Adding stock can help alleviate the housing crisis.
By Lawrence Amaturo
While it’s no stretch to say that folks are struggling economically across the country, California’s specific problems bring America’s attention to our doorstep. Astronomical pricing and subsequent price increases of single-family homes throughout the state keep a dynamic of the American “dream” as it was never intended: merely a dream. Our homeownership rate is among the lowest in the country—just over 56%—and it hasn’t moved much in the last 40 years! Fewer than half of 48-year-olds pay a mortgage; thousands of dollars in after-tax income goes toward rent every single month. Heralding the “We’re #1” moniker isn’t always a good thing; and in this respect our state has the highest percentage of renters in the country. Without home equity, most Californians will always struggle.
Wealth preservation for our retirement or the comfort of our children is destroyed when one must keep renting rather than owning a home. With skyrocketing home valuations, high interest rates and low supply of single-family homes, a near-term resolution is neither viable nor visible.
In typical Sacramento big-government style, legislators throw more taxpayer money than good, old-fashioned common sense at the problem. Perhaps the best example of this is found in the state’s home loan program, aimed squarely at our lowest-income residents. It begins with a lofty and worthwhile goal: helping those less fortunate achieve homeownership. I applaud the sentiment and guess that you do, too. Our Democratic majority in the California State Assembly crafted a $150,000 home loan program funded with taxpayer money. Introduced this year by Assemblyman Joaquin Arambula (D-Fresno), AB 1840 would have created a lottery offering zero-interest loans to first-time homebuyers, regardless of residency status. A prior bill establishing the program did not specifically allow for applications from undocumented residents; still, the program was overwhelmed with qualifying candidates, oversubscribed by more than 10-times the available monies, and “sold out” in 11 days. In other words, 10 times more of California’s lower income citizens were turned down than those accepted. How many of these applicants legally live, work and raise their families in the North Bay? Over 18,000 citizens applied and only 1,700 were randomly selected before the money dried up. When your state is “#1” in both budget deficit ($68 billion) and average home price (up 11.2% in the last year to $904,210), something has to give.
Or at least you’d think so. Assemblyman Arambula, however, wasn’t one of them. He authored AB 1840 to allow for expansion of the program to undocumented residents of California. In other words, expansion of a program that already failed to the majority of those it purported to benefit. And I suppose you can guess what happens to real estate prices when two candidates, each fueled with $150,000 of free, zero interest money, bid on the same home? The selling price of that home automatically rises, of course, and the cycle of unaffordability makes another turn in the wrong direction. (On Sept. 6, Gov. Gavin Newsom vetoed AB 1840.)
Put simply, I’m a believer that we can best help others once we’ve helped ourselves first. Undo buying pressure funded by government subsidies fuels higher prices, not lower. Relieving demand through the construction of more supply is, and always will be, the better solution. The alternative further distinguishes the “haves” from the “have nots,” and nothing is worse for our nation’s well-being and harmony. If Sacramento’s leadership will unchain our private industry, foster growth and champion risk takers who want to build more homes, we have that solution toward the American Dream… and California Dreamin’!
I’d love to hear your point of view on this critical issue.
