California to lend 20% down payments with 0% interest for homebuyers

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?

The program already ran out of money. $300m for 2300 buyers. https://www.latimes.com/california/story/2023-04-08/californ...

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.

The more recent news is that they have run out of money.

> '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...

Shot, meet chaser: https://www.kpbs.org/news/local/2023/04/10/california-first-...

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.

The headline I wanted to see: California to spend $300 million building new housing by retrofitting commercial real estate

California is really creative at finding ways to spend money.

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.

Found this part really interesting:

>Evans said the new loan program has a shared equity program. “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.

Is it safe to suspect that home prices, in CA, are going to sit 20% higher than they would, otherwise?

This seems suspect no? I agree the amount you need to out down is too much right now (floating 100k plus for a down payment), but making it essentially require 0 down sounds like you seriously run the risk of 08 part two, where it will be very easy to lend to people who actually can't afford it, or aren't financially responsible enough to handle it.

Lending half of a down payment or some other percentage would sound much safer.

This is throwing fuel on the fire, not only by increasing demand in an already supply-constrained environment, but by the government of california committing $300M to fairly-directly invest in residential real estate.

It's also not entirely clear what happens to the state's "20% cut of appreciation" if the home value drops. I suspect the state isn't going to take a haircut off their initial loan amount.

The day after this article was published, the program ran out of money after helping "more than 2300" homebuyers.

https://www.calhfa.ca.gov/homeownership/bulletins/2023/2023-...

I wonder what would happen if instead the state spent the 300m on building houses and selling them, say, 10% below market price or sth.

Well I guess you can build a fair few houses for that money. In this programme it was funding 20% of the house rather than 100%, but the 100% also includes the markups of the various business doing the building.

Meanwhile, not only do you end up with more houses, diluting the price down, but also neighbouring sellers / developers need to compete with the state cheapo houses, bringing prices further still.

Of course the other thing that happens is that because housing is a localized Ponzi scheme, local residents are aghast (understandably to me) because after years of saving to buy a house, the state devalues their property.

Though maybe if you spread out the housing... Now I'm just thinking aloud.

I hope that CA does not follow the UK down the path of absolutely fucking insane policies to try to hide the utterly insane state of their housing market(s).

The UK has policies like this (utilized by my niece to buy an apartment in London): buy 60$, rent 40% ... since you're only buying 60%, the downpayment requirements drop, so more people qualify. But wait, won't they have to pay rent as well as the mortgage? Why yes, they will indeed. But doesn't that mean that their monthly payments are still essentially unsound, as they would have been if they had bought 100% ? It certainly does, which is why this plan requires government backing to exist in the first place.

“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.

That could be a lot of money someday if you stay in the house long enough.

Isn't this a prefect recipe for a super-bubble? When you help people with the down payment this much, wouldn't basically everyone try to apply to enjoy appreciating property values, driving demand and prices ever higher, and even worse - with relatively little commitment to follow through if the economy gets choppy? With the down payment, at least you have some skin in the game, but with this program, for the first 5-10 years you would probably see your mortgage mostly as a rent alternative...

This madness in the US is feeding property speculation. The responsible thing to do is to use this money to build more housing, so prices will fall or at least remain at the same level.

Lending money indiscriminately so people can buy houses they can’t afford? 2008 is calling, it wants its terrible idea back.

More patchwork solutions a la healthcare style that adds more complexity for ordinary people.

When people couldn't afford to actually use health insurance due to high deductibles, what did the gov't do? Come up with HSA and HRA programs.

This is yet another giveaway to landlords and ways to prop up housing market that is one a decline.

> State lawmakers had set aside $500 million for the program as part of the 2022-23 budget. But a looming fiscal shortfall led Gov. Gavin Newsom to propose a 40% cut, so when CalHFA launched the program late last month, it was allocated only $300 million and expected to assist about 2,300 home buyers.

What a circus.

Btw funds were depleted from this almost immediately, and nobody that signed up for this was processed.

People that were already closing on a home and in that agencies system were first in queue to flip over to this programme

Everyone else will have no time to identify a place, sign up etc

Heh. So, we did a similar two loan structure back in 2004. It got us into the house, but paying both loans at once was stressful for several years until the family income finally caught up enough to provide a comfortable margin of safety.

> “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.

So instead of fixing housing speculation, this is just a roundabout way for the state to get in on it.

This is a wealth transfer from the tax payers to the landed gentry

So if home appreciates from 500k to 600k and I sell the house, the gov't gets to keep $20k (+ the $100k they loaned)

What happens if it goes down from 500 to 400k?

A handout to sellers in a buyers market

Help to buy ruined the housing market in the UK and especially London. This is so fucking stupid…

This is eventually a subsidy to the sellers (while the program is in effect)

Unless you increase supply it's not going to do anything.