The dream of homeownership is slipping further out of reach for many Americans. A recent report from the National Association of Realtors suggests that buying a first home has never been harder.
First-time homebuyers—defined as those who haven’t owned a principal residence, aka a primary or permanent residence, in the past three years—made up just 24% of the market for homes in 2024. It was the lowest percentage since the National Association of Realtors, or NAR, began tracking data in 1981 and reflects challenges first-time homebuyers face, such as elevated home prices, rising mortgage rates, down payment costs and a limited supply of housing in many places.
One major obstacle first-time homebuyers face is the cost of a down payment. Although down payments are lower for first-time buyers than for repeat buyers, they typically represent a significant percentage of a home’s purchase price.
In addition to upfront costs, elevated mortgage interest rates have increased monthly payment obligations, with 30-year fixed mortgage rates averaging above 6.5% in the past year, according to Freddie Mac’s Primary Mortgage Market Survey. Zillow notes in its market report for April that limited housing inventory further restricts access, as the supply of homes, although higher than in April 2024, is 22.9% below pre-pandemic levels. In the Federal Reserve’s Report on the Economic Well-Being of U.S. Households in 2024, 68% of renters cited the inability to afford a down payment as the reason for renting, 49% said they couldn’t afford a monthly mortgage payment and 46% said it was cheaper to rent. These financial and supply-side factors together contribute to the declining share of first-time buyers in the market.
State Actions
States recognize the importance of expanding access to homes for first-time buyers. Better access to primary housing can benefit local economies and create stable communities by stimulating job creation, spending and reducing turnover and vacancy rates. In fact, the NAR estimates that each home sale has a total economic impact of $125,000. States are using a variety of tools to address the challenges buyers face in the current market.
Down Payment Assistance Programs
At least 15 states, Guam and the U.S. Virgin Islands have enacted down payment or other loan assistance programs. These programs generally aim to reduce upfront costs through grants and forgivable or subsidized loans. In the 2025 legislative session, at least 30 states and Washington, D.C., have pending homebuyer assistance and incentive program legislation.
Minnesota (HF 2335, 2023) created a first-generation homebuyer program offering forgivable loans of up to $32,000 to individuals whose parents or legal guardians never owned a home or lost it to foreclosure.
Targeting Public Sector and Workforce Buyers
Some states direct down payment assistance to public service professionals to support workforce retention. Florida’s Hometown Heroes Housing Program, enacted in 2023, provides additional funding and broadens eligibility beyond front-line workers. The program offers up to $35,000 in down payment and closing cost assistance for full-time employed individuals purchasing their first home in Florida.
Similar workforce-focused initiatives have been enacted or introduced in other states for teachers. Connecticut created a mortgage assistance program for certified teachers employed by priority school districts or by transitional school districts to help in the purchase of a primary residence. The statute authorizes allows the lender to realize a reasonable portion of the equity gain upon sale of the mortgaged property. This year, Colorado lawmakers created a shared equity down payment assistance program for public school employees (SB 167). The program provides at least 15% of a home’s purchase price as down payment support, prioritizing first-time homebuyers who will use the home as a primary residence, with the state sharing in up to 10% of future appreciation. The measure is currently awaiting the governor’s signature.
Mortgage Rate Buydown Programs
Mortgage rate buydown programs help to improve housing affordability by reducing the interest rate on a buyer’s mortgage. These programs lower monthly payments by having a buyer, seller or third party pay upfront to reduce the rate, either temporarily or for the life of the loan. California, Colorado, Louisiana, and Washington, D.C., have enacted laws to support or authorize the use of mortgage buydowns, particularly to assist first-time and low- to moderate-income homebuyers.
Among these, California and Louisiana offer examples of how states are incorporating buydowns into broader homeownership initiatives. The California Housing Finance Agency may use program funds to buy down mortgage interest rates, including through shared appreciation loans and mortgages financed by revenue bonds. The statutory framework can support both up-front affordability and long-term investment in homeownership. In Louisiana, local housing authorities have broad discretion to administer buydown programs as part of a wider set of financing tools for affordable housing, allowing flexibility for local needs.
First-Time Homebuyer Savings Accounts
First-time homebuyer savings accounts encourage long-term saving for homeownership by providing state tax advantages. The accounts allow individuals to set aside funds for a future down payment and exclude contributions, interest or qualified withdrawals from state taxable income, subject to limits. Ohio’s homeownership savings program (HB 33, 2023) enables residents to open designated savings accounts with state tax deductions up to specified caps. Contributors may claim a deduction from federal adjusted gross income of up to $5,000 per year, or $10,000 for joint filers, with a $50,000 lifetime limit ($25,000 per contributor). The Kansas first-time homebuyer savings program allows individuals to contribute up to $3,000 per year, or $6,000 for joint filers, to their savings accounts. The yearly contribution limits are $24,000 for individuals and $48,000 for married couples filing a joint return, with a maximum contribution limit of $50,000.
The declining share of first-time homebuyers reflects deepening affordability and access challenges in today’s housing market. States are responding with a variety of approaches to make housing purchases more affordable and to lower barriers to first-time home buyers.
Zachary Exstrom was an intern in NCSL’s Financial Services, Technology and Communications Program; Heather Morton is the program’s director.