Commentary
It sounds really great for homeowners. The California Mortgage Relief Plan will provide 40,000 California homeowners up to $80,000 in relief, each. They even won’t have to pay it back. It was just approved by the U.S. Department of the Treasury as part of the federal American Rescue Plan Act’s Homeowner Assistance Fund.
“We are committed to supporting those hit hardest by the pandemic, and that includes homeowners who have fallen behind on their housing payments,” enthused Gov. Gavin Newsom, who is running for re-election. “No one should have to live in fear of losing the roof over their head, so we’re stepping up to support struggling homeowners to get them the resources they need to cover past due mortgage payments.”
But where does the money come from? Everybody else through higher taxes. In turn, these homeowners will pay higher taxes for other programs for other people. It’s a web of subservience to government in which everyone pays for everyone else, with the bureaucratic middlemen grabbing a large cut.
Part of it is the artificially low interest rates of recent years. Which the Federal Reserve Board now is committed to raising—which could, as in the past, spark a recession. For details, see my previous article on the Chapman University economic forecast.
The description of the new program shows the problem, as described on the official website, CaMortageRelief.org. For one thing, there are 13 million households in California. But the homeownership rate is just 54 percent, well below the national rate of 66 percent. That comes to about 7 million homeowners. The up to 40,000 homeowners to be helped would be just 0.57 percent of homeowners.
The CaMortgateRelief.org site provides the criteria: “Californians at or below 100% of their county’s Area Median Income, who own a single-family home, condo or manufactured home (permanently affixed) and faced a pandemic-related financial hardship after Jan. 21, 2020, and meet one of the following qualifications:
- “Receiving public assistance;
- “Severely housing burdened; or
- “Have no alternative mortgage workout options through your mortgage servicer.”
And the site provides a handy calculator to see if you might qualify. I picked Orange County, where I live, and plugged in “4” for people in the household.
Result: “100% of the Area Median Income (AMI) for Orange County / For a household size of 4 is $134,500.”
But the minimum income needed to buy a home her these days is at least $175,000. So you have to earn $40,500 more than is allowed for the benefit, just to afford a home in the first place!
Of course, that’s for first-time buyers. If you already own a home, and purchased it at a lower price a decade or more ago, then you are more likely to be able to afford paying a mortgage on it at an income of less than $134,500.
Sorry, young people, once again you get the shaft.
The key, though, is this is just one government program out of many thousands at the federal, state and local levels. There are mountains of bureaucracy needed to keep these programs going. They fund the salaries of the bureaucrats in the multitudinous bureaus.
The bureaucrats and the programs themselves have cost many trillions of dollars over the years. That money comes from the taxpayers—including those, such as yours truly, who are renters.
Conveniently, Newsom also said he has been providing renters and landlords assistance. Again, that money comes from somewhere. And you have to jump through bureaucratic hoops to qualify. Those in the middle class find it nearly impossible to get renters’ assistance.
Every market distortion also has a cost beyond the mere tax number on the bill. It forces people into behavior they otherwise might not take. The best example is the beloved mortgage tax deduction. Which encourages people to “buy”—get a mortgage on—homes they otherwise might avoid. Which increases demand for homes. Which increases the price.
And that’s aside from the regulatory distortions such as the apparently unreformable bureaucratic monstrosity known as the California Environmental Quality Act, which vastly increases the cost of building a home.
No wonder data by the California Department of Finance released Dec. 17 showed the state’s population continues to decline, by 173,000 in the year prior to July 1, 2021. The new population number is 39.37 million. Looks like we might never get to 40 million, let alone the 50 million demographers once predicted for 2030.
Part of the reason was 55,000 deaths from the pandemic. But other reasons were low numbers of immigrants from other states and nations, people leaving for cheaper states, and low birth rates.
Two families I have known for years just left for Tennessee.
It’s still great here if you’re a billionaire tech lord. But for the rest of us, years of fiscal and regulatory misfeasance and malfeasance have finally caught up to the Golden State, prompting an exodus.
Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.
