California ramps up the crazy, wants to own 45% of your home

55 Replies

Almost nothing good comes out of California these days. Anytime the government tries to help, they just make things worse. My guess is this will be no different. It’s usually more the poor implementation of it than it is the actual idea. Or the cost in relation to the benefit. 

Originally posted by @Travis Jacobs :

About half of Mortgage backed securities are owned by the U.S. Government already so I guess you can say in a sense they already own half of all properties across America with a loan on it. Any central planned program ends badly. This would be one of them. If prices do rise it would most likely be temporary and then stagnate/decline again. By a tax stance they own all lands where homes sit/don't sit on as well if those taxes aren't paid, this includes farm land.

What's the largest percentage of ownership you've ever seen on a mortgage? 3%? Maybe 7%? I've never seen even 10%.

To the person that said this is a good idea for the family that makes $59,000 in south LA... No it isn't, you're wrong.  What makes sense is they fold up that business that makes them $59,000 a year or sell off the clientele and leave for a cheaper cost of living situation, OR they triple their income.  

In Canada the government introduced assistance with the down payment portion with certain conditions (https://www.cmhc-schl.gc.ca/en...) for first time home buyers. nothing to do with race.  It is 5-10% and when you sell, they get a percent of the profit.

For the CA one, I get trying to help people but 45% is huge and why only a group based on race?  I get if it was based on first time home buyers or perhaps income, but not race and not 45%.  I wonder how many who take advantage of it (assuming it goes through) will then claim it wasn't fair when they sell their place?

@Nathan G.

So, if I interpret correctly, the government essentially wants a 45% equity / speculation interest in about $2B of property?

Couple thoughts:

It’s certain to further drive up prices, however if spread out across the entire state I can’t see $2B in real estate having a major impact above the expected fomo.

Do we really want a government that is speculating on real estate? Personally that’s outside my comfort zone as a business owner, but I know lots of folks play with disposable money that way. Just not for me. And so I would view it as irresponsible for a government to use tax dollars that way.

It would sure be nice if a government was revenue generating (outside of taxes) as opposed to revenue disposing. I’ve always thought if governments were required to operate like a business and generate a profit theoretically our taxes would go down.

I’m in Canada, and generally speaking we’re over at the “extra stupid” end of the tax spectrum. So please, burn this sh!t down before professor twinkle toes / instamoron in Ottawa reads it... or has it read to him.

If California truly cared about the cost of home ownership they'd remove the red tape and permitting nightmares that plague home builders and developers. 

Interesting idea  but not great, it poses a lot of risks to the state of California and will probably be hard to maintain. CA is banking on increase in real estate prices in the future to fund the program. Since it is a first time buyer program in an area with mudslides fires, and earthquakes you have the additional total loses in certain regions due to natural disaster or possible lose to foreclosures on these inexperienced buyers who in foreclosure damage properties before resale.  It is not the best  risk exposure for a state.  

The perspective they share is ". The first step to reaching the California dream of thriving in the middle class and building family wealth starts with homeownership." and it is targeted at minorities and those with high student loan balances and first time home buyers.  How is that a recipe for success?  the first step was probably before they got those high student loan balances. 

 I actually think Prop 13 has a significant impact on the turnover of housing in CA and it is hard to imagine it doesn't keep people from downsizing but I don't know the answer. There are affordable ownership programs in some states that designate homes as affordable and suppress the price on that home, you can only buy them if you are below a certain income.  You build 20 , 5 have to be affordable.  I favor that over this although it doesn't solve the true issue of lack of supply for locals in certain lower income occupations. 

In Canada its been that way for a long time. 200K for a house is dirt cheap, you can't even get a 1bd condo here for that price in most of BC and Ontario. With the recent appreciation of the CAD or downfall of the USD, its looking even more tempting to pick up some properties in the US...

Everyone wants to own a detached home but most never will be able to afford one here and have accepted condo or townhouse living as a standard

Originally posted by @Jim K. :

Guys, I'm getting the feeling that we're all just totally screwed. I've proven to my satisfaction that a new homeowner simply can't buy a functional starter house for under $100K in the Pittsburgh area without battling well-funded investors tooth and nail for it. I have an old high school friend in Chattanooga who's a broker and says the ceiling is $200K there.

Under these conditions, there are going to be multiple cockamamie ideas out of statehouses across the country and Washington that will be listened to and acted upon until we have another housing crisis. It's inevitable. The government will do anything to protect "the American dream of homeownership." They'll act and they'll act until they sink the whole thing.

@Nathan G. If someone wants to refinance there home, are they only eligible to account for there 55% ? So if a home is paid of and worth 100k, and the owner can only pull out 50% of the equity does that person get $50,000 or $27,000.

As I said earlier in this thread, these subsidies will only cause general prices to increase -- therefore, it wouldn't surprise me if this inititaive were supported by and lobbied for by home builders and developers ---- it greatly benefits them. It also benefits those who already own residential real estate in California. 

At the end of the day, financing basically only exists to support producer prices.

Think about it this way -- if 15, 20 or 30 year mortgages (and their exotic variants) were suddenly outlawed, and a new home buyer could only buy a home with cash savings -- what would happen to home prices overnight? 

If it isn't patently obvious, they'd plummet.

As someone else on this thread mentioned --- this is exactly what is behind the insane rise in college prices: the availability of financial aid literally creates price increases in tuition. 

Do away with or severely curtail the ability to finance an education, and college tuition comes down drastically. 


The city of Austin had a program like that for a few years. The city would get 50% but in return they financed the down payment for the first time home buyer and gave a guarantee. That program is no longer in existence. I believe that it was being funneled through wells fargo. The buyer had to go through a bunch of home buyer classes. I had a client that was considering it at the time. I suggested that the city was overstepping and to save up the down payment on his own. That is what he did. Given the appreciation rates of housing in the metro it was most definitely a very positive move. 


I understand the intention but it was a bad move for the customer, ultimately.  

Originally posted by @Frederick P wallberg :

@Nathan G.

So, if I interpret correctly, the government essentially wants a 45% equity / speculation interest in about $2B of property?

Couple thoughts:

It’s certain to further drive up prices, however if spread out across the entire state I can’t see $2B in real estate having a major impact above the expected fomo.

Do we really want a government that is speculating on real estate? Personally that’s outside my comfort zone as a business owner, but I know lots of folks play with disposable money that way. Just not for me. And so I would view it as irresponsible for a government to use tax dollars that way.

It would sure be nice if a government was revenue generating (outside of taxes) as opposed to revenue disposing. I’ve always thought if governments were required to operate like a business and generate a profit theoretically our taxes would go down.

I’m in Canada, and generally speaking we’re over at the “extra stupid” end of the tax spectrum. So please, burn this sh!t down before professor twinkle toes / instamoron in Ottawa reads it... or has it read to him.

I don't know. We already treat certain people with certain attributes (veterans and VA loans come to mind) to sweetheart deals. We already manipulate the housing market through GSEs and tax policy. Those are both giveaways. Equating this to communism is nonsense.

The "co-purchase with 45% of equity" idea sounds to me like the government operating like a business -- re-investing proceeds into its operations rather than distributing them to its shareholders.  If the return on capital is higher with reinvestment than declaring dividends, I'm conceptually fine with it as a long term shareholder of the State.

FWIW, I don't see any evidence that race is proposed as a qualifying factor for this.  Outreach based on race?  Yes.  Qualifying?  No.  i could be wrong.  I've never understood why we don't talk about allocating efforts for public good based on socioeconomic status instead of race -- people don't deserve help because of their race; they deserve help because a messy history of public policy, their ancestors' decisions, culture, law, and dumb luck made them start life's race far behind where I started.  If that's because of race, so be it.  If that's because a kid's Dad was in prison, so be it.  And helping people own real estate WHILE ENRICHING THE PUBLIC COFFERS in a historically wealth generating market seems like as good an idea as any other I've heard.

So how is CA going to look when these houses are defaulted on?  Will they auction them off and evict the minority owner or will they pass another bill to cover the arrears and help out the struggling owner?  I'm betting CA dumps a lot more than the 45% into these deals!

How much will CA loose when the wildfire goes through an area and wipes out the houses by the thousands?  Especially when there is NOT private  insurance available in so many areas!  And most people do not rebuild.  Even those that do rebuild often get cheated by the fly by night contractors who flock into an area after a disaster.  Will CA let the homeowner manage  a rebuild, when the state owns 45%?

It just boggles my mind that people who would make $59k a year and the price for a tiny shack in the ghetto there starts at $500k, wouldn’t have the common sense to move to a better more economical location.

It took a pandemic for a lot of folks to wise up to the dead end residency in urban America. You can choose Arizona, Wyoming, Arkansas or whatever but I can’t understand why people keep living in areas where the numbers just don’t allow a fair chance for them to get ahead! Get out of Dodge, make your millions, then move back if that’s what you want to do.

I believe we are headed for rough times because most people cant envision a move out of mom and dad’s basement to take advantage of what hard work in the greatest nation in the world affords them, but most of that opportunity is best taken advantage of in rural America.

I left California when I realized it’s not worth the 4 hour commute to get out of town (20 miles) on any 3 day weekend. The drive back in on Monday night was just as bad. I spend my life living, not driving in a car commuting 3 hours a day!

Originally posted by @Justin R. :
Originally posted by @Frederick P wallberg:

I don't knozxxxa.  We already treat csxxzz as ccxazzaxdeffcxxxxxxe fee ccxxx cc xxx x to exxaertain people with certain attributes (veterans and VA loans come to mind) to sweetheart deals.  We already manipulate the housing market through GSEs and tax policy.  Those are both giveaways.  Equating this to communism is nonsense.

Military members actually serve their country in exchange for a little bit of assistance, not 45% off. You should go serve for four years to see what it's like before equating that to some kind of handout.

Originally posted by @Nathan G. :
Originally posted by @Justin R.:
Originally posted by @Frederick P wallberg:

I don't knozxxxa.  We already treat csxxzz as ccxazzaxdeffcxxxxxxe fee ccxxx cc xxx x to exxaertain people with certain attributes (veterans and VA loans come to mind) to sweetheart deals.  We already manipulate the housing market through GSEs and tax policy.  Those are both giveaways.  Equating this to communism is nonsense.

Military members actually serve their country in exchange for a little bit of assistance, not 45% off. You should go serve for four years to see what it's like before equating that to some kind of handout.

Glad to hear we agree on that. Veterans deserve VA benefits.

The 45% co-invest idea sounds more like mimicking wealthy parents who help you buy your first home to "get you going".  Not a handout ... Comes with strings attached.  I don't see a *conceptual* problem with it.

Originally posted by @Joel Brown :

It just boggles my mind that people who would make $59k a year and the price for a tiny shack in the ghetto there starts at $500k, wouldn’t have the common sense to move to a better more economical location.

It took a pandemic for a lot of folks to wise up to the dead end residency in urban America. You can choose Arizona, Wyoming, Arkansas or whatever but I can’t understand why people keep living in areas where the numbers just don’t allow a fair chance for them to get ahead! Get out of Dodge, make your millions, then move back if that’s what you want to do.

I believe we are headed for rough times because most people cant envision a move out of mom and dad’s basement to take advantage of what hard work in the greatest nation in the world affords them, but most of that opportunity is best taken advantage of in rural America.

I left California when I realized it’s not worth the 4 hour commute to get out of town (20 miles) on any 3 day weekend. The drive back in on Monday night was just as bad. I spend my life living, not driving in a car commuting 3 hours a day!

 I left CA for similar reasons.  But you and I were the working folks.  Many that stay there do not work.  They get many handouts that other states won't give them.  Even undocumented kids in CA get free medical care.  I paid for mine through my work, and it was not that good!  Many years I had enough costs to claim it on my taxes.  CA supplements food stamps /EBT so the residents get more than in the rest of the US.  They even get Farmer's Market food stamps cards so they can buy their pot brownies, oh, sorry, their healthy veggies.  When they have to move from their house in rent controlled ghettos they get huge payoffs, as required by the rent control rules.  The non-working folks do come out pretty well!  Now they will get half a house to go with their reduced rate utilities, free food and medical care.  Oh and they already get down payment forgiveness in many areas!

The government pushing a lot of people into buying homes they otherwise couldn't afford. What could go wrong? Oh yeah, we have all seen that happened before.

BTW, when the government co-owns homes with private individuals, it is a step towards socialism. It's exactly what they did in Communist China. As far as I know, they don't even do that any more.