Eight out of ten American potential homebuyers do not buy a house because they cannot afford it. The National Association of Realtors (NAR) Board of Directors wants it to be easier for American citizens to buy a house, particularly through a tax program.
In 2016, the Board voted to support tax incentive programs for individuals who want to save money for a down payment. But the big question is: what does that mean for the potential homebuyer?
Essentially, this vote means that the NAR is making a policy decision for the trade group and its members. The decision, in brief, states that the Association supports policy changes at the the state government level to create homebuyer saving account programs.
These homebuyer saving account programs are special due to the fact that they are exempt from taxes on interest and capital gains at the state and federal level.
Other policy areas use saving accounts in similar ways, such as the 529 college savings accounts that do not incur taxes as long as the funds withdrawn are used on college expenses.
“NAR believes individuals or families saving for homeownership should be able to put a percentage of income or maximum amount of funds into an account that is tax free to be used within a specified amount of time for the purchase of a home,” NAR Spokesperson said.
The homebuyer saving account are usually for first time homeowners, although returning homebuyers may be able to cash in, depending on their state. This program tends to be packaged for the first time homebuyer who is seeking to go all in on their first real estate purchase.
“The support of this vote from the NAR Board of Directors has lead to changes at the state policymaking level.”
After the Board decided to enact this decision, the NAR Community and Political Affairs Division, along with state level Realtor organizations, lobbied to pass legislation at state legislative chambers. The partnership efforts included resources to legislators to support the economic case for these accounts.
States that passed this legislation just this year already include Iowa, Mississippi, and Minnesota. Two states, Colorado and Virginia, already had the program initiated before this past legislative session.
The program will continue into 2018 as several state REALTOR® associations will prioritize passing First Time Home Buyer Saving Account (FTHBSA) legislation with NAR assistance.
Will this type of legislation prove effective in stimulating home ownership? Time will only tell, but in the meantime, first time and returning homebuyers will be saying a big “thank you” to the states that have the policy.