The Individual Housing Account

This paper summarizes the available information about the proposed Individual Housing Account (IHA), a tax-exempt savings account designed to facilitate the accumulation of the downpayment on a home for would-be first-time homebuyers. We review both the limited body of U.S. research and data on a similar Canadian program which has been in existence since 1974. We find little evidence to suggest that the IHA would stimulate homeownership or housing construction to any noticeable extent. It would enable potential buyers to save enough for a downpayment more rapidly than they now can, but this would increase homeownership only during the start-up period for the program, not in the long run. We also estimate the foregone tax revenues from the program to be in the neighborhood of $2 to $3 billion annually, once the program has reached maturity.