Hillary Clinton is the first major presidential candidate of 2016 to unveil a detailed housing agenda, and among the proposals is one that the Center has been working on closely with policymakers: helping working families to afford down payments on new homes.
Clinton is proposing to support potential homeowners in their efforts to save for down payments with new initiatives for “underserved communities” that would match up to $10,000 in savings. The programs would apply to those homeowners who earn less than the area median income.
Since down payments are often the biggest obstacle to homeownership, this matching program would be a welcome addition to the extremely limited landscape of financial assistance currently available to low- and moderate-income New Yorkers seeking to become homeowners and to build wealth.
Right now, the city provides grants of up to $15,000 for down payment assistance through the HomeFirst program, which sets eligibility at 80% of area median income or about $62,000 for a family of three. But in the city’s hotly contested real estate market, even $15,000 is too little, and even families that earn more struggle to save for down payments.
For instance, at the low end of the market in the Bronx, the median cost of a single-family home in 2015 was $360,000, according to the Department of Finance. If the would-be homeowner were to pay the recommended 20% down payment, the buyer would need to have $72,000 in pocket. That means even middle-income would-be homeowners who could afford monthly payments are priced out of the market by those with enough cash on hand to pay out the steep down payments.
So even if Clinton’s proposals were enacted, in an overheated market like New York City, the would-be low-income or moderate-income home buyer would still be strained to come up with enough cash to afford the down payment.
That’s why the Center and the Coalition for Affordable Homes have been calling for raising HomeFirst program eligibility and increasing the grant amount to $25,000. Another policy tool that could be introduced in the city might be zero-interest loans, such as those available in Austin, Texas (which gives up to $40,000) or San Francisco (which gives up to $200,000). These loans offer home buyers substantial support while also recycling funds back to the city that can be used for other families.
Expanding the HomeFirst program and introducing zero-interest loans in combination with the kinds of proposals that Clinton has put forward could ultimately lower the often insurmountable hurdle of down payments — and keep working class New Yorkers living in the city.
Image: Clinton in Le Claire, Iowa, April 2015. (Credit: Hillary for Iowa)