First-Time Home Buyers Savings Account

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COLUMBIA — Missouri lawmakers are pushing a bill that could make it easier for people buying a home for the first time - and it could further aid those seeking to buy a home in Columbia.

The bill would allow Missouri residents to set aside money in a first-time home buyer savings account and deduct state taxes on half of the contributions. The funds could be used for a down payment, closing costs and other fees for buying a home.

A lobbyist for the Missouri REALTORS said House Bill 1796 - the First-Time Home Buyers Savings Account Act, which is receiving bipartisan support - would make it easier to purchase a home in Missouri.

"This is a great opportunity to help with the barrier that keeps most people from being able to purchase their first home," Adam Davis said.

"It allows people a little bit of a fiscal advantage when it comes to the home-buying process, so they can put money aside in the savings account, and then when it comes time to purchase their first home, they have that money there."

First-time home buyers often begin their careers with student debt and minimal savings, said Rep. Becky Ruth, R-Festus, who proposed the bill.

"So that's a lot of money to have to come up with all at once," she said.

The U.S. Census Bureau reports that only 36 percent of adults younger than 35 own homes. But that's not necessarily for lack of interest.

Millennials put off home ownership by an average of seven years with more than 80 percent blaming student debt, according to a joint study by the National Association of Realtors and the American Student Assistance. And Davis said it could affect many more.

"This is a great way to help anyone that's going to purchase their first home, from those that might have lost a lot of money during the last recession, and they're just rebuilding from that, and want to put some money aside in hopes to buy their first home,"  Davis said.

"But it's going to have a great impact on the millennials that are facing the crisis of student-loan debt."

Davis also said the program could be helpful in retaining residents. He said those who invest in a state savings program would be unlikely to leave their savings behind.

Columbia residents who qualify would be able to use the state savings account and the city's Homeownership Assistance Program.

The program provides down-payment assistance to low-income home buyers, and offers other home repair programs.

A housing specialist for the city said this would be a great opportunity for residents.

"We see a lot of folks who definitely need additional help in getting assets for their down-payment," Gary Anspach said.

"Folks who are putting money into that savings account, as long as they meet our asset-guidelines, they would still be eligible for our down-payment assistance."

The city program aids those who have less than $15,000 in readily-available assets, which does not include retirement accounts or mutual funds. The First-Time Home Buyers Savings Account would apply.

Some Missourians thinks this will directly address the need for affordable housing and the nationwide student-loan problem.

"I know very few who want to do lofts in downtown Kansas City, but everybody that I know my age wants to buy a house," said Micah Bottemuller, a Lee's Summit resident in his mid-20s. "They just don't know the best steps to do it."

The accounts would work similar to a 529 plan, which is a tax-advantaged savings plan designed to encourage saving for future college costs.

The state of Montana, where approximately 2 to 5 percent of eligible residents utilize the program, is one of seven states that has passed similar legislation.

The program would cost the state about $4.4 million a year once fully implemented, according to a fiscal estimate, but that estimate includes every eligible first-time home buyer opening an account and contributing the maximum amount.

Davis said a more realistic fiscal impact, if a similar percentage of people as Montana use the program, would be less than $100,000.

The bill passed in the House but awaits action in the Senate - if passed, it would take effect in January 2019.