Senators Doug Jones and Cory Gardner Introduce the American Dream Down Payment Act of 2020

Bipartisan bill would create savings accounts to allow prospective homebuyers to more easily save for down payments and other eligible costs associated with buying a home 

WASHINGTON – U.S. Senators Doug Jones of Alabama and Cory Gardner of Colorado today introduced the American Dream Down Payment Act of 2020. The bipartisan legislation would help prospective homeowners save for a traditional 20-percent down payment by creating special tax-advantaged savings accounts for eligible housing costs. These accounts would be similar to the popular 529 Plan accounts that encourage people to save pre-tax money to pay for future education expenses. Senator Sherrod Brown of Ohio, Ranking Member of the Senate Banking & Housing Committee, is also an original cosponsor of the legislation.

A recent survey cited by the Urban Institute found that more than two-thirds of renters view the down payment as a barrier to owning a home. As rents and student loan debt rise, it can be harder for prospective homeowners to save for a down payment, especially if they are a first-time homebuyer or aren’t able to receive help from family members. And while the nation-wide homeownership rate is relatively stable, there are significant disparities in homeownership by age, race, and ethnicity. The Black homeownership rate fell to a 50-year low in 2016, at just 41.7%, and remains nearly 30 points below the white homeownership rate. Millennials are less likely to own a home by 34 than their parents or grandparents were. If these trends continue, a growing number of Americans will be locked out of homeownership.

“As the coronaviruspandemic continues to devastate our nation’s economy, it is getting even harder for many folks in Alabama and across the country to put money away in savings and to work toward the American dream of owning a home,” said Senator Jones, a member of the Senate Banking & Housing Committee. “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 home-ownership. 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.”

“A down payment on a home can be a significant barrier to becoming a homeowner,” said Senator Gardner. “Inspired by the popular 529 education savings accounts, this bipartisan bill will make it easier for people to save for a down payment, which will aid both our unique housing challenges in Colorado and our economic recovery from the COVID-19 pandemic. I’m proud to work with Senators Jones and Brown to help more families achieve the American Dream and own a home.”

“Borrowers of color have been locked out of affordable homeownership for decades. The gap in Black and white homeownership rates remain as large now as it was before the Fair Housing Act was signed into law,” said Senator Brown. “These troubling and persistent inequities in homeownership rates have prevented generations of Black and brown families from obtaining the American dream of owning a home. The American Dream Down Payment Act is a new tool to help make homeownership a reality.”

“The introduction of the American Dream Down Payment Act offers Black American families and individuals the opportunity to build legacy wealth through homeownership. The ability to accumulate tax-free savings funds breaks down/eliminates one of the most prominent barriers to achieving homeownership, the down payment. This Act serves as a tangible springboard to increase Black homeownership and real wealth-building prospects which the National Association of Real Estate Brokers (NAREB) includes in the meaning of its time-honored slogan, Democracy in Housing,” said Donnell Williams, National President, National Association of Real Estate Brokers.

The American Dream Down Payment Act would:

  • Let states establish American Dream Down Payment Accounts, which they would manage in the same way they manage 529 Plan accounts today;
  • Allow prospective homeowners to save up as much as 20% of today’s housing cost, indexed for inflation, to use for eligible down payment and other housing costs;
  • Facilitate long-term savings for a down payment and allow contributions from family and friends; and
  • Allow homebuyers using their American Dream Down Payment Account savings and earnings to use those funds tax-free at withdrawal for eligible expenses.

To protect American Dream Down Payment Account holders, the Securities and Exchange Commission would be required to set standards for the investments of eligible accounts and allowable fees.

This legislation is supported by the National Association of Realtors, Habitat for Humanity, and the National Association of Real Estate Brokers.

Text of the legislation can be found here.