The California Homeownership Stimulus Program is an initiative to use funds administered by the California Housing Finance Agency to create affordable housing, increase multi-generational housing, promote jobs and small business development, and provide transit relief.

Introduction

California Community Builders has formed The Two Hundred (The 200), a coalition of community leaders, opinion makers and minority advocates called to action to mitigate the growing wealth gap through homeownership and home building in California.  The Two Hundred is focused on implementing the Homeownership Stimulus Program; a community based statewide effort to address both the supply and demand side issues for housing and homeownership. Funding for affordable housing at the state and federal level primarily targets rental projects while funding for homeownership and homebuilding is more dependent on private financial institutions as the major source of funding.  At the same time, there has been no cohesive statewide voice to advocate for low and moderate income communities and communities of color for homeownership. Rental housing for the poor and special needs population serve an essential role in society and must be supported. We also need to invest more in paths, such as homeownership, that build long-term generational wealth for the middle class and communities economically ravaged by the Great Recession.

The Homeownership Stimulus Program is rooted in the basic economic principles of supply and demand; more opportunities for homeownership must include increased supply (more housing units) and must include down payment assistance to increase the pool of qualified homebuyers (demand). Increasing demand by creating new prospective homebuyers without increasing the supply will inevitably increase the price of housing

Minority communities lost their equity through foreclosures along with their wealth disproportionately and consequently lost their down payment to re-enter the home buying market.  Before the housing crisis and the associated Great Recession, California was building 200,000 less housing units than population growth required which contributed to a housing bubble, inflated home prices, and the eventual collapse of the market.  Often times, NIMBYism (not-in-my-back-yard) and anti-growth advocates use environmental laws such as CEQA (California Environmental Quality Act) to slow down and even stop homebuilding and the repair of California’s deteriorating infrastructure. Even well designed housing development projects that meet the spirit of environmental laws are held hostage with expensive litigation. These laws must be reviewed and reformed with common sense streamlining.

The economic ramifications and fallout of the Great Recession for communities of color were catastrophic and have been well documented.  The widening wealth gap - the divide between the haves and have-nots - has created social and racial schisms not seen since the Great Depression. Communities of color, which were already the lowest on the economic ladder, were disproportionately financially decimated. The foreclosure rate for Latinos is 240 % higher than that of whites. For African-Americans, it is 160 % higher. Most disturbing, the Latino community lost $177 billion in assets; the African-American community lost $144 billion. The collective wealth of these communities that took 30 years to accumulate was lost in just over two years. The Asian community had, in 2005, a median household wealth greater than white households.  However, by 2009 Asians lost their place at the top of the wealth hierarchy. Their per capita net worth fell from $168,103 in 2005 to $78,066 in 2009, a drop of 54 %.

Strategy

The novel aspect of this homeownership initiative is that it is a bottom-up approach, with leadership steeped in real world pragmatism that will build unique partnerships with unlikely allies toward common goals: to stimulate the economy through homebuilding and homeownership and close the wealth gap. The plan is to use the benefits of home-building and homeownership as an economic stimulus to simultaneously create broad economic and social paybacks. This has been the path that built an American middle class that was once the envy of the world.  California is ripe to lead the nation with a comprehensive problem-solving strategy.  The Homeownership Stimulus Program is coalescing and building partnerships with community leaders, financial institutions, trade unions, and developers, the real estate industry, legislators, and policy advocates to utilize homeownership as an economic engine to make it possible.

This year the initiative will propose $300 million of funds to be administered by the California Housing Finance Agency (CHFA) subject to legislative budget oversight. CHFA would provide deep down payment assistance and financing for accessory dwelling units (ADUs) or infill (“in-law”) units.  A CDFI, experienced in public/private loan fund administration, would provide revolving lines of credit for small builders that will provide capital to build more homeownership opportunities and jobs.  The CDFI would also act as a repository for capital from financial institutions as they join in partnership with the Homeownership Stimulus Program.

The Project would create three loan funds and other benefits:

1.    Down payment assistance

Often even two income families able to pay a monthly mortgage cannot raise the down payment. Qualified buyers would be eligible for 40% of a mortgage down payment to max out at $50,000. To encourage new infill housing investment and discourage gentrification, buyers seeking home loans for infill housing in communities they (parents or children) already live, qualify for 60% down payment assistance.

2.    New Neighbor Program: Second Units Built in Single Family Homes:

Single-family second units offer opportunities for existing neighborhoods to increase housing, household income and while using existing public infrastructure. Pew Research shows second units provide multi-generational housing and housing for minority families.  All units built will have GHG compliant green building standards, including solar energy and water conversation appliances and landscaping.

3.   Jobs/Small Business Development

A major obstacle facing small developers is limited access to financial capital; they are often shutout by traditional lenders.  A revolving loan fund will provide capital to qualified local businesses to build housing.

4.    Transportation and Transit Relief

High housing costs have forced working income families further and further away from employment, resulting in longer commutes, traffic congestion and poor transit. Transportation policies and politics have resulted in decades of studies and litigation delays, increasing costs and reducing vital transportation improvements and expanded, connected transit.  Common sense reform must move forward.

5.    Helps Business  

California’s larger employers naturally have a vested interest in workforce housing for its employees.  Families that have decent housing and/or own their own home are proven to be healthier than most renters and the availability of homes close to work for employees enhance their value as it increases tenure and productivity.  From an environmental perspective, smaller commutes increase the use of public transportation and lessen commute times and mileage, which helps lower associated carbon emissions.  Shorter commutes allow employees to spend more time with their children and family pursuits increasing morale.  

Activities

  • Launch a series of mini-conferences throughout the state beginning in Oakland with San Diego, Fresno, Sacramento, San Jose and Los Angeles.
  • Outreach to minority community leaders and advocates for support
  • Research, develop and print promotional materials that highlight the impact home building on the economy and closing the wealth gap
  • Organize strategic partnerships – mortgage industry, labor, developers, real estate industry
  • Develop multimedia/social media tools to introduce and educate the community on the importance of housing and housing development to the economy
  • Community outreach and education on the benefits of homeownership and economic impact of housing investment
  • Modify policy goals of public institutions (housing agencies) towards homeownership
  • Promote the notion that government leadership and intervention is important in the appropriate situations

Economic Benefits

  • Financial institutions will increase their market share and profits while at the same time promote their public image that they are good corporate citizens.
  • Real estate related industries - real estate brokerages, mortgage banks, title companies, etc. will benefit from related transaction fees and services.
  • Construction industry - Construction jobs generated according to National Association of Home Builders’ estimate the one year impact of building 100 single family homes in a typical state would generate $30.4 million in income for residents, $6.1 million in taxes, and 419 jobs.
  • Opportunity for new homebuyers to build home equity and begin to narrow wealth gap
  • Small business creation from home equity

Social Benefits of Homeownership

  • Higher college attendance rates for children raised in a home the family owns
  • Lower rates of incarceration
  • Step towards racial equity and building inter-racial trust
  • Better communities with more engaged citizens
  • Strengthens democracy