Building the Next Generation of Homeowners Through Tax-Advantaged Accounts
Key Findings
- The cost of homeownership soared under the Biden administration.
- Existing tax-advantaged accounts demonstrate that Americans embrace dedicated savings incentives.
- Using Trump Accounts as an anchor would supercharge home purchases for future generations.
- Policymakers have already introduced pathways to promote tax-advantaged accounts for homeownership.
Overview
Homeownership has long been considered a cornerstone of the American Dream, yet for many Americans, particularly first-time buyers, that dream seems more unattainable than ever.
Under the Biden administration, median home prices spiked by roughly 24 percent, far outpacing income growth and inflation.1-3 Higher home prices, coupled with rising interest rates, made the median monthly mortgage payment more than double.4 In 2024, the national median price for single-family homes grew to five times the median household income, a near-record high.5 By early 2025, homeownership was considered unaffordable in 17 states, a sharp decline compared to the first quarter of 2020, where only California met that threshold.6 The median age for a first-time home buyer is now 40 years old.7
Roughly half of respondents in a recent poll stated that they would like to buy a home soon or in the next few years, but are afraid that they cannot afford to do so.8 The single largest concern for potential future homeowners is not having adequate funds to finance a down payment.9
The resources to build the next generation of homeowners already exist. What is missing is a savings vehicle designed specifically for the largest purchase most Americans will ever make.
Existing tax-advantaged accounts show that Americans will save when given dedicated incentives
Tremendous assets are currently sitting in retirement accounts, such as 401(k)s and IRAs, 529 college savings plans, and Health Savings Accounts (HSAs). In 2025, there was roughly $49 trillion in retirement accounts, a fourfold increase since 2000.10 By the end of 2024, there was $525 billion in 529 college savings plans, increasing fivefold since 2008.11 HSAs held $159 billion by mid-2025, a 16 percent increase in year-over-year assets.12
The tax code creates a complex web of contradictory incentives across these tax-advantaged accounts. Some 401(k) plans allow retirement funds to invest in real estate as an asset class, yet those same funds cannot be used for a down payment on the account holder’s own home.13 IRA holders may transfer up to $108,000 annually to charities tax-free, but face steep penalties to help their child purchase a first home.14-15
The 529 plan is itself a model. Congress created a dedicated savings vehicle for education, told families it would grow tax-free if used for the designated purpose, and families responded with half a trillion dollars in assets. The families who dutifully fund 529 plans are exactly the families who would open a dedicated homeownership savings account if Congress created one. The savings instinct is already there. The vehicle is not.
This pattern has hit younger generations particularly hard. Millennials and Gen Z buyers are more likely than older generations to have meaningful balances in HSAs or 529 plans, yet cannot apply those assets toward a home.16-17 This generation has already proven it will save for dedicated goals. Rising home prices and a median first-time buyer age of 40 are the predictable result of Congress never creating the opportunity to save money in a homeownership account.
Using Trump Accounts as an anchor for future homeownership would supercharge home purchases for future generations
In 2025, the One, Big, Beautiful Bill created Trump Accounts, which parents can establish for their children.18 Children born after December 31, 2024, and before January 1, 2029, will receive a one-time federal contribution, and parents, family members, and employers can make additional contributions up to a combined $5,000 annually.19 Employers may contribute up to $2,500 of that limit, which will not impact the employee’s taxable income.20
Trump Accounts encourage long-term investment and financial stability from the earliest stages of life. If parents make maximum contributions and invest in the stock market, the account balance could exceed $300,000 by the time the child reaches the age of 18.21
Unlike traditional retirement accounts, Trump Accounts are designed to support young adults as they transition into independence. Congress should also consider increasing the annual contribution caps, which would only accelerate fund growth and expand access to homeownership for more middle-class families.
By anchoring future homeownership in early-life savings and long-term investment, Trump Accounts offer a direct path toward rebuilding access to the American Dream for the next generation of Americans.
In addition to allowing transfers from other tax-advantaged accounts into Trump accounts, policymakers could also create a new tax-advantaged account exclusively for homeownership. A dedicated account would signal that homeownership is a priority alongside retirement, health care, and education.
A new tax-advantaged account could follow the existing HSA model: tax-free contributions, tax-free growth, and tax-free qualified withdrawals. Contributions could be made with pre-tax dollars, earnings would grow tax-free over time, and withdrawals used for qualified homeownership expenses, such as down payments or closing costs. Withdrawals would not be counted toward taxable income.
Retirement accounts, 529 plans, and HSAs are popular and effective savings accounts, and proof that Americans respond strongly to simple, clearly defined tax incentives. A homeownership account modeled after these accounts would capitalize on a structure that Americans are already familiar with. This would complement Trump Accounts, serving as the next step in allowing individuals to continue accumulating homeownership-specific savings into adulthood.
Policymakers have already introduced pathways to promote tax-advantaged accounts for homeownership
The case for dedicated homeownership savings accounts has already found champions in Congress. Rep. Kat Cammack (R-FL) introduced the Next-Generation Equity Savings Tool (NEST) Act in February 2026, establishing tax-advantaged First-Time Homebuyer Savings Accounts under the Internal Revenue Code.22 The NEST Act allows above-the-line tax deductions on contributions, tax-free growth, and tax-free withdrawals when funds are used for qualified home purchase expenses, including down payments, closing costs, and related financing costs for a primary residence.23 Eligibility is limited to individuals who have not owned a principal residence within the prior three years, and contribution limits are capped at 20 percent of the state median home price.24 Employers may also contribute on a tax-free basis.25
Sen. Rick Scott (R-FL) introduced the American Dream Accounts Act in March 2026, creating a parallel savings vehicle for first-time homebuyers.26 Individuals could contribute up to $7,500 per year, or $10,000 annually for those over 35, with a lifetime contribution cap of $250,000.27 Withdrawals used for a qualified first-time home purchase are not subject to federal income tax, with distributions of up to $500,000 available for a single buyer.28 The bill includes protections against short-term speculation: Previously untaxed amounts become taxable if a home is sold within three years of purchase, with reasonable exceptions for death, divorce, job loss, and family size changes.29
The Bottom Line:
Congress should expand opportunities for Americans to use tax-advantaged accounts for homeownership.
The homeownership crisis the Biden administration left behind is measurable. Median home prices rose roughly 24 percent, the median first-time buyer age reached 40, and working families in 17 states were priced out entirely.30-32 The obstacle standing between most aspiring homeowners and their first home is not the monthly mortgage, it is the down payment.33 Congress should do what it has done before: Designate homeownership as a savings priority and let Americans save their way there.
Rep. Cammack and Sen. Scott have already shown the way. Trump Accounts will begin building homeownership equity for the next generation from birth. Congress should now expand opportunities for Americans to use tax-advantaged accounts for homeownership. This would help give every working family a real path to the American Dream.
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