Congress Plan for Housing Market Could Save People Thousands

A bipartisan bill in Congress that aims to help teachers, firefighters and law enforcement officers become first-time homeowners by removing the need for a down payment and save prospective buyers thousands of dollars is misguided, a think tank claimed on Monday.

The HELPER Act, introduced in May 2021 as an amendment to the National Housing Act, got a new lease on life earlier this year as a cross-party group of senators presented a version of the bill in the upper chamber of the U.S. legislative body.

But critics of the bill say that the legislation was focused on the wrong challenge facing the housing market.

« Congress and other supporters have misdiagnosed the underlying problem: Access to financing is not the issue plaguing prospective teachers, law enforcement, and other first responders—it is the lack of housing supply, » argued Tobias Peter, senior fellow and the co-director of the American Enterprise Institute’s Housing Center. « The HELPER Act thus treats the symptom, not the disease. »

housing market
A sign advertises new homes at a construction site in Trappe, Maryland, on October 28, 2022. Congress is trying to pass a new law to help first-time homebuyers.
JIM WATSON/AFP via GETTY IMAGES

The HELPER Act will finance the buying of a home, do away with monthly private mortgage insurance (PMI) that homebuyers pay when they put down less than 20 percent, and incentivize sellers to pay up to 6 percent of closing costs, further reducing payments at the outset of purchasing a home.

The bill comes at a time when a mix of high mortgage rates at a two-decade high, lack of supply and high house prices has made it tougher to purchase a home, a key wealth builder for Americans.

Peter, however, suggested that should the bill pass, prospective buyers it aims to support will enter a housing market that’s struggling to build enough homes to meet demand.

In March, the real estate platform realtor.com revealed that the housing supply gap had jumped to 6.5 million by the end of 2022. By adding potentially more than 6 million new homebuyers without the building of new homes, will just spike prices and make it even more expensive to buy, according to Peter.

Other analysts point out that the HELPER Act will save potential buyers from having to eat into their savings when they try to buy a home.

« The typical first-time homebuyer raids a savings account or uses a 401(k) to make a down payment. Under the HELPER Act, eligible buyers can leave money in the bank for emergencies, to earn interest or furnish a new home instead, » argued Dan Green, CEO of mortgage lender Homebuyer.

The bill has substantial momentum with at least 84 co-sponsors in the House and 11 in the Senate.

But, for Peter, the real issue facing the crisis of home affordability is the lack of new homes. He pointed out that more support should be given to the LIFT Act—another attempt by Congress to provide assistance to homebuyers.

The LIFT Act, as Homebuyer’s Green explained, would create a « government-backed mortgage program for low- and moderate-income Americans » and will modify Federal Housing Administration mortgages « to make them pay off faster. »

What it won’t do is put pressure on the housing market by creating fresh demand for homes where there are very few, according to Peter.

This approach would help reduce the time it takes for homeowners to pay off their mortgages and help build wealth faster, particularly first-time, first-generation people of color.

« Building more housing will take time, but state and local actions that free the market from regulations will eventually enable more Americans to access the American dream of homeownership, » Peter argued.

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