Are $25,000 Grants For First-Time Buyers Really Possible?

The political season is underway and the debates and arguments have quickly shifted to real estate, mortgages, and housing. Both the Harris-Walz and Trump-Vance platforms touch on real estate issues, but now a specific proposal from the Harris camp is getting a lot of attention.

Harris wants a federal program to provide up to $25,000 in down-payment grant assistance. If passed it would help more than four million first-time buyers. But while such a program sounds enticing, how will it work, and what are the pros and cons?

Big Programs Are Made in Washington

The Harris plan simplifies proposed legislation that has been on Capitol Hill for several years, the Downpayment Toward Equity Act (DTEA). Although the DTEA grants are backed by many national and local organizations, it’s gotten nowhere.

Why? First, Washington is divided into hostile camps. Something supported by the Jones faction will be opposed almost automatically by the Smith group, and vice versa. Second, it’s a big, complex proposal with a lot of features to work out — and enormous amounts of money at stake.

Providing $25,000 to four million homebuyers will cost $100 billion. This is a lot of money, even in Washington.

However, when it wants to get something done, the federal government has been willing to spend colossal sums of money — think of the national highway system, the space program, or in 2022 the $280 billion CHIPS Act to boost domestic semiconductor manufacturing.

Such massive programs spread money and create jobs across states and congressional districts to achieve a given purpose, and the idea of a new national housing effort is not any different.

Who Gets The Money?

The Harris announcement says the plan will provide those “who have paid their rent on time for two years and are buying their first home up to $25,000 in down-payment assistance.” However, the full-blown program will have other standards as well, as can be seen from the 2023 version of the DTEA proposal. Here are some of the likely requirements.

First, participation is limited by income — you must earn less than a certain amount for a given area to qualify for a grant.

Second, you must be a first-time home buyer. That means you have not owned a property during the past three years.

Third, money from the program can be used for down payments as well as interest-rate reductions and to offset closing costs. For example, qualified borrowers might get a $450,000 FHA mortgage with 3.5% down ($15,750) and have enough left over to cover a variety of closing costs and maybe even all closing expenses.

Fourth, the program is open to various housing choices. You can use program funds to buy a single-family property, condo, co-op, or manufactured home.

Fifth, you can buy a single property with one-to-four units, provided that one unit is used as a prime residence. This opens the program to first-time purchasers who want multi-generational housing or are looking for rental income.

Can The $25,000 Grant Proposal Succeed?

DTEA legislation proposed in 2021 and 2023 has gotten nowhere on Capitol Hill, but will support from Harris help the grant program get enacted?

We don’t know the answer, in part because of cost ($100 billion is a big number for both parties) and complexity (there is no shortage of easier bills to consider). Another factor is that the election is several months away.

We don’t know who will win the presidency or the House, the Senate, or maybe both chambers. The election outcome could very much impact the grant proposal.

There are a lot of ideas floating around Capitol Hill at any time, and the odds of passage are not good. Gov Track reports that as of this writing, 17,052 pieces of legislation have been introduced in the current Congress and just 270 – about 2% — passed. 

The fact that a bill is enacted does not mean the original language becomes law. As proposed legislation floats through Congress, there are numerous opportunities for revisions, additions, and subtractions.

The result is a bill that starts with one core idea can be reborn with strange and curious changes. For example, with “equity sharing” a residential real estate owner and a non-resident investor owner can both get tax write-offs from the same property.

How did this real estate tax provision become legal? It’s included in the Black Lung Benefits Revenue Act of 1981, legislation to help coal miners.

Political platforms can be seen as a combination of wish lists and marketing, but they also give us some idea regarding what candidates are thinking and sometimes include bits and pieces that become law. Will the Harris proposal get serious hearings on Capitol Hill?

We’re unlikely to have an answer before January when a new Congress is sworn in.