During the March 2024 State of the Union, President Biden announced two housing proposals that generated significant coverage: a first-time homebuyer tax credit and a one-year seller incentive designed to increase inventory. Here’s what the proposals actually contain and what they’d realistically mean for buyers in the Montgomery County market.
Proposal 1: The Mortgage Relief Credit
The Biden administration proposed a mortgage relief tax credit for first-time homebuyers — structured as an annual credit over two years, claimed to be equivalent to reducing your mortgage rate by more than 1.5 percentage points. The White House framed it as helping more than 3.5 million middle-class buyers purchase their first home.
What it would actually mean:On a $400,000 mortgage at 7%, a 1.5-point effective rate reduction translates to roughly $4,800-$5,400/year in equivalent tax benefit, or $400-$450/month. That’s meaningful — particularly for buyers in lower-price-point markets. In Montgomery County, where the entry-level market runs $450K-$650K, it would help at the margins of affordability but wouldn’t fundamentally change the calculus for most buyers considering this market.
The income question:The proposal included no defined income cap in the initial announcement. TheTreasury Departmentindicated income restrictions would fluctuate geographically based on area median income — standard federal housing program practice. In high-cost areas like Montgomery County, the qualifying income threshold would likely be higher than in lower-cost markets, but the details remained undefined at time of announcement.
Congressional status:This proposal required Congressional legislation to implement. The 118th Congress did not pass it. Any housing tax credit proposal requires reintroduction in a new Congress and bipartisan support that has historically been difficult to achieve on housing legislation.
Proposal 2: The Starter Home Seller Incentive
The second proposal targeted the inventory side: a one-year tax credit of up to $10,000 for homeowners who sell their “starter home” (defined as below the area median price) to an owner-occupant rather than an investor. The theory: incentivize current homeowners who are locked in by low-rate mortgages to list their homes, increasing supply for first-time buyers.
The lock-in problem it’s trying to solve:TheFreddie Mac “lock-in effect” researchestimates that elevated mortgage rates have trapped millions of homeowners who don’t want to give up their 2.5-3.5% pandemic-era rates. A $10,000 incentive is unlikely to move most of these owners — the math on trading a 3% mortgage for a 7% mortgage on a comparable home doesn’t work for most households regardless of a $10K one-time credit.
What actually moves inventory:In the Montgomery County market, inventory increases when life circumstances compel moves — job changes, family size changes, retirement downsizing — not when modest tax incentives shift timing. Thehome sellers guidecovers the full decision framework for sellers considering whether now is the right time.
The Bigger Picture
Both proposals address demand-side affordability (making it slightly cheaper to buy) rather than supply-side constraints (building more homes).Harvard’s Joint Center for Housing Studieshas consistently documented that the US faces a structural housing shortage of 3-5 million units — a deficit that demand-side subsidies don’t address. The most meaningful housing affordability improvements come from zoning reform, permitting streamlining, and construction cost reduction.
Frequently Asked Questions
Did Biden’s first-time homebuyer tax credit pass?
No. The proposal required Congressional legislation that was not passed in the 118th Congress. Any housing tax credit would need to be reintroduced and passed in a future Congress.
What federal programs exist for first-time homebuyers in Maryland?
TheMaryland Department of Housing and Community Developmentadministers down payment assistance programs, mortgage credit certificates, and affordable loan products for eligible first-time buyers. These existing programs are less publicized than proposed new legislation but are actually available.
Would a tax credit solve housing affordability in Montgomery County?
At the margins, yes — a meaningful tax credit reduces the monthly cost of ownership for qualifying buyers. But Montgomery County’s affordability challenge is fundamentally a supply problem. More tax credits for buyers competing for the same limited inventory pushes prices higher, partially offsetting the benefit.
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