By Bruce Smith. Legislation pending in Congress would help open the door to homeownership for a new generation of Americans while providing the economy with a much-needed shot in the arm.

Although the nationwide homeownership rate stands near an all-time high of 67.5 percent, millions of American households are still struggling to buy their first home, and the homeownership rate among the nation's largest minority groups--African Americans and Hispanics--is under 50 percent.

Biggest obstacle

The single biggest obstacle to achieving the American Dream of homeownership is coming up with money for a down payment. Almost 35 million potential first-time home buyers are unable to purchase a home because they lack the funds for a down payment and closing costs, according to the U.S. Census Bureau.

Assistance plan

That's why the nation's home builders are strongly supporting the First-Time Homebuyer Down Payment Assistance Act (H.R. 2308), which was sponsored by Reps. Wes Watkins (R-Okla.) and Karen Thurman (D-Fla.).

This legislation would allow home buyers, their parents, or their grandparents to temporarily transfer up to $10,000 tax free from an IRA or 401(k) to invest in a down payment for a first-time home purchase.

First-time home buyers as well as their parents and grandparents currently are allowed to withdraw, without penalty, up to $10,000 to purchase a first home from a tax-deferred retirement account. But withdrawals are subject to income tax, which can run as high as 39.6 percent.

Tax relief

Eliminating taxation as an issue would significantly reduce the cost to the account holder and provide an enormous incentive for parents and grandparents to help their children or grandchildren buy their first home. This would allow millions of households to turn the dream of homeownership into a reality.

Furthermore, the NAHB believes that this housing economic stimulus is necessary to bolster the flagging U.S. economy. Historically, residential construction has served as the locomotive to pull the American economy out of economic slowdowns.

In short, passage of this legislation would provide more housing opportunities for America's families and a stronger economy for our nation.