A key topic in the affordability discussion is that homeownership appears increasingly out of reach for many, particularly younger, individuals. In a new insight, Director of Competition Policy Fred Ashton discusses why recent proposals to employ retirement funds for home down payments threaten to make the home affordability problem even worse.

Key points:

• In an attempt to address affordability concerns, the White House and a member of Congress developed separate plans to allow prospective buyers to access their 401(k)-retirement savings for a down payment on a home without facing tax penalties.
• Like many “affordability solutions,” however, both proposals would boost demand without increasing supply, which could undermine housing affordability objectives by putting upward pressure on home prices, while posing a significant risk to long-term financial security.
• If policy makers are serious about addressing home affordability – in other words, lowering the cost of homes – they need to focus on the myriad federal and local policies that restrict housing supply.

Read the analysis.