The Dream For All Program aims to help 1,600-2,000 people with downpayment assistance.
Things look a little different this time around.
The last time California’s Housing Finance Agency launched the Dream For All program there was such a rush of applications the program ran out of its allotted $300 million dollars in 11 days. This time there’s $250 million dollars to go around and a lottery system which randomly selects participants after the registration window has closed. There is also a greater emphasis on providing assistance to people who are unlikely to inherit any property from their parents in an attempt to address one of the barriers to building generational wealth.
“What we found is there is a fairly large segment of the population renting who have the monthly income. They’ve got a steady job, they’ve got good credit to make a house payment. But they can’t save up,” said Eric Johnson, spokesperson for CalHFA. “The idea behind the program is that you give people a fairly hefty downpayment. That allows people to say maybe this is doable. Further into affordability, we’re not making them have any payments on that loan [while they own the home].”
Dream For All will provide up to 20% of downpayment assistance, not to exceed $150,000, for participants who meet low income guidelines. Upon the sale of the home, they must repay the initial downpayment amount plus 15-20% of any profits from the sale (the exact percentage depends on certain income thresholds). These profits are returned to the program to fund the next round of homebuyers. By providing such a large downpayment buyers will have a lower monthly payment and most likely avoid the private mortgage insurance usually required with smaller downpayment sizes. An analysis from the advocacy organization California Forward estimates buyers will lower monthly payments by approximately $1,200 per month.
“This is a leap forward in trying to say, ‘How can we finance a really large, meaningful downpayment program’ and still make it so it makes sense for the taxpayers of California,” said Johnson.
The legislation driving this round prioritized homebuyers who are unlikely to inherit a home, or its proceeds, from family, making this one of the few large scale programs attempting to tackle the long-term economic impact of generational poverty. In addition to being below certain income guidelines, qualified applicants must have at least one person be a first-generation homeowner. For the purposes of this program first-generation is defined as not having had ownership interest in a home for the past seven years and not having parents who own a home (or owned a home at the time of their death). Anyone who has been in foster care or other institutional care is also eligible.
“It not only provides an opportunity for the household to purchase their first home and begin to generate wealth for their family, but it also reduces the stress on the rental housing market,” explained Tomiquia Moss, Secretary of the Business, Consumer Services and Housing Agency for California.
In California, renters make up approximately 44% of the population, far higher than the national average which tends to hover around 35% and second only to New York at 46%.
“I would describe [this] more as ‘patient’ resources rather than the volatile market that can sometimes be outside of a government housing agency,” continued Moss. “You see a lot more volatility in those markets and the relationships [CalHFA] has with the capital markets allows us to make those calculations and create the foundation for a mission-driven approach.”
The $250 million will be distributed on a weighted basis throughout nine jurisdictions in the state based on the proportion of households in each location. CalHFA expects to help between 1,600-2,000 registrants in this phase of the program.
“The biggest thing we’ve been able to do with this new system is make sure we’re penetrating pretty deeply into some of the markets that may not have access to mainstream news sources,” explained Johnson. “We’re not spending our money on billboards, we’re not spending money on television ads. We have ads in supermarkets. We have ads in laundromats. We’re sending out direct text messages and emails. We really want to make sure that the people who need this program the most are the ones we know about and have the opportunity to work with one of our lenders and get everything together.”
The registration window closes on April 29th, after which selected participants will be notified of their inclusion and if there are questions about whether an applicant meets the eligibility requirements they have time to provide additional proof before a final decision is made.
As Moss summarizes, “It really provides an opportunity for folks to exit the rental market, begin to generate that personal family wealth, and get on a track of economic, not just stabilization, but mobility.”
