The question we should be asking about Kamala Harris’ down payment grant proposal, Dr. Lee Davenport writes, is, “Will anyone jump through hurdles to take part in the program?”
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With election day less than one month away, there has been much talk about a particular proposal by Vice President Kamala Harris, so let’s get into it:
“My administration will provide first-time homebuyers with $25,000 to help with the down payment on a new home.” – Vice President Kamala Harris
I have seen a range of Instagram comments, some showing excitement like, “This is major! This absolutely needs to be in place,” by Quiana Watson, reality TV and luxury real estate broker. And, “Omg I could maybe afford a house. That would change my life,” by commenter Jill Anderson.
I have also seen concerned discourse via email that expresses that Harris’s grant (and other proposals) would be, “inflationary at best and would be crippling of an already weak economy at worst,” by Greg Blatt, past president of Dayton Realtors.
To borrow from Shakespeare, there has been “much ado” — perhaps over nothing.
Quiet as it is kept, Harris’s plan to offer $25,000 for first-generation, first-time homebuyers is already on the books. The Downpayment Toward Equity Act — also known as the $25,000 First-Time Home Buyer Grant or the Downpayment Toward Equity Act — would give eligible first-generation first-time homebuyers in the U.S. up to $25,000 to put toward the purchase of a home.
The funds could be used for costs such as the downpayment, mortgage closing costs or a lower mortgage rate. The Act was originally introduced in 2021. It is still in the current administration’s budget proposal; however, it has not been enacted yet.
But what if Harris’s administration, if elected, miraculously compels the stars of the Senate and House to align?
As an affordable, fair housing educator, who has helped many a first-time homebuyer use downpayment grant programs (there are over 2,415 which help to increase homeownership), I believe the next and better question (if the act or some variation is finally passed) is not how it will impact the economy but, rather, whether sellers will work with homebuyers who use such downpayment assistance.
The adoption of the program and participation by homesellers will determine if this becomes even a blip on the economy’s radar. Historically, the answer is some sellers will work with down payment assistance programs, but a lot more will not (many of us know this anecdotally).
This is especially true if the downpayment program is structured like existing programs, which may require extra time for homebuying classes, inspections and additional financial verifications, whether those time and administrative obstacles are exaggerated or true horror stories.
A speedy commenter on Instagram underscores that some homesellers resist such programs:
“Can’t wait to raise my house price another [$]25,000 above asking (guess who pays the additional PMI, taxes and interest?)”
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Again, this highlights that the first question is not how this impacts the economy but whether homesellers will participate despite historical trends and negative sentiments.
To add a few more hurdles to this herculean journey, “source of income” (which these assistance funds would fall under) is not a federally protected class. That means only the handful of locations that have “source of income” protection laws with general provisions that cover down payment assistance could possibly penalize homesellers for rejecting a homebuyer solely on using down payment assistance funds.
Again, historically, the disregard of “source of income” protections happens more than it should. Case in point, the housing choice voucher program (a.k.a. “Section 8”) has the most legal protections of the “source of income” designation currently. Notwithstanding existing laws, a recent lawsuit was filed against 203 California landlords and their representatives — including major real estate brokerages.
Unsurprisingly, some first-time homebuyer grant programs end a fiscal year still funded because of how much harder finding a suitable home is for prospective homebuyers using downpayment assistance.
Thus, before forecasting the impact on the economy, we really need to hear (and help strategize, since we have boots on the ground) how a federal downpayment grant program will be administered in a more homeseller-friendly way to circumvent the hurdles that other downpayment grant programs (as well as other “source of income” programs like “Section 8”) have documented in detail.
Otherwise, the economic impact will likely be inconsequential — and the grant program becomes more a token of goodwill rather than a substantive and widely adopted program.
Dr. Lee Davenport is a real estate coach/educator and author who trains real estate agents to provide access and opportunity in real estate. Connect with her on Instagram.
