To combat the recent spike in housing costs, California sponsored a program to help prospective first-time home buyers purchase a home by providing financing for the down payment. Unfortunately, the $300 million program ran out of money in less than two weeks, after only helping 2,300 people, according to The San Francisco Standard.
The program, called the California Dream for All program, was intended to provide buyers interest-free loans to help them make up to a 20% down payment on a home. The loans could also be used to cover closing costs. Unfortunately, the program, which opened for applications on March 27, is already out of funds.
The program came with a litany of requirements, including an income requirement and a homebuyer education course, as well as already having a home to close on. This left many Californians wondering how an estimated 2,300 people drained the fund in just a few days.
The size of the average loan amount seems to be contributing to the problem. The $300 million divided by the 2,300 residents taking advantage of the program comes to an average loan of $130,000. By putting a maximum of, say, $100,000 it could have helped over 3,000 people, while still accomplishing its goal.
More importantly, it’s an economic disaster to try to combat rising housing prices with a government subsidy, which will do nothing to stop the inflation of housing prices. With more loan funds, homeowners will be able to raise their prices, knowing more people have access to more financing.
While the rising cost of housing in California is surely a problem legislators should address, poorly thought out and quickly drained programs are not the answer.
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