A recent study on Homeownership in Silicon Valley conducted by the Joint Venture Silicon Valley Institute for regional studies recently concluded, “Homeownership represents a significant portion of the overall wealth in Silicon Valley, but the gaping divide between wealthy and non-affluent households is reflected in homeownership rate disparities.”
Today, homeownership is still widely considered the American Dream for many people. It builds equity, both literally and figuratively. According to the Federal Reserve, homeowners have an average net worth that is 40 times greater than renters. They build equity in their homes and can take advantage of tax incentives such as deducting mortgage interest and property taxes, all of which help build financial security.
Owners are also usually able to secure a fixed monthly mortgage payment. They don’t have to worry about the uncertainty of rising rents outpacing their earnings. For many families, paying their mortgage is like forced savings. Each payment and every home improvement goes toward increasing equity in their home. Additionally, homeowners tend to put down roots 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 must be addressed in order to increase homeownership rates. Barriers include availability of affordable for-sale units and the difficulties inherent in a competitive market. These barriers are reflected in the declining share of young families who are homeowners in Santa Clara County, and the increasing average age of homeowners. According to the study, “Large down payments relative to income are among the most significant barriers to homeownership in Santa Clara County and are heavily influenced by rising median home prices.
“While the for-sale inventory at lower price ranges has represented a relatively small share of listed homes, mobile homes and condos/townhomes are options that—assuming the down payment hurdle is surmountable—may provide monthly payments comparable to renting while providing adequate space for larger families, and opportunities for wealth creation.”
As I have always stressed while serving on the San Jose City Council, we must reduce barriers to allow for more rapid production of “For Sale” housing. One 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 must also 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 forces owners of multi-unit apartments of five and up to sell in a 140-day timeline (100 days for two to four units) to allow nonprofits and government entities the opportunity to make an offer before residential rental properties hit the market. Sellers risk losing motivated for-profit buyers.
Realtors and lending agents are knowledgeable about resources available to first-time homebuyers. We need to connect potential buyers with lenders and realtors to help educate them about First Time Homebuyer Programs. Thankfully, the Santa Clara County Association of Realtors (SCCAOR), the Santa Clara County Housing Trust, FHA and other agencies are working to find answers to help first-time homebuyers more easily enter this red hot housing market.
Santa Clara County, working through the Housing Trust, has put forward the Empower Homebuyer Program, a program funded by the Measure “A” parcel tax. Empower Homebuyers is a down payment assistance loan for first-time homebuyers in Santa Clara County. If a homebuyer has at least 3% of a home’s purchase price saved up, an Empower loan can provide the remaining 17%—enabling a down payment of 20% on a home with a sale price of up to $800,000.
Finally, SCCAOR’s Down Payment Assistance Fund, set to launch later this year will integrate with other down payment and loan programs to bridge the gap in the rising housing market.
Johnny Khamis is a former San Jose City Councilmember. He is running for the District 1 seat on the Santa Clara County Board of Supervisors.