BOISE — As Idaho cities grapple with the state’s booming housing market and rapidly rising home prices, it’s becoming harder for young families to afford their first home.
Gov. Brad Little is proposing one possible solution to the state’s affordable housing crisis — a First Time Home Buyers Savings Account.
The savings account would give tax incentives to young families to reduce the cost of purchasing their first home. Based on Little’s proposed budget, it would give individuals up to $3,000 in tax-free savings each year and $6,000 to married couples filing jointly, according to Marissa Morrison, the governor’s press secretary. All numbers are preliminary and could be adjusted during the full legislative process.
“Housing affordability is a big deal, and this is one of the ways to address it,” Little told the Idaho Press.
The account, Little said in his first State of the State Address in January, would “encourage young families to set aside part of their pre-tax income to make a down payment on their first home.”
Morrison said the savings account would be similar to the Idaho Medical Savings Account, which gives tax incentives to people saving for medical expenses or long-term care costs.
Though written legislation hasn’t been proposed, Morrison said a bill is being drafted based on models in other states — specifically Montana.
Montana’s first-time home buyer account program gives tax benefits to Montana residents who have never owned or purchased a single-family residence in Montana or any other state. In addition to the $3,000 and $6,000 contribution exclusions, interest and other income earned on the account are not taxable if they’re withdrawn to pay for eligible expenses. Qualified expenses include down payments, closing costs, Realtor’s fees, appraisal costs, credit history reports, pro-rated property taxes, home inspections and more.
Montana’s program requires that funds in the savings account must be used within 10 years of opening the account.
“Talk to your partners over in Montana,” Little said. “They’ve got it over there, and there’s hundreds of people that have homes now as a result of a first-time homebuyers savings account.”
Similar programs were created in such states as Colorado, Oregon and Alabama, among several others, according to data from the National Conference of State Legislatures.
Derek Santos, Little’s chief economist, did the research for the governor’s proposal and said that the FY 2020 fiscal impact assumes there would be a total of 13,200 mortgage saving accounts — 1,320 would be owned by single tax filers, and 11,880 would belong to joint filers.
The savings account however, would come at some cost to the state.
The governor’s budget estimates a $4.6 million loss of revenue as a result of people not paying those taxes, Morrison said.
“I know in the state, we like to see people saving — it’s certainly encouraging for folks,” said Miguel Legarreta, president of the Associated Taxpayers of Idaho. “It comes with some price tags.”
Mark Warbis, public information director for the Idaho State Tax Commission, emphasized that the commission doesn’t take a position on policies such as this one. He said that because the commission hasn’t seen any legislation, everything at this point is just speculation.
”We don’t run policy legislation — we run operational legislation,” Warbis said. “It’s left to people in the legislature, or in the public, and of course the governor himself to pursue policy like that. We haven’t been asked to put any numbers to it at this point.”
Senate Local Government and Taxation Committee Chairman Sen. Jim Rice, R-Caldwell, said he’s willing to consider the idea of this type of program, but before he sees any written legislation, it’s hard to comment on the proposal.
Legarreta said he thinks the program would be a “real benefit” for people trying to save for a down payment on a home.
“It’s not going to be a panacea, but it’s something we can do,” Little said. “Just like we do with health savings accounts, for people to be more responsible and to save up that money to buy that first home.”