Deukmejian Housing Plan Clears First Hurdle : State bonds: Senate committee endorses $2-billion proposal to assist first-time buyers.


Gov. George Deukmejian’s proposal to spend $2 billion in bond money to “put home ownership back within reach of the average family” won easy approval in its first legislative committee votes this week, despite objections that the plan would help the relatively affluent buy houses.

Critics say that the governor’s proposal would provide state subsidies to first-time home buyers with incomes as high as $83,699 a year in high-cost areas such as Marin County and San Francisco.

“You would be assisting people in Marin County whose income is twice your legislative income,” said Sen. Leroy Greene (D-Carmichael), who chairs the Senate Housing and Urban Affairs Committee. The annual salary for legislators is now $40,816.

Some legislators say the $2 billion that the governor is calling for is far more than the amount available to help the homeless and low-income families unable to find decent apartments.


They also complain that the governor’s plan has no provision for capturing part of the subsidized home buyers’ gains when they sell their property. In areas with skyrocketing sales prices, those profits can be considerable. And the critics say that the proposal could make it more difficult for local government to provide much-needed rental housing for the poor.

Despite the objections, Greene’s committee approved legislation that would implement the governor’s plan. And the Assembly Housing and Community Development Committee has endorsed a separate measure needed to make the proposal work.

However, Democratic lawmakers insisted on amendments to the legislation. And committee approval came with the understanding that the Republican Administration’s proposal is subject to negotiation, alongside Democratic-backed proposals to provide shelter for the homeless and apartments for the poor.

The governor’s first-time home buyers proposal is included in two bills that have been tethered together--neither can become law unless the other passes.


One of the measures, by Assemblyman Pat Nolan (R-Glendale), would expand the existing first-time home buyer program run by the California Housing Finance Agency. The agency would raise $1 billion by selling tax-exempt bonds over the next five years. The money would provide reduced-interest mortgages to as many as 12,000 first-time home buyers at interest rates that are typically 2% below conventional loans.

“This present generation of young people is the first in the history of our nation that won’t be housed as well as their parents, or better than their parents, " Nolan told the Assembly committee. “That’s a tragedy.”

The low-interest loans provided by the measure would provide many young families with their only opportunity for home ownership, he said.

But one member of the committee, Assemblyman Jim Costa (D-Fresno), objected to making subsidized mortgages available to people who may have incomes high enough to buy homes without state assistance. He argued that any housing aid should help those in the greatest need--possibly setting aside money to help construct apartments for low-income families.

John Witzel, deputy director of the housing finance agency, argued that Deukmejian has signed separate legislation that makes as much as $530 million available for apartments to serve lower-income households.

Nolan’s bill was approved by the committee on an 8-1 vote. The lone dissenter was Assemblyman Gil Ferguson (R-Newport Beach), who complained that government regulation of housing and government-imposed limits on growth are responsible for escalating housing costs in California.

“How come you’re not dealing with the causes?” Ferguson asked. “Why should we continue to fund a program for rich people in my district?”

The second part of the governor’s housing package is a bill by Senate Republican Leader Ken Maddy of Fresno. It is intended to extend the housing finance agency’s first-time home buyers program into areas of the state where the price of housing has been escalating.


The existing agency program depends on the sale of tax-exempt bonds to finance reduced-interest mortgages. The income from those bonds is not subject to either state or federal taxes. However, in recent years, Congress has imposed limits on how the bond proceeds can be used--setting limits on both income of borrowers and sales price of homes.

The Maddy measure would allow the housing finance agency for the first time to sell taxable bonds, which are not subject to the federal restrictions. Some 5,000 higher-than-average-income buyers could thus qualify under the new program. It would cost taxpayers about $20 million a year for 20 years, according to the nonpartisan Legislative Analyst’s Office.

The Senate Housing and Urban Development Committee approved the measure on a 6-0 vote, despite concerns about the bill voiced by Sen. Greene and others.

“Unless we help homeless people become renters and average-income renters become homeowners, we’ve got a housing system that doesn’t work,” said Marcus B. Brown Jr., lobbyist for California Rural Legal Assistance. “We need to build a ladder for everybody, not just for yuppies.”

Assemblyman Dan Hauser (D-Arcata), who chairs the Assembly housing committee, pointed out that the state housing finance agency must compete with local finance agencies for a share of $1.4 billion in tax-exempt bonds that can be sold in California each year under current federal law.

The local agencies have used part of their money to finance apartments and other low-cost housing units; the state agency has focused almost exclusively on home buyers, he said.

Hauser voted for Nolan’s bill, but he made it clear that he intends to negotiate for family rental units as part of any final package.

And Hauser has considerable leverage over the Administration’s plans. He has a bill of his own that he describes as vital to the Deukmejian proposal.


The bill increases the statutory limit on bond sales by the state housing finance agency. Without the measure, the agency will be unable to expand its existing first-time home buyers program. And Hauser has put that bill on hold.

“I decided to get their attention,” Hauser said. “They absolutely, positively have to have my bill.”

But Hauser and other Democratic legislators made it clear that they support the idea of helping first-time home buyers.

Assembly Speaker Willie Brown (D-San Francisco) said recently that he has concerns about helping high-income home buyers but noted that "$75,000 a year or more in some locales is not exactly high-income.”