Starting summer 2022, Kansans can open a first-time home buyer savings account
Gov. Laura Kelly on Monday signed into law Kansas House Bill 2187, which allows for the creation of a first-time home buyer savings account.
"We believe this bill will encourage homeownership in the state of Kansas, and provide an additional tool for working Kansans to make purchasing their first home a reality," said the Kansas Future Caucus, comprised of young state lawmakers.
Such accounts will become available July of next year, giving about a year for banks and others to implement and prepare such accounts if they choose to. The accounts will be limited to people who have never owned a home or divorcees who haven't owned for three consecutive years.
Home buyer savings accounts function in a way similar to health savings or 529 college savings accounts. A person can contribute up to $3,000 for an individual or $6,000 for a married couple per tax year to a home buyer account. That money can grow with interest, tax-free from the state, with a cap of $50,000 per account.
The money in the savings account can only be used for home-buying-related purposes; otherwise, withdrawal from the account can be subject to penalties.
A home buyer savings account is not a new concept. The first similar law was established 1998 in Montana, and since then, at least ten other states have enacted similar concepts, including nearby Colorado, Oklahoma and Missouri.
Kansas will soon join its neighbors, and the legislation had passed with very strong bipartisan support.
A big motivator for the bill is to incentivize homeownership, particularly among young and working-class people. Kansas already has a loan program for first-time home buyers, and since 2012, the state's homeownership rate has improved from 63% to 70% in 2020, according to U.S. Census data.
But for younger Americans, the trend is away from home ownership. Many reasons are cited, from having massive student debt to delaying marriages. A savings account can help but won't be a panacea.
Both the state's banking and real estate industries supported the bill, calling it not just a financial tool but also one for economic development.
"It is these types of policies that will allow for sustained economic development as we recover from the financial impact of the pandemic," said Mark Tomb, a lobbyist for the Kansas Association of Realtors. " Each home sale generates income from the transaction in the form of construction cost, brokerage fees, inspection cost, mortgage lending and insurance. This income is re-circulated into the economy, amplifying its impact."
Furthermore, the tool encourages people to save up and have financial security, said others, which in turn can help spur economic activity.
However, home buyer savings accounts will cost the state budget at least an estimated $3.5 million per year in tax revenue, per a fiscal note.