A recent study on homeownership in Silicon Valley conducted by the Joint Venture Silicon Valley Institute for Area Studies recently concluded that “homeownership accounts for a significant portion of overall wealth in Silicon Valley, but the yawning gap between rich and poor households is reflected in disparities in homeownership rates.
Today, home ownership is still widely considered the American dream for many people. It builds equity, literally and figuratively. According to the Federal Reserve, homeowners have an average net worth 40 times that of renters. They build equity in their homes and can take advantage of tax incentives such as mortgage interest and property tax deductions, all of which help build financial security.
Homeowners are also usually able to secure a fixed monthly mortgage payment. They don’t have to worry about the uncertainty of rent increases exceeding their income. For many families, paying their mortgage is like forced savings. Every payment and every home improvement helps increase the equity in their home. In addition, owners tend to root themselves in the community and take pride in it. Their children thrive in a more stable housing situation.
The joint venture study also talks about the many barriers that need to be overcome in order to increase homeownership rates. Barriers include the availability of affordable units for sale and the difficulties inherent in a competitive market. These barriers are reflected in the decreasing proportion of young homeowner families in Santa Clara County and the increasing average age of homeowners. According to the study, “large down payments relative to income are among the largest barriers to homeownership in Santa Clara County and are strongly influenced by rising median home prices.
“While inventory for sale at lower prices has represented a relatively small share of homes listed, mobile homes and condos/townhouses are options that, assuming the down payment hurdle is surmountable, can provide rental-like monthly payments while providing adequate space for large families and wealth-building opportunities.
As I always emphasized when I served on the San Jose City Council, we need to lower the barriers to allow for faster production of “for sale” homes. An example of a barrier is a consumer protection law that makes it extremely expensive to insure against product defects over a 10-year period.
We also need to prevent new bureaucratic laws such as San Jose’s new COPA law that could make it increasingly difficult to become a homeowner. Under COPA, the sales cycle is extended and requires owners of multi-unit apartments of five or more to sell within 140 days (100 days for two to four units) to allow nonprofits and government entities to make an offer before residential rental properties come on the market. Sellers risk losing motivated, for-profit buyers.
Realtors and loan officers know the resources available to first-time home buyers. We need to connect potential buyers with lenders and real estate agents to educate them about homeownership programs. Fortunately, the Santa Clara County Association of Realtors (SCCAOR), Santa Clara County Housing Trust, FHA, and other agencies are scrambling to find answers to help first-time home buyers get in more easily in this hot housing market.
Santa Clara County, in conjunction with the Housing Trust, offered the Empower Homebuyer Program, a Measure “A” land tax-funded program. Empower Homebuyers is a down payment assistance loan for first time home buyers in Santa Clara County. If a buyer has saved at least 3% of the purchase price of a home, an Empower Loan can provide the remaining 17%, allowing for a 20% down payment on a home with a sale price of up to $800,000 .
Finally, SCCAOR’s Down Payment Assistance Fund, slated to launch later this year, will integrate with other down payment and loan programs to fill the gap in the rising housing market.
Johnny Khamis is a former member of the San Jose City Council. He is running for the District 1 seat on the Santa Clara County Board of Supervisors.