New California ballot measure would make buying a home more attainable

Voters will be deciding on a ballot measure in November that could make the dream of buying a home for lower- to middle-class Californians more within the realm of possibility — at least in some parts of the state.

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, which is one of 14 measures set to appear on the ballot, targets what supporters of the measure call “the missing middle” class of working Californians who can’t afford the high down payments and also earn too much to qualify for down payment assistant programs.

The proposal would give these qualifying residents a second mortgage option that would be administered by the state, which would essentially be a new pot of money to borrow from. The initiative would reduce the required down payment to 3% of the purchase price and allow buyers to borrow the remaining 17%, at a fixed rate that’s still to be determined.

“Homeownership is so fantastically attractive,” Bob Hertzberg, a former state legislator and the architect of the proposal, told SFGATE by phone last week. “It gives a stake in the community. An opportunity for people to build generational wealth.”

This would be done by creating a $25 billion in bonds that would be repaid by mortgage payments. Those who qualify for the second mortgage would include people who are already a California resident for a year, who plan to actually live in the home and who are middle-class earners — which is anyone who earns no more than 200% of their city’s median income. Hertzberg said he wanted to take an “expansive view of what middle class meant.”

“Anecdotally, people in the middle class don’t feel taken care of,” Hertzberg said. He explained that the ballot can be bogged down by special interests “from big companies, and the average person wonders, ‘What are you doing for me?’”

Under this proposal, the middle class in San Francisco in 2026 would be considered around $324,000 in annual income for a family of four, according to the city. Hertzberg said that in the city, a two-bedroom, two-bathroom, 1,400-square-foot house costs about $1.6 million. If you rent that same place, he said, you’d end up paying nearly as much as a mortgage over time with no property to own in the end.

“The key is ownership,” he said.

These benefits would only apply to a “qualified new home,” which means the person has to be investing in new construction or the first sale of a converted nonresidential property. The home also has to be priced under $1.5 million, a figure that will be adjusted for inflation.

Hertzberg, who is also a lawyer and former leader of both the California Assembly and Senate, told SFGATE that he hopes the measure can encourage developers to build more single-family homes in California and bring in more first-time homeowners. Hertzberg said he spent five years researching and drafting this idea.

He said that usually the deal-breaker between someone who invests in a home or opts out boils down to the astronomically high down payments. 

“People don’t think homeownership is attainable,” he said, saying, hyperbolically, that $250,000 down on a home in cash might as well be $70 million. “… I wanted to introduce something that really understood, in a deep way, that people want to build generational wealth and get a home.”

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If passed, the California Housing Finance Agency will be in charge of the program.

Xavier Becerra, the Democratic gubernatorial candidate, endorsed the measure. Also in support are other former candidates for governor, including San Jose Mayor Matt Mahan, former U.S. Rep. Katie Porter, the former State Superintendent for Public Instruction Tony Thurmond, and former Mayor of Los Angeles Antonio Villaraigosa.

David Garcia, who heads a program at the UC Berkeley Terner Center for Housing Innovation, told SFGATE that the measure could be a creative way to get developers to start building starter homes and smaller-sized projects “in high-class places like the Bay Area” rather than “the big mansions that cost millions of dollars.”

“We think of homeownership as the American dream,” he said, adding that “a large lot, five bedrooms, three baths” was once that vision. But, he said that the average single-family home “keeps getting bigger and bigger” and in turn making less incentive for developers to build smaller scale projects that the state so desperately needs.

Hertzberg projects the proposal could build 190,000 new homes. Whether the homes end up in places with the most competitive and constrained markets is a different story — the reality is that more people living outside of major metropolitan areas, with more space to build, will benefit the most from this proposition.

“San Francisco is obviously the most challenging, but it [will] put it in reach for folks,” he said. 

Garcia agreed that there’s a lot of space to build new homes in less developed parts of the state like the Central Valley, where many projects are already underway.

“You don’t see many people taking advantage” in the Bay Area, he said, adding that the measure could encourage developers to bring duplexes and townhomes to the region where the land is limited, rather than larger homes. “But this changes the game a little bit.”