In an attempt to address the housing affordability crisis in the state, California has introduced a program designed to make homeownership more accessible to low- and moderate-income residents. The California Dream For All Shared Appreciation Loan program offers homebuyers with incomes up to $211,000 a 20% down payment and closing costs at a 0% interest rate. However, this new initiative could pose risks and potentially exacerbate the housing market bubble, reminiscent of the lead-up to the 2008 financial crisis.
The California Dream For All program is administered by the state’s Housing Finance Agency (CalHFA), which has a history of providing down payment assistance to first-time home buyers. With this new program, the state will become an investment partner in homeownership, offering interest-free second mortgages for up to 30% of a home’s cost. When the house is later sold or refinanced, the state will recoup the loan plus 20% of any increase in the home’s price.
This is going to work out really well … I guess no one learned the lesson from 2008? 🤷♂️ https://t.co/8JQoQ3wy9h
— Steve Barton (@SteveBarton101) April 11, 2023
While well-intentioned, critics argue that this program is counterproductive, as it ignores the real issue behind the housing crisis: a profound lack of supply driven by regulatory constraints. California’s stringent land use regulations and environmental policies have made it difficult to build sufficient housing to meet the needs of its residents, resulting in skyrocketing prices.
Simply increasing the demand for homes by providing state assistance to prospective buyers will not solve the underlying supply problem. Instead, it may only drive prices higher as buyers compete for a limited pool of available homes. The program may benefit the few who qualify for state assistance. Still, it ultimately raises the barriers to entry for the rest of the population seeking to become homeowners.
The better solution to California’s housing affordability crisis would be to focus on removing regulatory barriers and encouraging the private sector to build more homes. This would involve easing land use restrictions, streamlining the permitting process, and reconsidering zoning policies that limit the construction of apartments and affordable housing.
In recent years, the state has taken steps toward easing some regulations, such as promoting the construction of granny flats and duplexes in areas where single-family homes were previously the only option. While these efforts have provided some relief, it is not enough to address the magnitude of the housing crisis.
The true path to achieving the California Dream for all residents lies in recognizing the need for more housing supply and reducing the regulatory constraints that have stifled development. This would require a shift in focus toward promoting property rights, landowner freedom, and private enterprise, allowing builders to create an abundance of new homes that can truly meet the needs of the hard-working residents who still live in the Golden State.
