California could soon help first-time home buyers with their down payments and mortgage costs under a proposed $1-billion program to make homeownership more financially feasible for low- and middle-income residents.
Senate President Pro Tem Toni Atkins (D-San Diego) first introduced the idea last year of the state stepping in to help more Californians purchase their first homes amid a competitive housing market and rising out-of-pocket costs. On Wednesday, she unveiled more details of the program, a state budget proposal to lend prospective buyers 17% of a home's purchase price as a way to lower their mortgage costs and reduce their down payments.
Once a homeowner sells, transfers or refinances their house, according to the program's outline, the owner would pay back to the revolving fund an amount equal to 17% of the home's current value, even if the amount is larger than the initial loan.
"The California Dream for All program will give more people the chance to break free from the cycle of renting, become the first in their families to own a home, and make it possible for more people to set their children and grandchildren on a path to success. This has the ability to change people's lives," Atkins said in a statement.
The program is included in this year's Senate Democratic Caucus budget priorities, and proponents are asking for $1 billion annually over the next decade to maintain the fund. Those dollars could help about 8,000 first-time buyers each year, according to a report from the state treasurer's office in coordination with the nonprofit group California Forward.
The report noted that some 35% of the 555,858 homes sold in California last year were bought by first-time owners but that most home prices continue to be out of reach for the majority of households.
"Homeownership is a key element to securing housing and economic security for working Californians, building intergenerational wealth and creating stronger communities across our state," Otto Catrina, president of the California Assn. of Realtors, said in a statement. "Many Californians can afford a monthly payment but need assistance with the down payment and closing costs."
The proposal coincides with other legislative efforts in recent years to ramp up production in California and ease the financial burdens caused by the state's limited housing supply. Ninety-three percent of likely voters said that housing affordability is a problem in California, according to a March survey by the nonpartisan Public Policy Institute of California.
Gov. Gavin Newsom signed a bill last year, also written by Atkins, to let homeowners build duplexes on their single-family properties or split their lots to construct up to four units. Lawmakers this year have introduced legislation to set aside more money in the budget for housing and homelessness and to bolster homeownership opportunities through new and existing loan programs. Final budget negotiations between Newsom and lawmakers are scheduled to begin after the governor unveils a revised spending plan on Friday.
Atkins said the California Dream for All program would finally make homeownership an achievable goal for Californians who want to plant roots in the Golden State.
"People want to be able to live in California, but we have a production issue and we have an affordability issue. We have to solve for this using every angle we can or it's going to impact our economy," Atkins said. "This is an innovative program, and I'm excited that we have a chance to make California a partner for individuals and families who want to achieve the dream of homeownership."
This story originally appeared in Los Angeles Times.
