Demand for California’s new down payment assistance program overwhelmed the system and depleted its $300 million budget in less than 12 days, with applications put on pause effective April 7, according to the housing finance agency.
The legislator responsible for proposing the program responded optimistically to the news.
“It is incredible and inspiring to see that the launch of the California Dream for All program has already been so successful,” Senate President Pro Tempore Toni Atkins (D-San Diego) said in a statement April 14. “The fact that it has helped more than 2,400 first-time homebuyers with their down payments in its first two weeks is terrific.”
Designed to provide up to 20 percent of funding for low-income first-time home buyers, the “Dream for All” program was initiated with the passage of Assembly Bill 140 in 2021.
Resources are provided through the Dream for All Shared Appreciation Loan, in which the state provides a portion of the down payment in exchange for a share in the property.
The loan, in addition to a portion of the appreciated value of the home, will be repaid when the property is resold, according to the legislation.
The lowest eligible income for the program is $159,000 for several counties throughout the state, with San Franciscans and Silicon Valley residents in Santa Clara and San Mateo residents eligible if they make $300,000, the highest. Los Angeles’s limit is $180,000, and Orange County has the highest income limit in Southern California, at $230,000.
The original text written in 2021 proposed funding the project with $1 billion annually for 10 years. The proposal suggested the $10 billion invested would assist more than 150,000 Californians.
After legislative wrangling, the proposed amount later dropped to $500 million in 2022 and with the state facing a $25 billion budget deficit for the next fiscal year starting in July, Newsom decreased the allocation to $300 million for its introduction in 2023.
The funding gap leaves the program stalled awaiting further resources, according to legislators.
“While we are off to a strong start, we can’t truly make a difference in opening the doors to building generational wealth for Californians—especially those who historically have faced systemic barriers to homeownership—without sustained funding for the program,” Atkins said in the statement.
Intended to provide relief to thousands of entry-level home buyers, all funds were reserved in less than two weeks after more than 2,000 applicants flooded the program’s website.
With the program designed to succeed only with appreciating home values, the state of the real estate market in California has some experts warning that declining prices will put taxpayers’ and the state’s investments at risk.
While prices rose steadily in many areas across the state from 2020–2022, sales volume has cratered since then, down double digits in most counties, and prices are retreating, according to recent sales records.
Another area of concern, according to real estate experts, is the proposal to package the loans as mortgage-backed securities. The plan is to sell the instruments and use the funding for more lending opportunities, but analysts warn that similar ideas contributed to the finance and mortgage lending crisis in 2008.
The day the application window closed for the program, the housing finance agency announced a new Forgivable Equity Builder Loan, granting up to 10 percent of the purchase price to first-time homeowners earning more than 20 percent less than the area’s mean income. These funds do not have to be repaid if the buyers stay in the home for at least five years.
