So the solution to high home prices is to subsidize buyers?
California Legislative Leader Wants to Spend $10 Billion to Help Families Buy Homes
The program would provide up to 30% of a home’s purchase price via an interest-free loan in a bid to address the state’s sky-high housing costs
A top California lawmaker is proposing to spend $10 billion to help families buy homes in the state with some of America’s highest housing prices.
Democratic State Senate Leader Toni Atkins on Wednesday unveiled details of a proposal she’s pushing to create a revolving fund that would provide interest-free loans for up to 30% of the purchase price of a home for low- and middle-income households.
If implemented, it would be the largest program of its kind in the nation, according to the people who designed it. Proponents hope that it will be included in the state budget that must pass by June 15 and go into effect as soon as January. The aim is for it to eventually help about 8,000 families a year.
The median price for single family homes in California last year was $786,000, according to the California Association of Realtors, more than twice the nationwide average.
The proposal calls for the state government to share in any appreciation in the value of houses it helps purchase when they are sold and then invest those proceeds back into the fund.
“The purpose of this is to create a long-term endowment,” said Gene Slater, chairman of CSG Advisors, which advises public agencies on affordable housing and helped design the program. “We’re investing in the future value of the home so we can help other people.”
Under the proposal, California would spend $1 billion a year for 10 years. Participation would be limited to households making 150% of the median income in an area. There would be limits tied to a region’s median home price allowing home buyers in the most expensive markets such as the San Francisco Bay Area to benefit.
In Los Angeles County, households earning up to $120,000 a year could qualify for assistance, while in low-income areas like the agriculture-heavy Central Valley, that number would be closer to $107,000, according to data provided by the researchers who drafted the framework. Proponents want to target certain groups through outreach, including residents of largely Black and Latino neighborhoods and those with high loads of student debt.
The homeowner would repay the loan when they sell or refinance the home, along with a cut of the profit from any appreciation in value based on how much assistance the state provided. If the home price declines, Mr. Slater said, the state would be repaid if money is left over after the purchaser pays back their mortgage loan and recoups their portion of the down payment.
The program would be limited in scope to cover only about 2% of home sales volume statewide in an effort to avoid pushing prices higher.
Participants would be chosen on a first-come, first-served basis, with slots set aside for certain geographic areas and income brackets.
To become law, the proposal would have to pass both chambers of the Democratic-controlled state legislature and be approved by Democratic Gov. Gavin Newsom. A representative for Mr. Newsom declined to comment on the pending legislation. In a statement, Assembly Speaker Anthony Rendon praised Ms. Atkins’s work on the issue but didn’t say whether he supported her proposal.
Ms. Atkins said she expects the proposal to be a component in coming budget negotiations and hopes it will be part of a final budget deal next month.
“There are Californians that work hard every day and because of the high cost of living, they can’t own a home,” she said. “They want to be part of mainstream America too and part of that is defined as being able to own a home.”
The program represents a new approach by state lawmakers to addressing the impact of high housing prices on California families.
According to a report from legislative staff, only about a quarter of California households can afford to buy a home at the state’s median price of $590,000 for first-time buyers in 2021, with even smaller shares among Latino and Black families.
High housing prices have helped drive many families to move from the most costly markets on the coast to inland counties and others to leave the state entirely.
Previously, state officials have focused largely on trying to spur more housing construction, including by sparring with local governments over plans to build more units.
Proponents of the new program said even if it grows, assisting with down payments wouldn’t come close to completely addressing California’s high housing prices.
“At the end of the day, there’s a supply-side issue and we’re dealing with a demand-side solution here,” said Kate Owens, a principal at HR&A Advisors, a firm specializing in economic development that helped to develop the proposal.
While down payment assistance and other homeownership programs exist in California and nationwide, they typically provide 3% to 5% of a home’s price, according to Ms. Owens.
The fund would be possible in part due to a $68 billion surplus that the Senate’s analysts say they are expecting thanks to high tax revenues this year, largely from upper-income earners.
“With the reserve we have, this is exactly where we should be putting resources because it is one of our biggest problems,” Ms. Atkins said.
https://www.wsj.com/articles/califor...=hp_lead_pos11
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