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Let's Save the American Dream!
Why do State lawmakers bring the standard of living down, when they could lift it up?
Homeownership has long been the hallmark of the American dream. Yet, California’s recent housing policies and new housing laws ruin, and even endanger, single-family neighborhoods where many existing homeowners live. Moreover, State housing laws and programs do little to help more residents own homes.
So, let’s change this agenda.
The basic solutions are:
- Repeal the State housing laws that took away local control of land use and eliminated single-family zoning; and
- Enable homeownership.
THE AMERICAN DREAM
A 2023 Bankrate Survey found that 74% of Americans consider homeownership a central feature of the American dream. Respondents placed a higher value on it than on any other indicator of economic stability, including a comfortable retirement, a successful career, and a college degree.
Homeownerhip is the leading source of wealth for most families, according to the Federal Reserve, and over the long run provides families with more stable and lower housing costs compared to renting, according to the Journal of Economic Perspectives.
In addition, a 2013 study by researchers at Harvard University’s Joint Center for Housing Studies lays out several valuable points about homeownership for people of color. First, in real-life practice, homeowners are more likely to accumulate wealth than renters. Also, homeownership has meaningful social benefits in which people feel a sense of success, have control over their living situation, and can put down roots in a community. The Harvard researchers noted, policymakers should help people succeed as homeowners.
THE DEMISE OF SINGLE-FAMILY NEIGHBORHOODS
Rather than helping families afford more spacious single-family homes, most new California housing policies and laws promote tiny rental apartments in dense complexes as the new standard of living. This helps the bottom line for real estate investors and developers but provides no financial gain or wealth building for the renters.
Indeed, recent housing laws deprive residents of the American dream and ruin single-family neighborhoods that many devoted their entire lives striving to live in. Homeowners saved for a down payment; made mortgage, home insurance, and property tax payments for years; and, in addition, regularly spent additional funds and sweat equity on maintaining their properties. They did this believing that their communities would uphold or, better yet, improve their quality of life. They did not make such a lifelong investment in order to see their green, land-scaped neighborhoods turn into concrete deserts of dense apartment complexes, like what new housing laws allow.
Senate Bill 9, new Accessory Dwelling Unit (ADU) laws, and other recently adopted housing legislation took away local control of land use and eliminated single-family zoning. Single-family homes, with gardens where children can play and adults can commune with nature, may now be replaced with multifamily complexes with no yards, no parking, and only 4 feet setbacks. A homeowner who thought he had bought into a peaceful neighborhood where at most only 3 other families would live adjacent to his home (one family living in the house to the right of his home, one family living in the house to the left of his home, and one family behind) could now be faced with 18 households or more being next door neighbors (up to 6 units or more per lot).
Worse still, the new laws increase potential density and population, while reducing off-street parking, in high-fire severity zones and other hazardous areas with inadequate and unsafe access and evacuation routes. This will lead to streets being overcrowded with parked vehicles. Dire consequences, similar to Paradise and Lahaina, could result during an emergency when residents are unable to evacuate and fire trucks/paramedics are unable to reach their destinations.
Rather than lifting lower-income households up by helping them achieve homeownership and a higher standard of living, new laws bring everyone down to a worse quality of life.
Indeed, when seeking approval of their Housing Elements from the State Department of Housing and Community Development (HCD), typically jurisdictions must only consider tiny apartments or condos as housing that qualifies for very-low and low-income households. Affirming single-family zoning and helping families to live in single-family homes, build equity, and accumulate wealth is shunned.
Housing Element: A Housing Element is a local plan, adopted by a city, town, or county that includes the goals, policies and programs that direct decision-making around housing. Every eight years, each jurisdiction must update their Housing Element and plan for a certain housing quota, known as a Regional Housing Needs Allocation (RHNA). The quota includes housing for very-low, low, moderate, and above moderate households
Granted, homeownership isn’t in everyone’s future. For people without ongoing income, other solutions are needed. However, homeownership should be given a priority when solving our affordable housing needs.
So, let’s make this change happen.
In addition to repealing the laws that took away local control of land use and eliminated single-family zoning, the following should be pursued:
ENABLE HOMEOWNERSHIP
Co-Equity Loans AKA Shared-Equity Mortgages
Every jurisdiction should offer programs that enable homeownership and the benefit of equity growth and wealth accumulation. To begin with, counties, cities and towns should offer first-time home buyers co-equity loans, also known as shared-equity mortgages.
As home prices have continued to escalate throughout California, it has become increasingly difficult for prospective homeowners to secure sufficient funds for a down payment. Conventional home loans often require a 20 percent down payment from the buyer. Anything less generally results in a higher interest rate and, potentially, the requirement for Private Mortgage Insurance (PMI), which significantly increases costs.
A solution that is already being tested in cities such as Pleasanton, California, is to create a public fund that provides prospective home buyers equity capital to make their down payment in the form of an “equity sharing” loan or an equity investment. (Click HERE to view “Pleasanton’s Down Payment Assistance Loan Program”.)
The public fund is repaid its equity investment plus a commensurate percentage of the property’s appreciation (profit) when the dwelling is sold or refinanced. And then the jurisdiction can lend the money to another family for them to have a down payment on another home.
If homes are in more expensive areas, then the down payment would need to be a larger percentage of the home price, so that lower-income households could afford the monthly mortgage payments.
Down payment assistance could also help lower-income families buy townhomes, rowhouses, and condominiums.
Affordable housing in California now routinely tops $1 million per apartment to build, according to a 2022 LA Times article by Liam Dillon & Ben Poston. (Click HERE to read the article.)
Housing for low-income residents is typically financed with federal, state, and local government grants and tax credits, which reduce what banks and other large investors owe the Internal Revenue Service and the state treasury if they help pay for housing projects.
If, instead of giving the $1 million to a developer to build a small rental unit, the money was lent to a prospective home buyer for a down payment, it could go a long way toward the purchase of a single-family dwelling. Or, the amount could be distributed to multiple home buyers. Moreover, as already mentioned, the million-dollar equity investment plus the commensurate percentage of the property’s (ies’) appreciation could be used again for another family (ies), once the co-equity loan is paid back.
The California Housing Finance Agency (CalHFA) actually started a similar lending program in early 2023 but it appears to have been poorly funded and as of 4/7/2023 all additional loan applications for the program were paused. (Click HERE to read about this program.)
Homeownership enablement programs like this can make single-family homes, townhomes, rowhouses and condominiums affordable and should be preferred solutions to accommodating housing need.
Rather than bringing everyone down, let’s try to lift everyone up and help them achieve a higher quality of life and a better economic future. Let’s save the American dream!