House lawmakers from Florida and California have introduced a bill, with an Ohio lawmaker as an original cosponsor, that would let Americans pull money out of their 401(k) plans to buy a home without facing the usual taxes or early-withdrawal penalties. The measure arrives as the typical first-time buyer is now 40 years old and the national median down payment has climbed to 10 percent, according to the American Action Forum.
The legislation, formally titled the Homeownership Opportunity Act, was introduced by Rep. Greg Steube, a Republican from Florida, according to Steube's office. Rep. Jimmy Panetta, a Democratic representative from California, also introduced the bill, and Rep. Mike Carey, a Republican from Ohio, joined as an original cosponsor, according to reporting from the Tampa Free Press. The bill would allow Americans to withdraw workplace retirement savings for primary-home down payments and closing costs without taxes or penalties, per that same reporting.
Steube framed the bill as a matter of fairness for savers. “Hardworking Americans who have spent years saving for their future shouldn’t be penalized for wanting to buy a home,” he said, adding that the bill would let Americans use their retirement savings for homeownership without unnecessary taxes and penalties amid rising housing costs, according to the Tampa Free Press account.
How the Withdrawal Would Work
Under the proposal, qualifying withdrawals would be excluded from gross income, and the withdrawal limit would be set at the greater of $40,000 or 40 percent of a worker's vested balance, reduced by any prior distributions taken under the program, per the Tampa Free Press. The bill would cover 401(k), 403(b) and eligible 457 workplace savings plans, the same reporting states.
Borrowers would have up to three years to return the withdrawn money to an eligible retirement plan, and those who leave their employer in that window may return the funds to an individual retirement account instead, according to the Tampa Free Press. The act would take effect for tax years starting after December 31, 2025, and would sunset after December 31, 2035, per that reporting.
The Affordability Backdrop
Panetta said housing affordability is the number one challenge for families in California's 19th Congressional District, and argued the bill gives families more flexibility to cover down payments and closing costs, according to the Tampa Free Press. The pitch lands against a housing market where first-time buyers made up just 21 percent of all buyers in the National Association of Realtors' most recent survey — an all-time low — while the median age of first-time buyers climbed to 40, also an all-time high, according to the American Action Forum.
The math behind those headwinds is stark. The national median sale price for a single-family home was $409,500 in December, meaning a standard 20 percent down payment would run $81,900, according to CNBC. For workers ages 35 to 44, the median 401(k) balance is just $39,958, though the average balance is $103,552, the outlet reported. Among first-time buyers generally, 59 percent rely on personal savings for a down payment, 26 percent tap assets such as 401(k)s, IRAs or stocks, and 22 percent get help from family or friends, per the same CNBC report.
Industry Groups Weigh In
Building groups and advocacy organizations have supported the legislation, identifying cash-at-closing requirements as a major roadblock for prospective homeowners, according to the Tampa Free Press. Joel Rhoades, chief executive officer of Epcon Communities, said upfront home-purchase costs are a major barrier for prospective homebuyers and said the act would let individuals and families use eligible 401(k) savings toward a primary residence, per that reporting.
Rebecca Weber, chairwoman of AMAC Action, described the measure as another option for families facing high home-purchase entry costs. She said the act would allow eligible retirement savings to be used toward purchasing a home and said homeownership is a proven path to building equity and financial independence, according to the Tampa Free Press account.
Not the Only Plan on the Table
The bill is not the only proposal circulating in Washington along these lines. A Trump administration proposal would similarly allow homebuyers to tap into their 401(k)s for down payments without penalties, according to Fox 13 News, though the White House later discarded the idea for the time being. Separately, the Home Savings Act would permit penalty-free withdrawals for up to five years when used for down payments or closing costs on a primary residence, though that bill currently has no co-sponsors and is considered unlikely to make much movement in Congress, according to 401(k) Specialist.
Critics of these approaches argue they treat a symptom rather than the underlying shortage. The American Action Forum has warned that both initiatives would boost demand without increasing supply, which could put further upward pressure on home prices even as average 401(k) balances grew 8 percent in the second quarter of 2025, according to Fidelity Investments research cited by 401(k) Specialist. Financial advisors quoted by Fox 13 News have raised a separate worry about the toll on buyers themselves, with one saying, “My concern is that they're forfeiting their future,” underscoring the tension between solving an immediate affordability crunch and protecting long-term retirement savings.
