State Senate President Pro-Tempore (Senate Pro-Tem) Toni Atkins is carrying legislation sponsored by State Treasurer Fiona Ma that would provide a boost for potential first-time homebuyers. The proposed program comes after a study by the nonprofit California Forward that found that only 35.5 percent of all California home sales in 2021 went to first-time buyers. Statewide, only 26 percent of households can currently afford to purchase a median-priced home, and worse – only 17 percent of Latino and Black households could afford to buy a home at the current median price of $590,000.

The legislation developed out of the study’s results, dubbed “The California Dream for All Act,” would specifically:

  • Allocate $1 Billion in state funds per year for 10 years to establish what’s called a “revolving shared appreciation” first-time homebuyer program. Under this type of mortgage, buyers agree to repay it along with a share of the appreciation in the value of their home
    • In other words, once the homebuyer sells, transfers, or refinances the home to take cash out, the state would be reimbursed for the 17 percent share of the increase in home value
  • Provide the homebuyer with 17% toward the purchase prices, or roughly $100,000 toward the median priced home for first-time buyers of $590,000. This is expected to lower monthly mortgage payments by as much as 1/3 since buyers will theoretically be taking a smaller overall loan
    • If the first-time homebuyers purchase through a 3 percent Federal Housing Administration (FHA) loan, which is common for first-time buyers, they can avoid costly mortgage insurance, saving them an additional $1,000 per month
  • Provide homebuyers with extensive mortgage counseling to ensure participating in this program is their best financial decision
  • By using shared appreciation, the state should receive back enough to help the next generation of homebuyers purchase a home, even as prices continue to rise.

 A spokesperson for Senate Pro-Tem Atkins explained that while the program will include specifically lower- and middle-income first-time homeowners on a first-come, first-serve basis, they will specifically target its outreach, “To communities of color, including Black and Latino communities and potential participants with student debt, which we know limits their ability to enter the home buying market”

The bill’s sponsors very much have equity issues in mind, recognizing that communities of color have long been at a disadvantage in buying homes and other properties that can help build generational wealth. The Senate Pro-Tem’s spokesperson underscored that point, saying, “Unlike rental assistance programs, the goal of California Dream for All is to help more Californians move from renting to homeownership by turning monthly rent payments into affordable monthly mortgage payments that build their own wealth and help them thrive in the middle class.” Though he did make clear, “Our budget plan also calls for increasing the Renters Tax Credit.

When asked about any limits put on those selling the homes from inflating the sales price by an equal 17 percent, the Senate Pro-Tem’s office instead responded more to inflation in general, saying, “While the California Dream for All program will have a broader impact than existing more targeted programs, it will still only impact about 8,000 of the over 550,000 homes sold in the state each year – not enough to meaningfully impact home prices.”

A spokesperson with State Treasurer Fiona Ma’s office explained that the program was designed to help a targeted and relatively modest share of total home sales precisely to avoid spiking a dramatic rise in the cost of homes. He explained, “The consultants that were engaged to prepare the framework of the Program examined this issue closely and consulted with a wide variety of industry experts and stakeholders and concluded that attempting to initiate the Program at a markedly higher level would jeopardize the prospects of success.” The spokesperson did leave room for growth, however, saying, “It is entirely possible, but not yet assumed, that if the Program achieves the envisioned success, it would be scalable to a higher number, depending on the available funding and the degree of uptake by homebuyers.”

Stay tuned for updates on the progress of this legislation.

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