- California Senate Democrats proposed a program to subsidize up to 45% of new home costs.
This would apply to first-time homebuyers and would save families more than $12,000 each year.
Home prices have skyrocketed during the pandemic, putting homeownership out of reach for many.
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To ensure more equitable access to homeownership, California Senate Democrats included a program in the budget they unveiled last week that would partially subsidize the costs of buying a new home.
The “California Dream for All” program, which the Democrats first outlined in April in the Build Back Boldly budget plan, would pay for, and own, up to 45% of a home for a first-time homebuyer, cutting the purchase price of a home nearly in half. The lawmakers wrote in the proposal that this program would allow Californians to buy their first home with a “silent partner,” significantly reducing the homebuying cost and helping close the racial wealth gap.
“Generation after generation, those with wealth get wealthier, and those without fall further behind,” the proposal said. “As has been the case so often throughout the nation’s history, this has been made worse by racist barriers constructed to hold communities back – and the impacts of those barriers are still evident today. The first step to reaching the California dream of thriving in the middle class and building family wealth starts with homeownership. ”
According to the outline, this program would:
Save families more than $12,000 each year through the subsidized costs;
Establish the California Dream Fund, which would be infused with a one-time deposit of available funds;
Allow first-time homebuyers to partner with the Fund, which would own a minority share of up to 45% of the house;
And target outreach to underrepresented homeownership communities and those with high student debts.
Eligibility for the program is based on income levels, and eligibility of the homes is based on home price. The outline noted that eligibility requirements will differ by region “to reflect the reality that incomes and home prices differ dramatically throughout California.” Further eligibility criteria weren’t disclosed.
A March survey by the Public Policy Institute of California found that nine out of 10 Californians considered housing affordability a problem, and nearly one in three were considering leaving the state because of it.
Home prices have been skyrocketing across the country during the pandemic for various factors ranging from work from home fueling a surge in demand to expensive lumber causing the price of newbuilds to shoot up. Some homebuilders have even slowed construction because they can’t keep up with demand and the current level of prices.
Insider reported last month that the housing shortage could last for years, citing Goldman Sachs projections that millennials should remain interested in buying while starts will increase to the insufficient level of 1.5 million per year, and foreclosures won’t meaningfully impact supply. In other words, house prices should continue to go up for years.
The rising prices have housing experts like Redfin Chief Economist Daryl Fairweather concerned.
“When the pandemic is over, purchasing a home is going to cost much more than ever before, putting homeownership much further out of reach for many Americans,” Fairweather said in a statement. “That means a future in which most Americans will not have the opportunity to build wealth through home equity, which will worsen inequality in our society.”
The California program is meant to put homeownership back in reach for many residents, and the lawmakers are set to negotiate the budget, including the program, with California Gov. Gavin Newsom on June 15.
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