Sounds like throwing gasoline into the fire. Housing prices are high because of supply and demand... so CA wants to use taxpayer money to increase demand?
Seriously. I'm a much bigger fan of government intervention in markets than, I think, most on this site, but this program just seems insane. "House prices are too high—let's raise demand rather than address supply!" LOLWUT?
> "I thought the program was genius," said Scott Evans, executive vice president of Cross Country Mortgage, describing what he thought when he first heard about the new loan program.
Mortgage dude likes having more clients. Shocking.
> “When you sell the property or refinance the loan, they take up to 20% of the appreciation. The homeowner gets to keep 80%," he said.
Wow. This gets even weirder. At least I guess this means they'll likely make money on the whole thing, but I'm not sure I love a state government being an outright investor in private homes.
Help To Buy Equity Loan did this with new houses (the buyer technically had to provide 5%, but that was often given by the developer) 10 years ago, it's only just finished. The government part was 40% in London due to the insane prices there.
The idea behind it is quite reasonable. People couldn't afford to save up for a deposit because all their money went in rent, which was higher than the cost of an equivalent mortgage + home maintenance.
Certainly helped me break out of the earn->rent cycle.
CA will make money if home prices increase from current highs due to supply constraints and if owners sell triggering the capture IIRC. CA now has a +$300m financial stake in that outcome. $300m is probably peanuts compared to the upside of addressing the CA housing crisis and enabling more CA GDP growth but it's also not nothing.
Since increasing homeownership is a good thing, subsidizing homeownership is a good thing, amirite?
Reminds me of Heinlein's Friday, in which the heroine visits a future California. The government, having found that those with college degrees earn more money, promptly issues every citizen a bachelor's degree to correct this inequitable situation.
Doesn't seem to be stopping people from trying lol. A week after this article posted, and requests to the CA housing agency's website [1] are still timing out both in my browser and via `ping`.
But yeah, as others have said, this is throwing fuel on a fire. The problem to solve for is a lack of affordable supply, not a lack of money on the demand side. But throwing money at voters is never a bad move politically, so it's understandable how we ended up where we are.
Unfortunately, the way financialization works, we should expect this to lead to a bump in home prices that roughly perfectly offsets the increased buying power created by this financial instrument. The only long-term solution to affordable housing is abundant supply.
Pumping government money into private markets always works this way.
A good example of this is the TV digital converter boxes, when we switched the airwaves from analog to digital. Those boxes were only 10 or 15 bucks or so. But then the government gave everyone vouchers for 40 bucks for a converter box. So, guess what? All the converter boxes were 40 bucks, or more. Because they could be. It was free money. The money would've been far better used by the government just giving the converter boxes directly.
I appreciate this as an anti-inequality measure, but it feels like in California low/med income buyers are being outpriced by a lot more than 20% of a down payment.
"We can fit 18 million groups into 14 million units of housing, as long as we pay 20% of the cost" feels like a really last ditch housing policy.
Ah yes, because clearly the way to fix a housing crisis from outsized demand and insufficient supply is to give even more people access to cheap debt. This is so unbelievably stupid, I can't help but wonder if this is actually on purpose to make the problem worse.
This type of thing makes me think of a corollary to Hanlon's Razor: given enough time to try to solve a problem, sufficiently stupid people are indistinguishable from evil.
Readit News
> "I thought the program was genius," said Scott Evans, executive vice president of Cross Country Mortgage, describing what he thought when he first heard about the new loan program.
Mortgage dude likes having more clients. Shocking.
> “When you sell the property or refinance the loan, they take up to 20% of the appreciation. The homeowner gets to keep 80%," he said.
Wow. This gets even weirder. At least I guess this means they'll likely make money on the whole thing, but I'm not sure I love a state government being an outright investor in private homes.
Help To Buy Equity Loan did this with new houses (the buyer technically had to provide 5%, but that was often given by the developer) 10 years ago, it's only just finished. The government part was 40% in London due to the insane prices there.
https://en.wikipedia.org/wiki/Help_to_Buy
The idea behind it is quite reasonable. People couldn't afford to save up for a deposit because all their money went in rent, which was higher than the cost of an equivalent mortgage + home maintenance.
Certainly helped me break out of the earn->rent cycle.
The problem needs to be solved on the supply side not demand side.
Reminds me of Heinlein's Friday, in which the heroine visits a future California. The government, having found that those with college degrees earn more money, promptly issues every citizen a bachelor's degree to correct this inequitable situation.
A fair portion of this is that things are so out-of-whack that no one has any plan but to keep the bubble going.
Dead Comment
But yeah, as others have said, this is throwing fuel on a fire. The problem to solve for is a lack of affordable supply, not a lack of money on the demand side. But throwing money at voters is never a bad move politically, so it's understandable how we ended up where we are.
1. https://www.calhfa.ca.gov/
Municipalities need to be active participants in increasing supply. Not dumping free money and increasing demand.
Also, no need to picture soul crushing tower blocks. e.g. HUD's projects of the last few decades are always pretty respectable.
A good example of this is the TV digital converter boxes, when we switched the airwaves from analog to digital. Those boxes were only 10 or 15 bucks or so. But then the government gave everyone vouchers for 40 bucks for a converter box. So, guess what? All the converter boxes were 40 bucks, or more. Because they could be. It was free money. The money would've been far better used by the government just giving the converter boxes directly.
This is just madness, house prices are guaranteed to go up and affordability is likely to increase zero.
> 'Unprecedented' demand: $300 million set aside for home loan assistance program gone in 11 days
https://www.msn.com/en-us/money/realestate/unprecedented-dem...
It's a mystery for the ages.
I appreciate this as an anti-inequality measure, but it feels like in California low/med income buyers are being outpriced by a lot more than 20% of a down payment.
"We can fit 18 million groups into 14 million units of housing, as long as we pay 20% of the cost" feels like a really last ditch housing policy.
Jan 2023 "After 2 years of massive surplus, California is facing a $24B budget deficit" - https://www.capradio.org/articles/2022/11/16/after-2-years-o...
Edit: While I appreciate the downvotes, can someone tell me why my thinking is wrong?
This type of thing makes me think of a corollary to Hanlon's Razor: given enough time to try to solve a problem, sufficiently stupid people are indistinguishable from evil.