The House Committee on Financial Services (FSC) held a virtual hearing
last week on ways to provide equitable and affordable housing infrastructure. The
memorandum setting out the hearing’s purpose stated that, not only is affordable
housing a crucial part of the nation’s infrastructure and a stable asset that boosts
individuals, families, and communities’ ability to thrive, but it also
generates construction activity and jobs that stimulate the economy.
Prior to the hearing the FSC published 17 draft bills centering around
housing that have been introduced into the current congressional session. They
deal with everything from flood insurance to lead paint abatement to housing on
Native American lands. One proposal, presented as a draft for discussion, is the “Downpayment Toward Equity Act of 2021.” It
is of particular interest because it builds on a much discussed housing policy
set out during the presidential campaign.
As a candidate, Joe Biden proposed investing $640 billion over 10 years to assure every American “has
access to housing that is affordable, stable, safe and healthy, accessible,
energy efficient and resilient, and located near good schools and with a
reasonable commute to (homeowners’) jobs.” He laid out four points to accomplish
Ending redlining and other discriminatory and unfair
practices in the housing market.
Increasing the supply, lowering the cost, and improving the
quality of housing, including through investments in resilience, energy
efficiency, and accessibility of homes.
Pursuing a comprehensive approach to ending homelessness.
The fourth point, “Providing
financial assistance to help Americans buy or rent safe, quality housing,
including down payment assistance,” was to include “a refundable and
advanceable tax credit and fully funding federal rental assistance.” The tax
credit was proposed at $15,000.
discussion draft differs substantially from Biden’s pre-election vision for
direct assistance to homebuyers. It isn’t known if the President was consulted
or had any input into its content, and there is no guarantee it will ever
become a formal bill let alone law, but here is a brief summary.
The stated purpose
of the draft is to provide downpayment assistance to first-generation
homebuyers to address multigenerational inequities in accessing homeownership
and to ultimately close the racial homeownership gap in the U.S. That
assistance is not in the form of a tax credit, but rather an advance grant
which can be used for a downpayment, closing and associated costs, or to buy
down interest rates on qualified mortgage loans. The funds can also be layered
with other assistance from state, federal, local, private, public, and
nonprofit sources to acquire the home.
The grants are limited to low-income buyers who fall within a yet
unspecified dollar cap or one tied 120 percent of an area’s median income (180
percent in “high cost” areas). Biden’s $15,000 has become $20,000 with another
$5,000 available to individuals deemed to be members of a socially
To be eligible for the assistance the homebuyer must meet
23 qualifications. In addition to the income cap, these include that a buyer must
be a first time homebuyer (and his/her spouse) or has not owned a home during
the prior three-year period. In addition, his/her parents or legal guardians have
not owned a home during the prospective homebuyer’s lifetime or, if they did,
that home was lost through an adverse process such as foreclosure. An exception
to this generational rule is allowed for a prospective buyer who has ever been in
Applicants for assistance must receive homeownership
counseling for an approved source and meet the underwriting standards and
dollar loan limits for a mortgage as established for the GSEs Fannie Mae and
Assistance is available to purchase an owner occupied one
to four unit property. To prevent “flipping” the prospective buyer will be
required to repay 100 percent of the assistance if he/she ceases to occupy the
property within the first 12 months following its acquisition. The repayment
obligation declines 20 percentage points for each 12-month period thereafter,
to 20 percent prior to the end of the 60th month. Repayment is
waived in whole or part if the proceeds from the home’s sale are not adequate
to cover the amount due.
State finance agencies would administer the programs but could assign
responsibility to community based non-profit organizations. Funds would
be distributed to the states via a formula based on population, median area
income and racial disparities in homeownership. The national gap in
homeownership between white and Hispanic households in the fourth quarter of
2020 was 25 percent and nearly 30 percent between black and white households.