California to Help First-Time Homebuyers With Down Payment

California to Help First-Time Homebuyers With Down Payment
Newly constructed single family homes for sale in Encinitas, Calif., on July 31, 2019. (Mike Blake/Reuters)

SACRAMENTO—Lawmakers are hammering out the details of a billion-dollar proposal to help first-time home buyers cover their down payment, as part of the 2022–2023 state budget signed by Gov. Gavin Newsom June 27.

Proposed by California Senate President Pro Tempore Toni Atkins (D-San Diego), the “California Dream for All” program would help pay 17 percent of the home price to make homeownership more affordable for first-generation homeowners.

“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 last month.

The program requires the state to invest $1 billion per year for ten years, which has been included in the state’s $300 billion legislative budget.

To “[make] the state’s homeownership landscape more equitable, inclusive, and attainable for Californians,” the program could cover all or most of the down payment, which in turn allows lower-income homebuyers to forego costly mortgage insurance, Atkins said. Each eligible buyer can save up to about $1,000 per month.

However, when the homeowner refinances or sells the home, the share of the home value originally covered by the state should be paid back. The funds will be reinvested into the program to help more homebuyers purchase their first home, according to Atkins.

Avid supporters of the program include California State Treasurer Fiona Ma and some real estate organizations.

“Given that the current median price of a first-time home in California exceeds $590,000, conventional down payments of 20 percent have become unrealistic for far too many in the Golden State,” Ma said in the statement.

President of the California Association of Realtors Otto Catrina said “[h]omeownership is a key element to securing housing and economic security for working Californians, building intergenerational wealth and creating stronger communities across our state.”

However, some experts said government funds will make homes more unaffordable in California.

Jim Righeimer—a real estate developer and a former president of Huntington Beach Fountain Valley Association of Realtors—said the program would drive up the demand in the housing market, which would lead to higher home prices.

“It's completely economic illiteracy, to think that giving people free down payments for houses could do anything except raise the cost of houses even higher,” Righeimer told The Epoch Times.

Agreeing with Righeimer, Moussa Diop—an assistant professor of real estate at the University of Southern California’s School of Public Policy—said higher demand means higher prices unless there is enough supply.

“It's gonna help some people buy a house, but if the program is significant enough, it can make prices go even higher unless supply can respond,” Diop told KSBY last week.