President Bush signed into law the first American Dream Down Payment Act on December 16, 2003. The legislation created the American Dream Down Payment Initiative to provide grants and loans to help families whose income was below 80 percent of their local median income. Besides down payments, costs covered by the program include origination fees, credit reports, fees for title evidence, fees for recordation and filing of legal documents, attorneys’ fees, and private appraisal fees. The maximum down payment grant is $10,000 or 6 percent of the purchase price of the home, whichever is greater. The average subsidy is approximately $7,500. HUD administers the ADDI as part of HUD's HOME program.
On August 3, 2010, Senators Doug Jones of Alabama (D) and Cory Gardner of Colorado (R) introduced the American Dream Down Payment Act of 2020. Senator Sherrod Brown of Ohio, the Ranking Member of the Senate Banking & Housing Committee, is also an original cosponsor of the legislation. Congressman Gregory W. Meeks (D-NY) and Congressman Al Green (D-TX) introduced a companion bill in the House on September 4th.
The goal of the legislation is to help prospective homeowners save for a down payment by creating special tax-advantaged savings accounts for eligible housing costs. These accounts are modeled on the popular 529 Plan that encourages families to save money to pay for future education expenses by exempting them from federal income taxes.
The legislation would:
• Let states establish American Dream Down Payment Accounts, which they would manage in the same way they manage 529 Plan accounts today;
• Allow prospective homeowners to save up as much as 20 percent of today's housing cost, indexed for inflation, to use for an eligible down payment and other housing costs;
• Facilitate long-term savings for a down payment and allow contributions from family and friends; and
• Allow homebuyers to use their American Dream Down Payment Account savings and earnings for tax-free withdrawals for eligible expenses.
The National Association of Real Estate Brokers, Habitat for Humanity, and the National Association of Realtors support the legislation.
