CA’s New Housing Program Requires Home Sellers to Share Profits

By: Beth Moreton | Published: May 12, 2024

With increasing house prices, it’s becoming more and more difficult for people to get their first step onto the property ladder.

California has a solution to this with its Dream for All program, which helps homebuyers buy their homes. However, there is a catch: Once their home is sold, they will have to give back a share of the profits.

Houses in California Are Unaffordable

One issue many have is that California housing prices are unaffordable to many despite the housing market plunging to an all-time low. 

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A row of five houses in California with trees growing beneath them.

Source: Dmitry Kropachev/Unsplash

This is due to many factors, such as not having enough affordable housing, higher interest rates and property tax rates, and California being one of the most expensive places to live in the U.S. 

The California Dream for All Program

The California Dream for All program has been developed to help Californians hoping to get on the property ladder. It acts as a second loan when buying a house.

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This is a sign for the California Housing Finance Agency. At the top, it says “Cal HFA,” with the last bit inside an orange house. Below, it says “California Housing Finance Agency” against a blue background.

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Those buying the home will be offered 20% of the price, up to $150,000, and are expected to pay this and a percentage of the home’s appreciation value back. 

Dream for All Was Introduced in 2022

California’s Dream for All initiative isn’t entirely new, as it was first introduced to Californians in 2022.

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Toni Atkins standing behind a lectern with a “Toni Atkins for Governor” sign. People are standing behind her, holding up those signs.

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It is a homebuyer assistance program first introduced to Californians by Senator Toni G. Atkins. The money will be paid to those who qualify for the program. 

Buyers Must Be Able to Afford the Mortgage

One of the conditions for people wanting to receive assistance with the initiative is that they must be able to afford the mortgage payments.

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A set of keys on a wooden table with a mini house keyring attached.

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The initiative is simply to help buyers with the capital for a down payment and the closing costs. 

Repayments Are Based on Income

One of the catches with the Dream for All initiative is that when homeowners decide to sell their homes, they will have to pay back the 20% loan they initially received.

A person sitting on the floor holding some $100 notes.

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They will then have to pay back some of the appreciation value. Low-income earners will have to pay back 15%, and moderate-income earners will have to pay back 20%. 

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Homebuyers' Credit Ratings Are Considered

Alongside their income, the Dream for All initiative plans to take the credit ratings of those wanting to use the program.

A man sitting at a desk on his laptop holding a credit card.

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The credit rating needs to be over 660, and income cannot be any more than 120% of the average earnings of those living in the same areas, which excludes many. 

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$300 Million Was Available to Homebuyers

When this initiative began, $300 million was set aside to help those wanting to climb the property ladder.

A pile of $100 notes on a table attached by elastic bands.

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The initiative proved very popular as Californians had used up the total amount in under two weeks. 

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Homeowners Could Suffer Under Dream for All

While Dream for All helps Californians get on the property ladder, they are expected to suffer when selling their home.

A suburban house with a drive leading up to it and a ‘for sale’ sign outside.

Source: Pixabay/Pexels

As they will have to pay back more than they were given, and many rely on the profits from the sale of their home to buy their next one, the program is expected to leave many struggling and with very little money left. 

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Funding Will Target Low-Income Earners

The next round of the program is expected to target those at the lower end of the earning scale. 

A person counting $1 notes, holding two piles in their hands.

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It is also expected to target first-time buyers who have yet to buy a home, especially those who are the first in their immediate family to buy a house. 

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People Are Unlikely to Sell Their Homes

Due to the strict conditions of the initiative, many people will likely put off selling their homes for far longer than necessary to avoid paying the loan back.

A sold sign outside a house.

Source: Matt Seymour/Unsplash

There are not enough houses in California currently, which means that while the initiative will help some people buy their first home, it will leave others without a home and potentially homeless. 

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Dream for All ... A Blessing or a Curse?

The main benefit of Dream for All is that it enables those who previously never thought they would own their own home to buy a house.

A row of houses in California. A black car is parked on the street outside the houses.

Source: David Vives/Unsplash

However, a caveat is that people using this initiative expect to pay back much more than they initially borrowed, which will put people off selling their homes. So, while it gets some people into a house, it keeps many others out. 

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