$2-Billion State Plan Would Benefit First-Time Home Buyers

As runaway housing prices threaten the American dream of homeownership for untold Californians, Gov. George Deukmejian acted Wednesday to prevent the vision from collapsing for many prospective first-time buyers.

In a document accompanying his proposed state budget, Deukmejian called for a beefed-up housing program spread over five years that would provide first-timers with $2 billion in loans to acquire a down payment or obtain mortgage interest rates at below-market levels.

One top state official estimated that about 15,000 homes could be purchased and would shelter more than 50,000 people.

The proposal was endorsed as a “good first step” by the California Assn. of Realtors, a trade organization with a major stake in buying and selling of housing. It also drew support from the California Building Industry Assn.

The governor’s action attracted backhanded praise from the Democratic chairman of the Assembly Housing and Community Development Committee, Assemblyman Dan Hauser of Arcata. He complained that Deukmejian last fall vetoed two first-time home-buyer bills that Hauser carried.

“I look forward to having the governor as a new partner in advocating creative affordable-housing legislation,” Hauser said.

The governor’s plan, parts of it subject to approval by the Legislature and ratification by the voters, basically would commit the use of state bond funds for five years to assist low- and moderate-income Californians who want to buy their first home.

Currently, the state aids low-income people who earn $25,000 to $45,000 a year in obtaining loans at interest rates below market levels. This means the state, in effect, loans them money to “buy down” the interest rate so they can afford the monthly payments, or provides low-interest loans so they can come up with a sufficient down payment.

State Housing Finance Agency Director Karney Hodge, whose agency administers the program, said the Deukmejian plan calls for expanding the project to include those Californians earning $50,000 to $60,000.

He said the state would wait until the house was sold to collect the money it loaned at low interest rates. Typically, a house is sold in seven years.

In an interview, Hodge forecast that the program would help finance the purchase of about 15,000 homes during the next five years. “At 3 1/2 people per family, that is in excess of 50,000 people that are under roof,” he said.

Housing costs, especially in urban areas, have increased so dramatically that home ownership by perhaps millions of first-timers has become an impossibility.

Although the funds would be spread statewide, Hodge said that under the program “we’ll be able to reach a segment of the population we have not reached before and that would be in some of the major metropolitan areas such as Los Angeles and San Francisco.”

He refused to characterize the impact on the overall first-time buyer population but insisted that it would be as “good as or better than” home purchase programs operated by any other state. “I’d put it up against any of them,” Hodge said.

In an effort to make sure that the state remains committed to the housing program after Deukmejian leaves office in 1991, Hodge said, a committee that decides how bond funds will be spent will take steps soon to make the enterprise a five-year venture. Deukmejian allies dominate the committee.

The Housing Finance Agency will raise $1.8 billion of the $2 billion by issuing both revenue and tax-exempt bonds under its existing authority, Deukmejian told the Legislature.

The remaining $200 million must be “reauthorized” by the Legislature and voters. That money was approved by the voters in 1982 but not spent for a “Cal-First” first-time home-buyers program because the terms were so restrictive and the mortgage market so unfavorable that the program went nowhere, Hodge said.