Down payment plan is just a bad idea

With the state having a $97.5-billion budget surplus, you can be sure that California’s lawmakers are having a field day dreaming up new spending programs.

One of the more dubious ideas, courtesy of Democratic Senate President Pro Temp Toni Atkins of San Diego, is to create the “Californian Dream for All” program to help Californians buy houses.

As is typically the case, lawmakers identify an actual problem. Home prices have been soaring.

California has the secondlowest homeownership rates in the nation.

Many Californians can’t scrape together the down payment necessary to buy their first home. Prices and mortgage rates are soaring, making home buying more unapproachable than ever.

As is also typically the case, the Legislature offers a “solution” that misses the main cause of the problem — and expands the size of the state bureaucracy.

Although the details are evolving, the program would float $1 billion in revenue bonds to create a fund in which the state offers 17% or 20% interest-free loans to cover homebuyers’ down payments.

How to have your say:

The program would also grab $150 million a year from the general-fund budget to pay for its administrative and staffing costs.

Certainly, struggling homebuyers might appreciate the “free money,” but in this case they must sign a deal with the Devil — or at least with the state bureaucracy. The government would gain a stake in the equity.

In her statement, Atkins explains that program participants would pay back the loan at time of sale – but CalMatters notes that the state would also receive “a 20 percent share of any increase in the home’s value.” You can be sure that the state won’t be there to pay 20 percent of the cost of that new roof.

The program raises other concerns.

It won’t ever have enough funding to make a dent in the state’s home-affordability crisis.

Critics have noted that it will create political pressure on the state government to “forgive” the down payments.

Instead of creating costly programs, lawmakers reform the myriad laws that make it so difficult for developers to build new houses.

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