By John Finnerty

CapitolWire

The state House overwhelmingly approved legislation to create a tax-deductible savings program for first-time homebuyers. Money deposited into these accounts can be used for the down payment and closing costs for a single-family home in Pennsylvania.

The program would allow individuals to save as much as $50,000 toward the cost of a home. Couples could save as much as $100,000. Would-be homebuyers could deduct the amount contributed to the savings accounts when they file their state income tax.

The program would be similar to other tax-exempt savings programs, including the 529 plan that allows parents to save for their children’s college tuition.

“There’s no feeling like saving up the money and purchasing your first home, but today that’s becoming increasingly difficult with rising interest rates and other financial barriers,” said Rep. Ryan Bizzarro, D-Erie, the prime sponsor of House Bill 818. “We estimate that this legislation could help up to 4,000 more people buy their first home in Pennsylvania each year.”

House Bill 818 was approved by a 183-20 vote.

Rep. Thomas Kutz, R-Cumberland, said people trying to sell their homes also stand to benefit from the program because there will be more buyers competing to buy homes. Would-be homebuyers could save as much as $5,000 a year for individuals or $10,000 a year for couples. Those using the program would only be allowed to deposit into the savings account for 10 years.

Varying cost estimates

The effort could cost the state as much as $103 million in lost revenue, depending on how many people sign up, starting in 2025-26.

It would cost the state between $13.6 million and $19.9 million, if half of eligible buyers use the account, and save approximately 10% of the median existing home sales price in Pennsylvania, according to a fiscal note completed by the House Appropriations Committee. If all eligible first-time homebuyers participated in the program and contributed the maximum amount allowed, it would push the state’s cost into the $103 million range.

Shapiro proposal

The proposal is just one front in the struggle to help deal with housing affordability.

Gov. Josh Shapiro has proposed providing $10 million for state grants to help first-time homebuyers with closing costs, including a down payment, as a way to help move people out of the rental market.

He has directed the state Department of Community and Economic Development (DCED) to present a draft housing action plan with specifics on proposed programs by September.