My home state of Maryland has launched a new scheme to encourage home buying and help young people pay back their student loans. What’s not to love? Actually, quite a bit.
Here are the nuts and bolts of the program, called “SmartBuy.” Maryland’s Department of Housing and Community Development has several homes for sale. If an individual with student loan debt buys one, Maryland taxpayers will refund up to 15% of the home’s purchase price, a sum which must be applied towards the buyer’s student debt. SmartBuy participants must then occupy the house for at least five years.
“Programs such as Maryland’s, which encourage homeownership through student debt relief, thus dampen movement among one of society’s most mobile demographics.”
The median purchase price of the fifteen homes currently listed on SmartBuy’s website is $200,000. A buyer with student debt would be eligible for up to $30,000 in loan forgiveness, courtesy of Maryland taxpayers. Or, if the buyer opted for the most expensive home on sale, he could receive up to $46,500 in forgiveness.
The state Department of Housing and Community Development has allocated $10 million to the program, according to the Baltimore Sun. The state hardly needs more spending. Per Tax Foundation rankings, Maryland has the seventh-highest tax burden in the nation, higher than all neighboring states. Student borrowers who settle in Maryland under SmartBuy may find the deal less favorable than they anticipated come April 15.
More importantly, the U.S. government already does plenty to encourage homeownership. The home mortgage interest deduction, Fannie Mae and Freddie Mac, Federal Housing Administration-insured loans, and other government-sponsored programs all conspire to make homeownership easier and cheaper. Young people get an especially good deal, with low down payments for...
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Preston Cooper is a fellow at the Manhattan Institute's Economics21. Follow him on Twitter here.
This piece originally appeared in Forbes