Costa Mesa pauses cannabis-funded homebuyers assistance plan, will let funds accrue
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When Costa Mesa leaders were considering in 2021 how an influx of retail cannabis sales tax revenue under Measure Q might benefit the city’s denizens, they envisioned a program that would help first-time homebuyers enter an otherwise formidable housing market.
As the initial funding, derived from a one-half cent portion of a 7-cent-per-dollar tax specified in Measure Q’s ballot language, began to accumulate, so too did ideas about how the money might bolster local homeownership.
Perhaps it could help applicants with down payments or closing costs; at least that was the thinking applied back in 2021, before the buildout of actual cannabis dispensaries and before the city had any actual receipts in hand.
But now, looking at a fund that by next July will have grown to $842,000 at a time when the median purchase price for a home in Costa Mesa has climbed to $1.4 million, the idea of making a real impact for would-be homebuyers seems to have gone up in smoke, for now.
Councilmembers considered the dilemma in a study session Tuesday, contemplating whether to keep the dream alive and begin drafting plans for a first-time homebuyer pilot program, allocate the funds to another affordable housing goal or change course altogether and redirect the reserve to the city’s general fund.
The alternative scenarios were created after the council in June was unable to provide staff with enough direction to begin drafting a formal program and opted instead to discuss the possibility of making wholesale amendments to the Measure Q designation, a move that would require a two-thirds council vote.
City leaders agreed in 2021 to dedicate one-half cent of the 7-cent-per-dollar retail cannabis tax toward implementing an Arts & Culture Master Plan. Now, the relatively modest sum is the primary source of funding for arts programming — and it’s coming up short.
Leaving the option to move forward with a pilot program in the mix at Tuesday’s study session, staff once more explained how one-time grants could help mortgage-qualifying households with some of the expenses associated with financing a home.
“We’re trying to target a sector of the community that hasn’t had any other affordable housing or any other types of subsidy opportunities,” explained senior planner Anna McGill.
So far, total cannabis sales tax receipts have generated more than $8.5 million in revenue for the city, one-fourteenth of which is being dedicated to the homebuyers’ program and an equal amount going toward implementing the city’s Arts and Culture Master Plan.
The $842,000, she explained, could be disbursed in payments of $25,000, $30,000 or $35,000, assisting dozens of Costa Mesa residents, natives or graduates of Newport-Mesa Unified School District — all previously identified as the target recipients of the assistance.
Another option could be transferring funds into a Housing Trust Fund, an account established in 2024 with the allocation of $2.5 million of pandemic-era American Rescue Plan Act (ARPA) money that’s since been used to close gaps on notable affordable housing projects already in the works.
Members of the council were conflicted about how to make the most impact with a relatively small amount of money. District 3 Councilmember Andrea Marr, who terms out of office in December, said while the idea of providing more opportunities for ownership was a laudable goal, perhaps more assistance for renters was needed.
“I hate punting on this, but I feel like right now we should probably just let this ride in its own fund,” she said.
Councilmember Arlis Reynolds, who represents Council District 5 and will also leave the dais at the end of the year, agreed, saying the extra time would not only let funds accrue but would give the city more time to complete rezoning and affordable housing endeavors already underway.
Mayor John Stephens, who during the June meeting recounted being able to purchase his first home in Costa Mesa in 1991 only with the assistance of a small loan from parents, said he wasn’t opposed to helping a smaller number of families realize their ownership dreams.
And even as legal cannabis sales continue to bring roughly $3.2 million in revenue to the city each year, the mayor recognized a gap between his vision and reality.
“I was hopeful we’d be able to put a pilot program together and we’d be able to administer it and cut a big check, and everybody would be able to stand there and we’d bring up the families and the whole thing,” said Stephens, who also leaves the council in December. “I had this dream, but the dream’s not going to happen. It’s going to go to another council.”
