Bridging the Down Payment Gap: A Proposal to Unlock $35 Trillion in Home Equity

The Point

Mar. 2, 2026

From Pinpoint Executive Director Eric Ventimiglia:

A major barrier to addressing the current housing affordability crisis is that young people and couples with solid earnings often can’t buy a home simply because they can’t afford the down payment. That problem is growing more acute, as down payment costs have soared along with a 40% increase in median US home values since the start of the decade.

Adult children can currently obtain a loan or gift from parents or grandparents with sufficient wealth to help finance a home down payment.

For those without parents or grandparents with that level of wealth, there may be another option: using their home equity to make the loan or gift, by leveraging existing products that include home equity lines of credit (HELOCs), reverse mortgages, and cash-out refinancing.

The problem is that utilizing home equity this way is rarely part of the conversation in retirement discussions with financial planners, despite Americans holding an estimated $35 trillion in home equity, with about 40% of that held by older homeowners.

The proposal is simple: In any financial or retirement plan that is tied to federal housing programs such as FHA or VA loans, tax-advantaged retirement arrangements like 401(k)s and IRAs, or federal housing-related tax preferences like the capital gains exclusion, advisors would be required to reasonably consider using home equity to help a child, grandchild, or other relative put together a down payment on a primary home. Home equity should be part of the conversation, just as 401(k)s, IRAs, brokerage accounts, pensions, and Social Security are.

The proposal would be especially relevant for parents and grandparents who feel “locked in” for two reasons:

• Capital gains exclusions of $250,000 for individuals and $500,000 (unchanged since the 1990’s) would trigger massive taxes.
• Today’s higher interest rates make downsizing costly.

The proposal requires no new tax law — it simply clarifies that families may use existing private-sector home equity tools, structured through pathways already in the tax code, to help a relative with the down payment and closing costs on a primary residence, while providing a safe harbor for financial planners who facilitate these discussions. All credit risk remains with the private sector, and the limitation to primary-residence purchases prevents misuse for other purposes.

Mobilizing just 10% of senior home equity — approximately $1.4 trillion — could generate roughly $2.1 trillion in incremental GDP and nearly $485 billion in total federal, state, and local tax revenue, all without new spending or deficit expansion, and with no government credit risk because the products involved are privately originated, underwritten, and serviced.

Plenty of surveys and data have shown how serious the problem has become:

• The median age of first-time home buyers has climbed to 40 years old, up from the late 20s in the 1980s, according to the National Association of Realtors.
• More than 80% of aspiring homeowners say down payments and closing costs are a significant obstacle to owning a home, according to a 2025 Bankrate survey, with one in five stating they will never be able to save enough.
• A recent Federal Reserve Report on economic well-being said more than two-thirds of renters cited an inability to afford a down payment as a primary reason for renting.

Housing research shows a deeply bifurcated market: equity-rich, all-cash buyers are at an all-time high, while cash-strapped first-time buyers are at a record low. Treating home equity the same as other assets would unlock existing family wealth that is typically invisible in retirement planning conversations.

And while housing supply constraints, overregulation, and onerous permitting have been major drivers of increased housing costs, the immediate barrier for many first-time buyers is a lack of accumulated capital — the upfront cash needed to close.

While there is no silver bullet to fixing America’s housing affordability, this proposal can work alongside other efforts to unfreeze the housing market. Retirees and empty nesters could more easily downsize to smaller homes or retirement communities and put larger homes on the market for younger, growing families.

One fix is the bipartisan effort in Congress to double the capital gains exclusion to $500,000 for individuals and $1 million for couples. The FHFA has also said it is evaluating portable mortgages that would let homeowners transfer their existing low mortgage rates to a new property.

An estimated $80–$90 trillion in wealth will transfer from older to younger generations over the coming decades, naturally easing down-payment constraints — but on a timeline measured in decades, not policy-relevant months. Adding home equity to the conversation aims to accelerate that transfer immediately, by allowing families to help relatives fund down payments. Mobilizing even a modest share of this locked-up equity would boost homeownership, economic growth, and tax revenue – all without a dollar of new federal spending.

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