How the proposed "California Dream for All" program would work
As currently proposed, the plan would be funded with $1 billion per year for the next 10 years, aiming to assist 7,700 borrowers per year. Here's how it would work for one hypothetical set of homebuyers.
Begin life as renters
Jessica and Michael have been renters in California their whole lives. They have some savings, but spend much of their paychecks on increasingly high rent and paying off student loans. With a household income of $90k, buying a home at California prices seems out of reach.
Enter shared equity agreement
The program aims to help low- and middle-income households like them develop generational wealth through a revolving fund with interest-free loans.
Median single-family home price: $786k
Jessica and Michael can contribute 3% of the purchase price for the down payment: $24k
The state would provide 17% for shared appreciation: $134k
First mortgage: $629k
Rising prices create equity for buyers, help new homebuyers when houses are sold
10 years later
Upside scenario
Home price appreciates 6% annually. Jessica and Michael sell it for $1.3m, reimburse the state and exit the program.
First mortgage balance: $502k
The state would be reimbursed the initial principal of $134k plus 17% of the gain from the sale, and that money reinvested into the fund: $226k
After transaction costs, they would have grown their equity by 20.4x: $481k
Downside scenario
Home price appreciates 0%. Jessica and Michael sell it, reimburse the state and exit the program.
First mortgage balance: $502k
The state recoups the invested money for the fund at no gain or loss: $134k
After transaction costs, they still increase their equity by 3.4x: $79k