A sweeping new proposal in California offers big hopes to potential first-time home buyers who are struggling to afford a home in the state. The California state legislature recently unveiled a $267 billion spending plan for the upcoming fiscal year that would include paying up to 45% of a home’s purchase cost for first-time home buyers. Under the program, the state would establish a “California Dream Fund” that would cover nearly half the home purchase in exchange for a partial ownership stake.
The “California Dream for All” program—proposed by Democratic state senate lawmakers—has been met with controversy over its giant price tag. If approved, it would offer a direct cash subsidy to first-time home buyers. The legislation is also aimed at trying to close the racial wealth gap, noted lawmakers.
“The first step to reaching the California dream of thriving in the middle class and building family wealth starts with homeownership,” according to the California Senate Democrats’ Build Back Boldly budget plan. “The California Dream for All first-time home buyer program aims to address historical and economic barriers to homeownership with a new way for Californians to buy a first home and get a foothold in the middle class.”
Eligibility for the program will be based on regional income levels and home prices.
However, critics argue against the plan saying home sellers could just raise their prices to capture more of the value of the subsidies. For example, under the program, if approved, a $400,000 home would only cost the individual purchaser $220,000 while the fund would cover the other $180,000. But critics argue that a home seller could raise their price to $728,000 to get $400,000 from the individual buyers and then gain $328,000 courtesy of the taxpayers.
State lawmakers are set to negotiate the budget, including this program, on June 15.