SACRAMENTO, Calif. (KTXL) — Seven Democratic senators are proposing new programs to build back a stronger economy and housing market after the pandemic — one of which could help first-time homeowners in a major way.
“The Build Back Boldly package I feel is a very robust attempt to help us with the housing crisis,” said Barb Lebrecht, the director of the California Association of Realtors.
Lebrecht said she is feeling optimistic about the latest Build Back Boldly budget plan by Senate Democrats like Anna Caballero, who is promising to take on a turbulent real estate market and the ongoing issue of homelessness.
“We have the lowest homeownership in the state of California since the 1940s,” Sen. Caballero said. “This is one of the alternatives to try to start putting people on the path to be able to own their own home and to start creating wealth for themselves.”
To put the housing crisis into perspective, Lebrecht said the median income for a family of four is just under $70,000. Right now, the median price of a home in Sacramento is close to $500,000.
They are proposing a five-year, $20 billion commitment to acquire more permanent housing for the homeless, create more low-income housing assistance programs, improve housing affordability with emergency grants and tax relief benefits and provide a new California Dream for All program for first-time homebuyers.
“The proposal is to create a fund in the state of California,” Caballero explained. “The homeowner would put up part of the purchase price depending on what their income allows them to do and the fund would put in the rest.”
The program would, essentially, help cut the cost for first-time homebuyers nearly in half by allowing them to purchase a home with a silent partner who owns a minority share of up to 45%. Therefore, a $400,000 home could be bought for $220,000, with the other $180,000 being picked up by the investor.
“You have to ask, why would someone contribute that much as a private investor? Well, they’re giving them the capital gains exclusion,” Lebrecht told FOX40.
That means investors are exempt from property taxes and insurance and are only tied to the value of the home. It potentially makes this a win-win situation for both the homeowners and a program that’s attempting to close the gap between racial and economic disparities within the housing industry.
When asked how this program would benefit a private investor, Sen. Caballero said as the equity in the home rises in value, the shareholder would see a rise in their investment as well.
“The longer it stays in the fund, the more money will accrue to them,” she explained.
“I have a lot of buyers that I call ‘cusp buyers.’ So if they can only afford another $25,000 or $50,000, it would get them what they wanted, and something like this would really do that,” Lebrecht said.
Sen. Caballero said these proposals are still in their infancy and will be brought up at the next major budget meeting with Gov. Gavin Newsom in the coming weeks.