Thu, May 12, 2022 11:45 AM
By By Madison Hirneisen The Center Square, The Center Square
(The Center Square) – In an effort to make homeownership a possibility for more California residents amid rising prices, a new proposal by a leading Senate legislator would spend $10 billion over the next decade to help families purchase homes.
Senate President Pro Tempore Toni Atkins, D-San Diego, unveiled a new proposal Wednesday that would provide 17% toward the purchase price of a home for first-time homebuyers – a move that officials say could cover the downpayment and potentially lower mortgage payments by one-third. The program – dubbed the “California Dream for All” program – is limited to homebuyers making up to 150% of their area income.
Atkins is proposing $1 billion per year starting in the 2022-2023 fiscal year for the program, with continued allocations of $1 billion for 10 years. The funds would establish a “revolving shared appreciation first time homebuyer program,” according to a budget committee report.
Atkins’ proposal comes as California eyes a potential $68 billion surplus – up from a January forecast of $29 billion.
The statewide median home price in California was $771,270 in February of this year, according to the California Association of Realtors. Homeownership is at its lowest level since 1940 in California, according to a budget committee report, as rising prices make purchasing a home out of reach for many residents.
“Everyone should have the opportunity to achieve that dream and invest in their families’ futures,” Atkins said in a statement. “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.”
Lawmakers estimate the proposed funding would support more than 8,000 first time homebuyers per year, which a budget report says is “enough to benefit a significant number of homebuyers, but not so much that it would skew home prices further up.”
Officials highlighted the “recyclability” of the program during a budget hearing Wednesday, explaining to lawmakers that when a homebuyer sells, transfers or refinances the home, the state would be reimbursed for the 17% share of the increase in home value, which would be recycled to aid new first time homebuyers.
Proponents of the program estimate it will assist 157,200 families over 40 years, resulting in 32,000 more than a 3% simple interest program. It’s also estimated to generate borrower wealth of $133.8 billion, an estimated $13.2 billion more than a 3% simple interest program.
Reports of the proposal quickly drew skepticism from critics who questioned the impact this proposal would have on already-high home prices in the Golden State. Others noted that California is facing a shortage of affordable housing.
“The situation CA faces is very simple. Too much money and too many people chasing too few homes,” Alex Tabarrok, professor of economics at George Mason University and former California resident, told The Center Square in an email. “The solution is also very simple. Build more homes.
“Instead of recognizing the problem and its solution, California legislators insist on subsidizing demand. At best this will benefit a handful of lucky home buyers who get a cash break at taxpayer expense. At worst, it will fuel housing inflation which means that the gains will be passed on to already wealthy landowners.”
Atkins is aiming to include this program as part of the 2022-2023 budget and is preparing to have budget trailer bill text ready for the June budget deadline. Gov. Gavin Newsom will unveil his revised budget Friday.