American Pledge Foundation is advancing an innovative proposal to help workers save for home down payments through a program modeled after 401(k) retirement accounts, according to CEO Rob Henger.
The foundation is working with the U.S. Treasury and Senate Ways and Means Committee to establish tax-advantaged savings accounts specifically for home purchases. The program would allow employers to match employee contributions, similar to traditional retirement accounts.
“We’re working towards [having] the Treasury stand up a home savings plan that’s modeled after the 401(k),” Henger explains. “An employer and employee can come together and develop a savings plan pre-tax, and allow the employer to match, to accelerate a down payment.”
While the structure mirrors retirement accounts, Henger notes a crucial distinction in the timeline: “The only difference is a 401(k), you defer the taxes for maybe 30 years of your life. Here we think that folks will save their down payment in one to three years. So the IRS is deferring their taxes for a much shorter window.”
This shorter deferral period could make the program more palatable to Treasury officials concerned about long-term tax implications.
The program aims to serve as an employee benefit that helps companies with recruitment and retention. By contributing matching funds toward workers’ home purchases, employers can help stabilize their workforce while promoting community investment.
“If a corporation says, ‘Hey, we’re willing to encourage our young people to buy houses and become more stable and part of the community so that they’re better employees,’ we can stand up a program where the employer and employee can save money in a home savings plan,” Henger says.
Unlike some existing down payment assistance programs that restrict buyers to specific lenders, American Pledge’s nonprofit status allows participants to shop for the best mortgage rates.
“If any corporation uses us as part of their down payment assistance, their employees can go get a loan anywhere and get the best interest rate they want,” Henger notes. The foundation serves as a pass-through entity that meets Fannie Mae and Freddie Mac guidelines.
While still in the proposal stage, the program represents a novel approach to addressing the down payment barrier that prevents many workers from achieving homeownership. By leveraging the proven 401(k) model and engaging employers in the solution, American Pledge aims to create a sustainable path to homeownership for working Americans.
