The 2020 presidential election certainly was a heated one, but one issue that never really seemed to command the spotlight was housing. Rather, the candidates had bigger things to argue over, such as the handling of the coronavirus pandemic and plans to dig the U.S. economy out of its current hole.
But now that we have a winner (wasn't that the longest week ever?), it'll be interesting to see how a Biden presidency impacts homeownership. In fact, Biden has a rather comprehensive plan mapped out on his campaign site that covers everything from affordable housing to eliminating discriminatory lending practices. But one major point of interest for budding real estate investors is Biden's targeted tax credit.
Is a new tax credit on the way?
Biden is proposing the First Down Payment Tax Credit, a refundable and advanceable credit worth up to $15,000 for qualified buyers. Biden's intent is to make that money available at the time buyers seek to purchase a home; they won't have to wait until they file a tax return to get it.
The specifics of how the credit, if passed, will actually work are a bit hazier. While it's clear, based on the name of the credit, that only first-time buyers will be entitled to a monetary award of up to $15,000 for home purchases, the details of who qualifies need to be ironed out.
That said, Biden's campaign site specifically states that his First Down Payment Tax Credit builds off of a temporary tax credit that was part of the American Recovery and Reinvestment Act of 2009, which was passed to help the economy move past the Great Recession. For that credit, qualifying buyers needed to have not owned a home during the three-year period prior to claiming it.
An opportunity to start investing in real estate?
Finances are often a barrier to getting started in real estate investing. But while Biden's new tax credit could certainly make homeownership a lot more attainable for many families, it won't necessarily spark a huge investing surge right away.
For one thing, if the rules that apply to the new credit are the same as the ones that applied under the American Recovery and Reinvestment Act, the credit will only be available for homes used as a primary residence; vacation homes and rental properties will not qualify. Also, $15,000 isn't a whole lot of seed money, given the way home prices have spiked over the past few months.
In September, the median U.S. home price was $311,800. Back in January, it was $266,200. Unless housing prices come down substantially between now and when Biden's credit is implemented (assuming that happens), $15,000 won't so much as get buyers out of paying private mortgage insurance, assuming they don't have additional funds.
The Millionacres bottom line
Still, if the First Down Payment Tax Credit does go through, it will undoubtedly help a lot more people break into homeownership, and once they have that stability, they may be more apt to go out and start building individual real estate empires, slowly but surely. As such, Biden's credit could, in due time, actually work wonders in helping budding investors set themselves up with extensive -- and impressive -- portfolios.