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Let state mortgage program expire

April 12, 2023

With a recession approaching, now is a good time to reassess expensive government programs, cutting where possible. A good place to begin is letting expire the California Dream for All Shared Appreciation Loan program.

According to its website, it is a down payment assistance program of up to 20% of a home’s purchasing price “for first-time homebuyers to be used in conjunction with the Dream For All Conventional first mortgage for down payment and/or closing costs. Upon sale or transfer of the home, the homebuyer repays the original down payment loan, plus a share of the appreciation in the value of the home.”

The $300 million allotted for the program was supposed to last “months, according to loan officers who attended agency presentations,” reported the Washington Post. “Instead, it became evident within days that the money would run out almost immediately.”

An April 6 Program Bulletin to CalHFA Approved Lenders announced the program would be paused beginning April 10.

“It’s not surprising people took advantage of it while it’s available,” Geoffrey Lawrence, director of research at the Los Angeles-based Reason Foundation, told us. But there’s a problem. “It has little effect on housing affordability because you’re effectively subsiding high housing prices. For a program like this that makes tens of thousands of dollars available to homebuyers, it would goose the price of homes by about the same amount. It’s similar to college loans, which is one of the reasons tuition keeps going up.”

It’s simple economics: When demand increases, prices go up. That means those who know about the mortgage program and fill out the paperwork in time got an advantage over everybody else, especially the taxpayers footing the bill.

Any funding from not continuing this program should be saved to deal with a budget deficit for fiscal 2023-24 that could exceed $30 billion.

As to making housing more affordable, instead of goosing demand, as this program has done, we encourage the state to continue working to increase supply.

Two good ways are: Reform the California Environmental Quality Act. And enforce Senate Bills 9 and 10 from 2021, which promote more construction.

Orange County Register

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Let state mortgage program expire

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