Why is the Homeowner Stimulus Act necessary?
Rampant greed, predatory lending practices and shortsighted government policies triggered the Great Recession last decade, transferring wealth from working and lower income classes to America’s super rich in unprecedented fashion. A loss of $300 BILLION among minority families alone.
The subsequent economic “recovery” in California left homeowners and hundreds of thousands of former homeowners mired in debt and rental prices the highest of any state. Before this housing crisis, California annually produced 250,000 fewer units than its population required. Millennials are the most unlikely to afford to buy a home in California. This wealth gap creates a pandemic social problem.
We must stanch this economic bleeding by using homebuilding and homeownership as economic stimulus to build market rate housing, create jobs, and increase homeownership and home equity. This historically built the American Middle Class, once the envy of the world.
As the wealthiest state in America and one of the globe’s Top Ten economies, California can lead the way (just as it seeks to do with climate change).
How can the Act help working and young families?
- Increasing home ownership to give these families the best opportunity for financial equity.
- Providing down payment assistance, the biggest single obstacle to buying a home, when family income might otherwise qualify for a mortgage.
- Lowering shelter costs: mortgages today often are less than rent! California rents are the highest in the nation.
- Reducing the price of homes. As more families qualify for a home, the housing supply will increase to meet demand.
- Promote second-unit construction in existing neighborhoods. The state is “graying” in numbers vastly disproportionate to adequate housing. Secondunits built in family homes are viable options for multigenerational living.
Who will benefit by the Act?
Moderate, low-income and younger working families, and public service professionals: teachers, public safety, health care providers, fire-fighters.
Describe how the Act would operate.
The legislature would allocate $300M from cap and trade auction fees to create three revolving loans accounts continuously appropriated.
One loan fund provides down payment mortgage assistance; the second, capital to build second, infill units on existing family homes; and the third, capital financing to qualified small business construction and related trades and crafts. Together these loans could generate 60,000 units over the duration of the loan funds.
How is this Act an investment?
Homeownership is the traditional path to wealth accumulation for working class families. Homeownership helped create the middle class in America.
The recent recession and collapse of the housing market decimated moderate-income families that lost their homes leading to the ominous “wealth gap” in this country. It is estimated that total economic losses exceeded $150 BILLION among Latino families, and a like amount among black families.
Finally, increasing homeownership is an investment in the state’s economy. Each loan generates:
- $304,000 in active income for California residents
- $ 61,000 state and local taxes
- 4.2 jobs
Plus the all-important socio-economic benefits: accumulation of personal equity, neighborhood stabilization, less blight and better schools.
Most economic stimulus plans rely on tax credits. Why not this one?
Successful fiscal stimulus historically has two objectives:
1. Support households and businesses most likely to increase spending; and
2. Avail the greatest benefits to those most adversely affected by economic recession.
Orange County pioneered a similar program when workers at Disneyland couldn’t afford to live anywhere near the park. Napa County has a small “soft second” down payment program for homebuyers.
Why is this program so important?
It supports working and low-income families unable to get onto the first rung on the “wealth creation ladder”. It creates homeownership, financial equity and jobs in communities where needed. We organize government and private vested interests, including social justice NGOs, veterans, developers, workforce activists, labor and financial institutions to educate families where legislators live and represent.
Why aren’t affordable housing advocates engaged in this effort?
Most affordable housing and housing policy organizations’ raison d’etre includes subsidized rental housing, caring for the most vulnerable and needy residents. This is an essential focus. As important, however, is homeownership as the path to economic sustainability – the financial backbone of middle class. Moreover, we can do both. These are not mutually exclusive priorities – or ought not to be in the most wealthy state in the world’s most wealthy nation.
Will increased homeownership and second-unit development affect the environment?
Positively! All construction mandates (rooftop solar, water conservation) green building standards, appliances and smart technology. More importantly, workers can live closer to home, reducing GHG, transportation costs and time away from families.