Democratic lawmakers introduced new legislation today to help first-time homebuyers grappling with soaring house prices with a tax credit of up to $15,000 as part of President Joe Biden’s bold housing agenda.
The First Time Homebuyer Act, led by US Rep. Earl Blumenauer (D-OR) and Rep. Jimmy Panetta (D-CA), will create a refundable tax credit worth up to 10% of the purchase price, or $15,000. Taxpayers can choose to treat the purchase of their home as occurring in the prior taxable year to receive the credit sooner.
As housing prices and demand continue to rise to unprecedented levels, homeownership barriers for low- and middle-income Americans are growing as well. The tax break aims to combat the country’s affordability crisis by incentivizing first-time homebuyers, particularly those among historically marginalized communities.
“The goal of homeownership is out of reach for too many families, as housing prices rise on the Central Coast and throughout California, even in this pandemic. The homeownership gap especially impacts families of color, who for too long have been disproportionally deprived of building wealth through homeownership. Families need help purchasing their first home, so they can fully achieve the American dream,” Congressman Panetta said.
To be eligible for the full credit, borrowers must not have owned or bought a home in the past three years. They must also meet income limits of 160% or less of their area median income and purchase a home at or below 110% of their area’s median purchase price.
Sunny Shaw, president of the National Association of Housing and Redevelopment Officials, believes that the tax break will boost homeownership and help ease the affordability problem. Rob Dietz, chief economist at the National Association of Home Builders (NAHB), thinks its surrounding context and detail will be key to its success..
“It’s certainly a positive step, particularly for frustrated first-time homebuyers that are looking for that additional financial boost to try to attain homeownership,” Dietz told MPA in an interview. “Right now, however, the challenge in the market is on the supply side. Even if you boost demand, you still have to solve some of the supply-side challenges that are limiting inventory because the risk would be that you would increase demand, further boost home prices as demand increases and, without a corresponding supply response, you would just then offset some of the benefits that would come from the tax credit.”