What's in the Build Back Better Bill for Homebuyers?

H.R. 5376, better known as the Biden-Harris Build Back Better bill, could give future homeowners the leg up they desperately need.

The bill passed the House on November 19, 2021, and is in line to be reviewed by the Senate. If passed there, it would go to the president to be signed into law.

While there’s still a long way to go, here are the most homebuyer-relevant aspects of the bill as it reads now.

$20,000 first-time, first-generation homebuyer grant

The part of the bill that has homebuyers most excited is a substantial down payment grant.

Up to $20,000 or 10% of the home price would be available for first-time, first-generation homebuyers. They could use the funds toward the down payment, closing costs, and even discount points to bring down the mortgage rate.

No repayment is required if the buyer remains in the home for five years.

Earlier in 2021, a bill emerged called the Down Payment Toward Equity Act, which called for a $25,000 grant, $5,000 of which was reserved for “socially and economically disadvantaged individuals.” This update removes the bonus amount and any mention of the “disadvantaged” classification.

Homebuyers would have to attest that neither they nor their parents have ever owned a home, but no further proof would be required.

The passage of the bill could mean a big boost to homebuying budgets, especially those without the benefit of generational wealth from real estate-owning parents. Student loan payments, inflation, and skyrocketing home prices and rents have not been friendly to those who do not yet own a home.

About $9 billion would be available, after administrative costs, for the First-Generation Downpayment Assistance Program, as it is called in the bill.

Assuming a $20,000 grant for each qualifying buyer, the fund could assist up to 455,000 first-generation homebuyers purchase a home between 2022 and 2026.

Combining data from the National Association of Realtors (NAR) and the U.S. Census Bureau, around 7 million homes are sold per year, about 34% of those going to first-time buyers.

It’s not known how much of that 34% (2.38 million) first-time buyers are also first-generation buyers. But with up to 455,000 grants available, the bill could go a long way toward helping people become the first in their family to become homeowners.

The $20,000 grant could end up being one of the most popular pieces of the massive Build Back Better Act, which spans 2,468 pages.

Rental assistance

One of the biggest expenses pre-homeowners face is rent.

Rents are on a tear, rising 10.2% from the previous year in September 2021, according to CoreLogic.

As rents increase, it becomes harder for would-be homebuyers to save for a down payment. That’s why rental assistance could be another piece of the bill that could help homebuyers.

The Build Back Better bill provides $25 billion toward rental assistance, especially for the most vulnerable renters. An additional $65 billion would be allocated to public housing.

Another $15 billion is set aside to build or preserve affordable rental homes. The National Low Income Housing Coalition (NLIHC) estimates that 150,000 homes could be constructed or maintained for those who need them most.

Increased housing supply

According to a Whitehouse statement, the bill would “enable the construction, rehabilitation, and improvement of more than 1 million affordable homes, boosting housing supply and reducing price pressures for renters and homeowners.”

Specifically, the bill would provide low-cost capital to state housing finance agencies to develop affordable housing, according to a Whitehouse fact sheet.

Additionally, the bill would increase Fannie Mae’s and Freddie Mac’s ability to back manufactured home loans and those for 2-4 unit properties. These property types offer a lower-cost alternative to traditional single-family homebuying. Manufactured homes often come with a lower price tag, but are harder to finance through traditional methods.

Properties with two to four units can also be less expensive monthly, since the buyer can rent out additional units as long as they live in one, in many cases.

Finally, regular homebuyers and non-profit organizations would get the first chance at bidding on government-owned foreclosed homes – before large investors. This could allow families to purchase and live in lower-cost homes rather than have them scooped up by large investment firms.

Build Back Better: should homebuyers wait to buy?

Though the bill is not yet law, it provides hope for homebuyers who may be discouraged because of lack of savings, few homes on the market, and fast-rising prices.

This bill seeks to address those issues from different angles, some more direct than others.

The outcome could be a bigger selection of affordable homes and a down payment to acquire them, if all goes according to the Administration’s plan.

But for those who are ready to buy now, it may not be worth waiting for the bill to become law and its initiatives to take effect. Home prices could climb in the meantime, and so could mortgage rates. And there’s no guarantee that the most direct help, such as the $20,000 grant, would be included in the final bill.

But for those whose homebuying horizon is a year or two away, this bill could certainly give their homeownership goals a real boost.