State Lawmakers Pass Sweeping Housing Bill  

Connecticut lawmakers returned to the Capitol for a special session this week, approving a sweeping housing reform bill focused on making homeownership more affordable and boosting the state’s workforce.

While housing reform dominated conversation for much of the year, Gov. Ned Lamont vetoed the legislation passed during the regular session.

The revised bill, HB 8002, reflects negotiations among a bipartisan coalition of legislators, municipal leaders, and housing advocates.  

New Path to Homeownership

One of the key provisions of the bill is a First-Time Homebuyers Savings account, aimed at addressing housing affordability and workforce retention in Connecticut.

The CBIA-championed initiative creates a tax-advantaged savings vehicle to help residents save for the purchase of their first home and offers incentives for employers to support their employees’ homeownership ambitions.

“This legislation will help address two issues impacting economic growth—high homeownership costs and the workforce shortage,” said CBIA senior policy director Pete Myers.

Beginning in 2027, Connecticut residents who have not previously owned a home can open a dedicated savings account at a bank or credit union, exclusively for saving toward the down payment and closing costs of a first home.

“This legislation will help address two issues impacting economic growth—high homeownership costs and the workforce shortage.”

CBIA’s Pete Myers

Contributions to these accounts are tax-deductible up to $2,500 annually for single filers and $5,000 for joint filers, provided their federal adjusted gross income is below $100,000 (single) or $200,000 (joint).

Interest earned in the account is tax-free, and withdrawals for eligible home purchase expenses are exempt from state income tax.

Employers can also contribute to their employees’ accounts and claim a 10% tax credit for up to $2,500 per employee per year.

There is no cap on the number of credits an employer can claim, which allows them to support multiple employees.

Meaningful Impact

“Not only does it make a meaningful impact for people looking to buy their first home—it also gives employers a competitive advantage over surrounding states by allowing businesses to use this account as a recruitment tool,” Myers said.

“Employees who can afford to buy homes are more likely to stay in Connecticut, reducing turnover and enhancing local spending.”

Contributions into the account can come from any source, and account holders may change the designated beneficiary at any time, provided each account has only one beneficiary at a time.

“Homeownership drives community stability and economic vitality.”

CBIA’s Pete Myers

There is a 10% penalty if funds are taken out for non-homebuying purposes.

Myers emphasized that the bill is a direct investment in businesses and the future of Connecticut.

“From a business perspective, homeownership drives community stability and economic vitality—key ingredients for a thriving workforce,” he said.

“The bill’s flexibility allowing contributions from any source, including employers, gives companies a new tool to attract and retain talent in a competitive labor market.”

Widespread Support

Housing advocates, business leaders, and policymakers praised the new program.

Connecticut Association of Realtors director of government relations Jim Heckman called it “a very proactive way to encourage savings for a home in a market demonstrating high demand and low inventory.”

“Promoting homeownership opportunities by assisting individuals in saving for a down payment should be a key component of the state’s efforts to promote greater housing opportunities for all,” added Council of Small Towns executive director Betsy Gara.

Affordability pressures are shutting many young people out of the housing market.

Connecticut’s action comes as the median age of first-time homebuyers nationwide has reached a record high and affordability pressures are shutting many young people out of the housing market.

The First-Time Homebuyers Savings Account aims to make homeownership more attainable, boost local economies, strengthen communities, and help Connecticut attract talent.

Incentivizing Growth

The bill passed by the General Assembly also includes measures to incentivize housing development statewide.

Earlier proposals of the bill included provisions that municipalities feared would remove local control.

Among them was the “Fair Share” policy that mandated towns plan and zone for housing units based on regional needs. Another controversial proposal known as “Work, Live, Ride,” prioritized state infrastructure funds for towns that increased density near public transit.  

“This bill should move the needle in a positive direction.”

CBIA’s Grace Brangwynne

HB 8002 changes many of those provisions to incentivize housing growth rather than mandate it.

Municipalities now have the option to contract with the Connecticut Municipal Development Authority, zone for more housing near public transit, or create housing growth plans at the municipal or regional level through a council of government.  

Moving the Needle

After a marathon debate, HB 8002 cleared the House 90-56 and the Senate 24-10.

The governor said he plans to sign the bill into law.

“Connecticut’s housing shortage is among the most severe in the country,” Lamont said.

“It is driving up costs for working families, deterring businesses from investing or growing, and worsening homelessness.

“This comprehensive proposal takes strong steps toward addressing this crisis.”

Gov. Ned Lamont

“This comprehensive proposal takes strong steps toward addressing this crisis.”

“This bill should move the needle in a positive direction to increase housing supply for the growing workforce in Connecticut,” CBIA senior policy director Grace Brangwynne said.

“I give the bill proponents credit for bringing different voices to the table that didn’t have a spot there when the original version of this bill was passed.”

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For more information, contact CBIA’s Grace Brangwynne (860.244.1163).