San Jose councilwoman wants city to consider helping first-time home buyers with down payments

As more San Jose residents struggle to cope with the city’s
astronomical housing prices, one councilwoman wants the city to
help moderate-income families buy their first homes by assisting
them with a down payment.

In a new memo, Councilwoman Pam Foley — who owns a family
mortgage company — urges the city to explore everything from an
equity sharing model to second mortgages with flexible pay-back
options.

“Today, many middle-income, first-time homebuyers searching in
the San Jose market find themselves capable of making a mortgage
payment, but struggling to save enough funds for a downpayment,”
Foley wrote. “Now on a regular basis, we see much of San Jose’s
middle-class emigrating from Silicon Valley into less expensive
regions of California or to entire states altogether.”

In San Jose, a family of four living on around $150,000 would
qualify as moderate income, as would an individual making up to
about $105,000. While that might not sound too bad, single-family
homes in the nation’s 10th largest city now average more than $1
million, while condos run nearly $800,000. In other words, saving
up a down payment on a moderate income has become impossible for
many people.

According to a report from the director of the city’s Housing
Department, set to come before City Council on Tuesday, the average
gap between what people can afford and reality is more than
$300,000.

“These conditions make it cost-prohibitive for the city to run
traditional homebuyer down payment assistance programs that were
previously funded annually with several million dollars in
redevelopment funds, at much lower subsidy levels per household,”
wrote the housing director, Jacky Morales-Ferrand.

Several other factors add to the challenge. The city used to
have more options for subsidizing housing for moderate-income
households when the state had redevelopment agencies. But when
those were slashed in 2011, so was some funding that had gone
toward affordable housing. And, according to the
report, developers used to require little if any subsidy from the
city to build moderate-income housing, but now high construction
costs and the booming economy have made market-rate housing much
more appealing for builders. Those new buildings also tend to be
well above what residents who earn moderate incomes can afford.

More than 65,000 households — about 20 percent — in San Jose
qualify as moderate income, including people who work as teachers,
accountants, registered nurses and even some computer hardware
engineers. But since 2014, developers have pulled building permits
for only around 1,585 homes for moderate income residents — less
than half of the production level the city aimed to achieve by the
end of 2018.

“There are very few housing tools currently to meet the needs
of these residents,” Morales-Ferrand wrote bluntly.

In her report, Morales-Ferrand noted that the council approved
$10 million for acquiring and rehabbing housing for moderate-income
families and said her department will return later in the year with
potential ways to do that. She also noted that the number of
permits for accessory dwelling units, which are generally
affordable for moderate-income families, has gone up since the city
made it easier to build them. In 2014, San Jose issued just 21
permits. In 2018, the city issued nearly 200. The department is
also exploring a range of other options for adding more affordable
housing, from redeveloping city-owned sites to public-private
partnerships.

Related Articles

Still, Foley wants the city to take another look at downpayment
assistance programs, which the city used to offer to teachers and
credentialed staff. At the county level, 2016’s Measure A
allocated $25 million for first-time buyer assistance.

“The fact that average wages in San Jose have simply not kept
up with rising housing costs, along with other economic factors
such as rising interest rates, higher financial lending thresholds,
and decreased federal property tax deductions only serve as
additional obstacles for first-time home buyers,” Foley wrote.
“Once again, the City of San Jose must undertake a more concerted
and collaborative effort to make our region a more affordable place
for moderate income individuals.”

Source: FS – All – Real Estate News 1
San Jose councilwoman wants city to consider helping first-time home buyers with down payments