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When the California Housing Finance Agency was created in 1975 in Governor Jerry Brown’s first term, the mission was simple: help low- and moderate-income families buy their first home.
More than 40 years later, amid skyrocketing housing prices and near-record low homeownership rates, that goal is getting harder and harder to attain. So much so that the agency, known as CalHFA, has quite literally redefined what it means to be “moderate-income” in California — and their definition of “moderate” may be different than yours.
In fiscal year 2016, only 124 households making over $100,000 obtained a loan through CalHFA, accounting for only 3 percent of the mortgages offered by the agency.
During the first 11 months of fiscal year 2018, nearly 1,000 households making over that amount obtained a loan—accounting for 14 percent of CalHFA’s mortgages. Those that earn over $85,000 now comprise 30 percent of CalHFA borrowers, according to exclusive data provided by the agency.
Escalating housing costs are a likely culprit. The median price of a California home has jumped 21 percent over the last three years, reaching $580,000 in April, according to the California Association of Realtors.
That means it’s harder for lower-income Californians to qualify for a mortgage—even with down payment assistance. It also means more and more California households making six figures don’t have the savings they need for a down payment.
“If we know that supply is fewer, and that incomes haven’t kept pace with prices, how do we continue to help out the low-to-moderate space?” said Tia Boatman Patterson, executive director with CalHFA. “One of the ways you do it is to help more people by broadening our income targets.”
CalHFA officials stress that the overall number of loans CalHFA has provided to lower-income Californians has increased over the same time span—the number of households making under $70,000 and receiving a CalHFA home loan has grown more than 50 percent since 2016.
And even if six-figure households are a faster growing part of the population the agency serves, Boatman Patterson says higher-income homebuyers are in no way taking away opportunities from lower-income ones.
But the increasing appetite for down payment help from higher income households raises questions about how feasible it is to make homeownership a cornerstone of building wealth for those on the lower-end of the income ladder.
“Historically, we have and still do advocate for homeownership as a powerful tool to build intergenerational wealth and close the racial wealth gap,” said Vedika Ahuja, a program manager at the Greenlining Institute, a policy group that pushes for increasing homeownership among low-income families and communities of color. “And increasingly in California, in high-price markets, that’s becoming a less and less viable tool.”
Where $200,000 a year is middle income
Under new rules adopted earlier this year, CalHFA has expanded the pool of people available for down payment assistance, closing cost assistance and other programs intended to make homeownership accessible for Californians who otherwise couldn’t afford it. The decision to increase income limits for first-time homebuyers was approved unanimously by the CalHFA board of directors at the recommendation of its staff.
The new income limits for the CalHFA programs exceed six figures in every California county, but the eligibility cutoffs are especially high in parts of the state where housing prices are most astronomical. In San Francisco, a single-person household can make up to $228,300 and be eligible. In San Diego and Sacramento counties, the cutoff is over $150,000. That means state legislators in Sacramento — with salaries just over $100,000 — would qualify for help buying a home.
And, the cutoff doesn’t change based on the size of a household. An engineer making $100,000 would be eligible for the same programs as a single mother of six.
“What would the public policy reason be that I would treat a single person differently than an eight person household when they’re trying to buy a house?” said Boatman Patterson. She argues that higher-income individuals with savings and better credit profiles would get cheaper mortgages outside of the CalHFA program, so the programs won’t be subject to abuse by people who don’t need them.
CalHFA is a self-supporting, independent housing agency that funds itself by selling its mortgages to third party investors, who package the federally-backed debt together in a bundle.
Before switching to that financing model, CalHFA was prohibited by federal rules from relaxing its income restrictions.
Saving for a downpayment isn’t as easy as it used to be
Sacramento loan advisor Tanisha Broadway has seen firsthand a shift in the type of client needing help buying a first home.
“What’s happening in our markets is people make really good money, they just can’t afford to put any money down,” said Broadway, who counsels homebuyers on CalHFA products like down payment and closing cost assistance. “Everything is expensive and people are living check to check a lot of times.”
Broadway said that while high rents make it difficult to save enough for even a 3.5 percent down payment—the down payment often required for CalHFA loans—the closing costs can push a home even further out of reach.
The most popular CalHFA product is a 30-year fixed rate mortgage, with market-rate interest rates.
Aspiring homeowners can also qualify for low- or zero-interest loan to finance down payments and closing costs. Those loans don’t require a monthly payment—they are only payable when the homeowner sells or refinances the property.
The down payment and closing cost assistance programs can add up to a good amount of money. Broadway said she recently had a client receive almost $30,000 in help for a nearly $400,000 home.
“A hundred and fifty-two thousand a year for someone is definitely by no means low income,” said Broadway, referring to the program’s new income-cap for Sacramento. “But for people who make good money, they just can’t save money, this is the best product for them.”
Broadway works in an area where CalHFA’s loans are increasingly popular. Sacramento County alone accounted for 14 percent of the program’s total loan volume last fiscal year. The bulk of homebuyers CalHFA helps are in the Central Valley and Inland Empire.
But even after CalHFA raised income limits, many parts of the state simply cost too much to attract new homebuyers. Despite the $220,000 income limit, no resident of San Francisco has utilized the program this year.
The program has a limit on the sales price of a home one of its mortgages can be used for—$700,000. The median price of a home in San Francisco? $1.6 million.
The California Dream series is a statewide media collaboration of CALmatters, KPBS, KPCC, KQED and Capital Public Radio with support from the Corporation for Public Broadcasting and the James Irvine Foundation.