to give local governments incentives to revise zoning.
Many of Biden’s affordable-housing proposals are designed to help renters. The most far-reaching of these would be an expansion of Section 8 rental assistance. Because of funding shortfalls, only about 1 in 4 eligible households receive federal rental assistance, according to the Center on Budget and Policy Priorities. Biden’s plan calls for increasing the funding to give Section 8 housing vouchers to everyone who is eligible.
All of these proposals would take time to implement. The most important thing is to handle the crisis of back rent that’s owed due to the pandemic. According to the National Council of State Housing Agencies, at least $25 billion in back rent was owed as of January 2021.