diff --git a/packages/static/kairos-overlay-files/collection.yaml b/packages/static/kairos-overlay-files/collection.yaml
index a148c2b6c..76c012e63 100644
--- a/packages/static/kairos-overlay-files/collection.yaml
+++ b/packages/static/kairos-overlay-files/collection.yaml
@@ -1,4 +1,4 @@
 packages:
   - name: "kairos-overlay-files"
     category: "static"
-    version: "1.1.45"
+    version: "1.1.46"
diff --git a/packages/static/kairos-overlay-files/files/system/oem/00_home_dir_owner_fix.yaml b/packages/static/kairos-overlay-files/files/system/oem/00_home_dir_owner_fix.yaml
new file mode 100644
index 000000000..b8cc4cb3d
--- /dev/null
+++ b/packages/static/kairos-overlay-files/files/system/oem/00_home_dir_owner_fix.yaml
@@ -0,0 +1,15 @@
+name: "Fix home directory permissions (kairos issue #2797)"
+stages:
+  initramfs.after:
+    - name: "Fix permissions"
+      commands:
+        - |
+          # Iterate over users in /etc/passwd and chown their directories
+          awk -F: '$3 >= 1000 && $6 ~ /^\/home\// {print $1, $6}' /etc/passwd | while read -r user homedir; do
+              if [ -d "$homedir" ]; then  # Check if the home directory exists
+                  echo "Changing ownership of $homedir to $user"
+                  chown -R "$user":"$user" "$homedir"
+              else
+                  echo "Directory $homedir does not exist for user $user"
+              fi
+          done