Uncertainty Surrounds Homeownership Proposal

by on April 29, 2004

Mayor Newsom continues to push for bond money to assist homeownership. The proposed November housing bond currently allocates $50 million for homeownership at the expense of additional funding for supportive and affordable rental housing. As concern over the allocation formula grows, it’s time for the Mayor to lay out all the details for his homeownership plan

In San Francisco, 95% of renters cannot afford the median price of a single-family home. Home prices have skyrocketed despite the dot-com bust, as low-interest rates and insatiable demand has kept the market strong.

While every elected official cites the need to help renters become homeowners, the devil is in the details. For example, if we accept the premise that San Francisco should provide financial assistance to those currently unable to afford homes in the city, a series of important questions remain..

First, how much assistance per household should the city’s taxpayers provide? There are existing state programs providing generous downpayment assistance to first-time homebuyers, but most of the city’s renters would need a $100,000-$200,000 up front subsidy to qualify for a mortgage and then meet the monthly payments. Those who could most easily become homeowners, and need the least amount of public assistance, are renters with household incomes of $100,000 and up. Should assisting this group be a top city priority?

Sister Bernie Galvin of Religious Witness With Homeless People is among many who think not. In an April 27 letter sent to the Mayor’s Housing Work Group, Galvin noted that ” it is not that any of us fail to recognize the right for homeownership of those seeking the American dream and their need for assistance; it is simply a matter of clear priorities, given this city’s growing crisis in homelessness and the dire shortage of housing that is truly affordable to the poorest among us.”

Second, how many households would achieve homeownership through the bond? The current proposal provides around $17 million over five years for homeownership assistance, divided equally among those earning 60-80%, 80-100%, and 100-120% of median. While each category includes a range, a developer would not be required to sell to anyone who was not at the top of the range (so those earning less than 80% of median could easily be left out).

The proposal thus offers financial assistance of about $3.5 million a year to families of four earning $73,000. If each of these families needed $100,000 to qualify to purchase a $600,000 two-bedroom condo or townhouse, then the bond would assist only 35 households per year. If, as is more likely, $200,000 would be needed for families to qualify for mortgages, than less than twenty households would benefit annually.
The other families of four to be helped with homeownership earn between $90,000- $110,00 per year. We share the view that providing scarce tax dollars for this population is not a top city priority.

Third, what kind of homes will people be getting? When we speak of homeownership as the American Dream, the image is of a single-family home. It is unclear whether any such housing would constitute the “homes” provided by the bond. If Prop J is any example, the vast majority of “homeownership” units are likely to be condos built downtown, not houses in the Mission, Bernal Heights or Visitation Valley where they are most desired.

Fourth, who will be eligible for the assistance?. Unless eligibility for the homeownership portion of the bond is limited to those who have lived in the city for five years or more, the longterm San Franciscans voters think they are helping may not benefit. The chief reason for the city’s high housing cost is excess demand from those moving to San Francisco from outside the city; if everyone is eligible for grants of $100-200,000, we will have thousands of newly arrived residents applying.

At a time when the Bush Administration is trying to take away housing subsides from thousands of Bay Area families, and with homelessness the linchpin of Newsom’s mayoral campaign (recall his previously announced support for a $150 million supportive housing bond, since cut to $75 million), we agree with those who would alter the current proposal by reallocating $50 million from homeownership to supportive and affordable rental housing.

Comments on our analysis is always appreciated.

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