Lawmakers recognize the struggle with low wages, student loan debt by introducing a First-Time Homebuyers Savings Account Program.
Part of the American Dream has always been the ability to purchase your own home.
But some inevitable circumstances tend to get in the way of the dream, or delay it.
Low wages and high student loan debt are two major blockades for young potential homebuyers.
Pennsylvania lawmakers have recognized the struggle and have introduced a First-Time Homebuyers Savings Account Program, similar to a 529 college-savings plan.
The proposed program, Pennsylvania House Bill 1981, would allow account holders to save up to $50,000 over a maximum of 10 years toward the costs associated with purchasing a new home.
Annual contributions would be capped at $5,000 for single taxpayers and $10,000 for couples filing a joint return.
The measure, providing for the establishment of savings accounts for first-time homebuyers, was introduced by state Rep. Ryan A. Bizzarro, D-Erie County, and state Rep. Rosemary M. Brown, R-Monroe/Pike.
Prime sponsors are Sen. Bob Mensch, R-Montgomery County, and Sen. Wayne Fontana, D-Allegheny County.
Mensch also represents portions of Berks County.
Bizzarro said he co-sponsored the bill because programs that already offer assistance to first-time homebuyers don't go far enough.
In a statement on his website, Bizzarro said: "I introduced this bill because I believe that the benefits of homeownership should be available to all Pennsylvanians, not just those who are wealthier or better established. It's time we joined other states that give new buyers additional incentives to save."
Kim Shindle, director of communications for the Pennsylvania Association of Realtors, said other states that have adopted similar programs are Alabama, Colorado, Iowa, Minnesota, Mississippi and Virginia.
Pennsylvania appears to have wide bipartisan support for the bills, based on the results of an April 11 vote to approve the bill by the House Urban Affairs Committee.
Twenty-five committee members voted in favor of the bill, with two members not voting.
Mensch said he believes the program would benefit the whole commonwealth, including Berks County.
"Since the 2009 financial crisis, the number of first-time homebuyers has decreased significantly," Mensch said. "According to the National Association of Realtors, the share of first-time homebuyers in the national home sales market has fallen from 45 percent to just 32 percent.
"A First-Time Homebuyers Savings Account will be an important tool in helping people overcome the financial obstacles to home ownership," Mensch said.
Mensch said that he believes the overall result of the program will have a positive impact on the state's economy by creating jobs and additional earnings for households.
"This is appealing to our representatives and senators, as we have seen nothing but overwhelming support for it," said Realtor Mark Mohn. "A recent survey showed that more than 80 percent of Pennsylvanians support the program."
Mohn is the legislative committee chairman for the Pennsylvania Association of Realtors and an agent with RE/MAX of Reading, Spring Township.
"To my knowledge, Gov. Tom Wolf wholeheartedly supports this," Mohn said.
Mohn said the program will become an important tool for first-time homebuyers.
"First time homebuyers have more challenges in the marketplace, including finding adequate funds to be able to go through with a purchase," Mohn said. "Fifty-six percent of Pennsylvania residents are dealing with college student loans."
LendEDU ranked Pennsylvania as the state with the highest debt per borrower, with an average debt of $35,185, Mohn said.
"So, that's why many first-time house buyers may not have the capital needed to purchase a home," Mohn said. "But with the First-Time Savings Account Program, family members can contribute to the account."
The program would also identify a first-time homebuyer as anyone who has not owned real estate in the commonwealth for at least three years.
As an example, Mohn said the program would be available to a divorced person, when one party had to leave and rent an apartment for three years or more.
Shindle said the holder of an account would have a tax incentive.
"They would be able to deduct their contributions to the account from their state income taxes," Shindle said. "There would be, however, a 10 percent penalty if the funds were withdrawn and not used for the purchase of a home."
There would also be a requirement that the funds would have to be used for the purchase of a home in the commonwealth.
Any purchases out of state would be subject to the 10 percent penalty.
Mohn said the benefits of the program to the state would be an increase in home sales, which ultimately strengthens communities and the economy.
"Some studies have found that this program would result in an increase of 4,000 homes purchased annually," Mohn said. "But there are also ancillary expenses related to a home purchase, such as furniture or appliances. There are estimates that show the economic impact of those expenses could be between $7.8 million to $68 million.
"A contribution to an account would make a phenomenal wedding gift," Mohn said.
Wesley T. Stefanick, director of government and community affairs for the Reading-Berks Association of Realtors, said the program will be a benefit to the residents of Berks County.
"In Berks County, the First-Time Homebuyers Savings Account program would allow many more people to start saving for their first home," Stefanick said. "These accounts could help more of Berks County's residents and future residents save for their first home.
"Grandparents and parents here in Berks County could open an account for their grandchild and child, but also open a college savings account at the same time and help to alleviate future debt for that child," Stefanick said. "First-Time Homebuyers Savings Accounts are a great financial decision that will ultimately build future wealth."
Mohn said a key to the success of the program will be how it is marketed.
"We are working with a lot of friends in the banking industry to get the word out and let people know that this exists," he said.
Mohn said the Pennsylvania Association of Realtors is hopeful that the program will be approved by both the house and the senate before the end of this year.
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