Kamala Harris’s latest proposal to offer $25,000 in down-payment assistance to first-time homebuyers is grabbing headlines.

For many, it sounds like a dream come true—especially with rising home prices making it harder to save for that initial down payment.

But as with any government plan, the devil’s in the details. While the idea might help some buyers, there are concerns that it could have unintended consequences, including driving home prices even higher.

The goal of the policy is to increase homeownership, particularly among minority and first-generation buyers, who face more significant barriers to entry. But what happens when extra cash floods a housing market that’s already struggling with low inventory and high demand?

Could Harris’s plan actually end up hurting the very people it’s meant to help? Let’s dive into the potential pros and cons of the proposal and what it could mean for first-time homebuyers.

What Is Harris Proposing?

Harris’s $25,000 down-payment assistance plan aims to help buyers secure homes without struggling to save for a traditional down payment. The focus is on first-generation homeowners, meaning those whose parents never owned a home, to narrow the racial homeownership gap.

The plan aligns with the Downpayment Toward Equity Act, which offers:

• $20,000 to eligible first-generation buyers earning below 120% of the area’s median income.
• An additional $5,000 for those from “socially and economically disadvantaged” backgrounds, including Black, Hispanic, and Native American buyers.

The proposal is designed to address systemic inequalities and help more people achieve homeownership. But is this policy really as beneficial as it sounds?

Will the Plan Inflate Home Prices?

Here’s where things get tricky. Giving buyers more money in a market with limited housing supply could push prices even higher. When sellers know that buyers have extra cash, they may increase their asking prices, offsetting the benefit of the grant.

As Mike Reynolds, a loan officer at Future Mortgage Group, explains, “These kinds of programs always seem helpful on paper, but they tend to backfire by raising prices. You’re adding fuel to a fire that’s already burning.”

We’ve seen this before during the pandemic. Stimulus checks and low interest rates created a surge in demand, which led to record-high home prices. This down-payment assistance program could have a similar effect, making it harder for buyers to find affordable homes.

Table: How Extra Cash Can Impact Home Prices

Pros: Making Homeownership More Accessible

Despite the concerns, the plan does have its benefits. The extra $25,000 could make a difference for buyers who’ve been priced out of the market. It offers:

• Relief from saving a large down payment.
• Elimination of private mortgage insurance (PMI) in some cases.
• A shot at building equity earlier than they otherwise could.

For many buyers, these advantages outweigh the risks. “It’s hard to argue against a plan that makes buying a home easier for people who’ve been excluded from the market,” says Sarah Allen, a real estate agent with First-Time Buyer Solutions.

Still, getting into the market is only half the battle—staying in the game long-term is just as important.

The Flip Side: Potential Long-Term Issues

There’s a valid concern that some of the buyers using this assistance might not be financially prepared to maintain homeownership. What happens if unexpected expenses—like property taxes or repairs—start piling up?

John Peterson, a mortgage consultant at Lending Solutions Inc., notes, “Down-payment assistance gets buyers in the door, but it doesn’t solve the issue of affordability in the long run.” Without a cushion for emergencies, some buyers might struggle to keep up with their mortgage payments.

Table: Ongoing Costs First-Time Buyers Need to Consider

What About Rising Interest Rates?

Even with down-payment assistance, rising mortgage rates are making it harder for buyers to afford monthly payments. In 2024, mortgage rates are hovering between 6.5% and 7%, significantly higher than in previous years.

This means buyers using the $25,000 grant may still struggle with high monthly payments. For some, the grant might not be enough to offset these costs, making homeownership a financial burden instead of a blessing.

Who Really Benefits?

While the plan aims to narrow the racial homeownership gap, it’s worth asking whether it will truly benefit those it targets.

• 44% of Black families own homes compared to 73% of white families.
• By limiting eligibility to first-generation buyers, the plan ensures that most recipients will come from minority communities.

While this sounds fair in theory, some argue that the focus on racial equity excludes other buyers who may also need assistance.

Table: Homeownership Rates by Race (2021)

Conclusion: Is Harris’s Plan the Right Solution?

Harris’s $25,000 down-payment assistance plan offers a mixed bag. On the one hand, it provides much-needed relief for buyers struggling to enter the market. On the other, it could drive up prices, leaving buyers in a worse position overall.

In a market already facing limited inventory and high interest rates, adding more buyers with extra cash could do more harm than good. While the idea of promoting equity is commendable, the execution needs to consider the bigger picture.

Ultimately, buyers need to weigh the pros and cons carefully. Programs like this can help, but they come with risks. For first-time homebuyers, working with knowledgeable lenders and making informed decisions is key.

Frequently Asked Questions

What is Kamala Harris’s $25K homebuyer credit?

Kamala Harris’s proposal offers eligible first-time homebuyers up to $25,000 in down-payment assistance. The plan emphasizes helping marginalized communities, focusing on addressing the racial homeownership gap. If implemented, it could reduce initial barriers to homeownership, but critics argue it may also create unintended consequences, like rising home prices.

Who qualifies for the $25K credit?

The $25K credit is aimed at first-generation homebuyers, particularly from disadvantaged communities. Buyers from families who have never owned homes before will be prioritized. Additionally, minority groups, including Black, Hispanic, Native American, and Asian American individuals, may receive extra benefits to promote equity and boost homeownership rates.

Will the $25K credit apply to all first-time homebuyers?

No, the credit prioritizes first-generation homebuyers and disadvantaged groups, meaning not all first-time buyers will qualify. The focus is on creating racial equity, so buyers whose parents owned homes may not receive the same level of support. However, there may be other assistance programs available for these buyers.

Could the $25K credit increase home prices?

Yes, many experts warn that increasing demand through financial assistance without addressing the limited supply of homes could lead to higher prices. When more buyers have down-payment support, sellers may raise prices, resulting in affordability challenges—especially in competitive housing markets where inventory is already tight.

How is the $25K credit different from other assistance programs?

Unlike most down-payment assistance programs that are open to all buyers, this plan focuses specifically on first-generation and minority buyers. The goal is to narrow the racial homeownership gap, a core element of the proposal. This targeted approach distinguishes it from broader, state-level, or national homebuyer assistance initiatives.

Will the credit be available immediately?

No, the proposal will require Congressional approval before becoming law. If passed, it will likely take time to implement as states set up programs and guidelines for eligible buyers. Buyers should monitor developments to understand when and how they can access the funds if the bill is approved.

Can buyers combine the credit with other assistance programs?

Yes, eligible buyers can often combine this credit with other local, state, or federal down-payment assistance programs. Combining multiple programs may provide a more significant financial advantage, but it’s important to understand the eligibility criteria and how these various programs interact with each other.

How does the plan address long-term affordability?

The plan focuses on helping buyers afford the initial down payment but offers little to ensure long-term affordability. Some experts caution that while the assistance may help buyers enter the market, it could contribute to higher home prices, making it harder for others to afford homes in the future.