In the quest to boost homeownership, a new bill has been floated that could gain enough bipartisan support to take flight: a tax-free homeownership savings account. For potential investors, should the bill pass, it offers a low barrier to entry to begin their investing careers.
Targeting First-Time Homebuyers, but It Helps Newbie Investors Too
Representative Haley Stevens (D-Mich.) has just introduced the Homeownership Savings Act (H.R. 9709), which aims to help first-time homebuyers save for a down payment and closing costs. Eligible buyers could deduct their contributions from taxable income (within set limits) and withdraw them tax-free, as long as they are used for qualified home purchase expenses such as down payments and closing costs, Newsweek reports.
Using the Program to Buy a Small Multifamily Home
Of particular interest to potential real estate investors is the likelihood that the program will extend to small owner-occupied multifamily buildings (two-to-four-family), allowing first-time homebuyers to house hack and have their tenants’ rental income cover the mortgage while they save enough money to buy property No. 2.
Although the act applies only to first-time homebuyers, not second or third properties, it could be an invaluable first step toward starting an investment career and benefiting from rental income, depreciation, and other tax breaks that owning an investment property offers.
“The Homeownership Savings Act addresses a real barrier by allowing first-time buyers to save in a tax-advantaged account specifically earmarked for a down payment, which could meaningfully shorten the savings timeline for moderate-income households who are otherwise competing against rising prices and high rates,” Hannah Jones, senior economic research analyst at Realtor.com, told Newsweek.
How the Bill Would Actually Work
The bill would enable first-time homebuyers to save money in a dedicated account for homebuying expenses only. They would be able to deduct contributions from their taxable income, provided they adhere to the annual limits.
Savings would then be able to grow tax-free, as with other tax-free accounts, such as Roth IRAs or 529 college saving plans. Borrowers can withdraw funds tax-free when they are used specifically for home purchase costs.
What Are the Limits on Saving?
Per the Newsweek article, the lifetime contribution is $40,000 per buyer. The annual tax-deductible contributions vary by filing status: $3,000 for married couples filing jointly and $2,500 for head of household. For single filers, the limit is $2,000.
The bill also allows employer contributions, potentially shortening the savings timeline for eligible workers. But the limits are still low—more on that later.
Who Qualifies?
Qualification is targeted toward first-time buyers with limited incomes. All funds must be used for first-time home purchases and cannot be repeated for additional homes.
Although the savings limits are low, for potential investors, combining this with an FHA loan, which requires a 3.5% down payment (or a 3% down payment), and then bolstering it with rental income from tenants means there is a low-cost path to buying a first investment property. However, this is only likely to work in very affordable housing markets.
“With home prices up 60% nationwide between 2019 and 2025, it is increasingly difficult for young families to achieve the dream of homeownership,” Stevens’ office said in a press release.
The Affordability Conundrum
While the sentiments behind the plan are valid, the numbers are woefully off. At a savings rate of $2,000-$3,000 a year, potential homebuyers enrolled in the plan will likely never catch up to rising home prices.
Drew Powers, founder of Illinois-based Powers Financial Group, told Newsweek:
“This does nothing to address affordability, which is the real issue in housing. The current median new home price is nearly $400,000. After saving $3,000 per year to a $40,000 cap, a decade has passed, and the saver would have barely a 10% down payment on today’s prices, let alone what home prices will be 10 years later.”
Despite the obvious drawbacks, Newsweek reports that several industry groups, including the Mortgage Bankers Association, the Michigan Bankers Association, and the Community Economic Development Association of Michigan, have voiced their support.
As H.R. 8709 is still in the early stages of the legislative process, Newsweek contends that modifications to savings limits are likely. This could work alongside the White House initiative to allow would-be homebuyers to use their 401(k)s as down payments, thereby increasing the down payment amount.
Down Payment-Saving Strategies
Assuming that a would-be homebuyer requires 3% for a down payment and 2%-5% for closing costs and other fees and wishes to achieve their goal of saving $30,000 in three years, The Wall Street Journal calculates potential buyers would need to save $830/month. Multiple strategies working together will help buyers reach that target faster.
Cut down on housing expenses
If lowering your housing costs seems like an oxymoron, in the current climate, it’s not as outlandish as it sounds, but it might mean some inconvenience.
Living with roommates or moving back in with parents are tried-and-true ways to lower housing costs. Other methods include remote working and living in an affordable country as a digital nomad. That is also a savvy way to jump-start your real estate investing career, should you stay overseas and continue to acquire investment properties, deducting taxes and renovation costs in the process.
Forgo luxuries
Extra Starbucks runs, DoorDash, eating out, travel, and streaming subscriptions all add up. Forgoing luxuries to reach your investment goal will be more than worth it in the long run.
Use side hustles and gifts
A 2026 guide from AmeriSave mentions that strategic side hustles, such as Uber/Lyft driving, dog walking (which can net six figures in some cities), tutoring, and many more, can contribute to sizable additional income. AmeriSave also mentions websites such as Zola and Honeyfund, where friends and family can contribute financially to wedding registries, baby showers, and milestone birthdays.
Final Thoughts
While readers and viewers of BiggerPockets are used to hearing about investors talking blithely about the number of doors they own, it’s always worth remembering that they started somewhere. That’s unless they were handed an investment portfolio by their parents, which usually started with an owner-occupied home they later used as an investment property or a small multifamily home they house-hacked.
Getting to that all-important first home and having it pay for itself is an invaluable first step toward freeing you from a housing obligation that financially strangles most Americans. That’s why incorporating any savings strategy that helps you buy your first small multifamily building is something worth taking seriously.
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