Housing News

Could a $50,000 Down Payment Grant Solve the Housing Affordability Crisis?

A $50,000 down payment grant for first-time homebuyers may sound like the kind of boost the housing market needs. But the same dollars meant to open doors for buyers could also drive up the prices of the homes they’re trying to buy.

Earlier this year, Oregon Democratic Senator Jeff Merkley proposed legislation that would provide up to $50,000 to be used as a down payment to eligible first-time homebuyers. Fellow Oregon Democratic Senator Ron Wyden co-sponsored the bill.

On paper, Merkley’s Homeownership Promise Act sounds like a big win, especially for the 68% of American renters who say they can’t afford a down payment, per U.S. Federal Reserve data.

However, the grant could wind up making it harder for first-time homebuyers to become homeowners.

“If the number of buyers who become more powerful by virtue of having better down payments increases considerably…then the seller will have an upper hand,” said Alexei Morgado, a Florida Realtor and founder of real estate exam prep company Lexawise. “Buyers will compete with one another for the purchase.”

While the bill faces a major uphill battle in Congress, it could signal the direction Democrats may go if they win control of the House and Senate in the upcoming midterm elections.

Below, we’ll review what this legislation says and how it might affect first-time homebuyers.

What the Homeownership Promise Act says

If passed and signed into law, the Homeownership Promise Act would establish a matching grant program for eligible first-time homebuyers. For every $1 saved, the Department of Housing and Urban Development (HUD) would make a matching contribution of $5.

Aspiring homeowners would need to open an interest-bearing “Homeownership Promise Account” at an eligible financial institution to make these deposits and receive the matching funds.

At a max, first-time homebuyers can save up to $10,000 (excluding interest), either through their own contributions, contributions made by their employer, or contributions made by a nonprofit organization. That would mean the federal government would match up to $50,000, for an account total of $60,000 (excluding interest).

The program isn’t for every buyer or every home, though. Specifically:

• Buyers who previously owned homes wouldn’t be eligible.
• Buyers would have to complete an HUD-approved housing counseling program.
• The home’s purchase price (excluding closing costs) couldn’t exceed the median single-family purchase price for the area.

How the $50,000 down payment grant could change the market

For the millions of Americans who can’t afford a home, a grant program designed to make median-priced homes more affordable sounds great. But it could lead to some problems:

More buyers during a housing inventory shortage

The U.S. is still facing a housing shortage. A recent Zillow report found that new listings in the fall of 2026 were 11.9% below the pre-pandemic baseline.

A core reason the market is currently slow: Many would-be sellers don’t want to give up their current mortgage rates because they’re lower than the rates they could get now.

A surge of buyers with money for a down payment would further crowd an already limited market.

Prices could go up

More eligible buyers competing for a limited number of median-priced (or cheaper) homes would put the power in sellers’ hands.

That means prices would likely increase and many buyers would find themselves in bidding wars.

Buyers may waive contingencies

In a seller’s market, buyers have less negotiating power. That might mean overlooking some faults in a home.

And in incredibly competitive markets, it might mean waiving inspection and appraisal contingencies, which opens buyers up to major risks. If the inspection turns up problems with the home or the home doesn’t appraise for as much as the buyers offered, the buyers could be saddled with a very expensive problem. 

Many buyers will still be left out

To get the full $50,000 grant from HUD, a buyer must save $10,000 on their own. But in Bankrate’s latest Annual Emergency Savings Report, 53% of Americans said they didn’t have access to funds to cover a $1,000 emergency.

And if they can’t save $1,000 for an emergency, saving $10,000 to get the full effect of the matching grant is likely off the table.

“Households that can save the necessary funds will get the maximum benefit before those that have problems making ends meet,” Morgado explained.

That means the legislation might not serve the Americans who have the greatest need for assistance.

More problems beyond down payments

Morgado also noted that the proposed Homeownership Promise Act doesn’t fully solve the affordability crisis most aspiring homebuyers face.

“Down payments are just a partial solution to the problem of affordability,” Morgado said. “In Florida, for instance, I’ve noticed cases where buyers are qualified on price, and then it becomes known that the additional cost of either insurance, [homeowner association] HOA, property tax, or special assessment brings the mortgage payment up so that it’s no longer possible.”

In other words, this legislation may solve the down payment issue (for some households), but it still doesn’t change the fact that many Americans simply can’t afford monthly mortgage payments at today’s high home prices, mortgage, insurance, and HOA rates.