Thanks to the nation’s most stringent environmental laws, California already has the nation’s most expensive housing. But instead of repealing those laws and building more housing, the Democrats that control California have instead chosen to subsidize demand, which will only raise the price of housing in California even higher.
In 1970, lawmakers passed the California Environmental Quality Act, which empowers just about anybody to go to state court to stop construction on any project that requires government approval. Since all housing construction involves getting permits from state and local government, CEQA makes it easy for environmental activists, or really anybody who wants to stop a project for any reason, to get a court order doing just that.
As one recent study of the impact of CEQA on housing construction put it, “CEQA’s working premise is that new construction is bad for the environment. Current environmental conditions in the vicinity of a proposed project should be preserved if possible.” With the working premise that all new construction is bad for the environment, no wonder it is so easy to stop construction with CEQA.
Instead of repealing CEQA, however, the Democrats who control Sacramento have decided to subsidize demand instead. Specifically, they developed the Dream for All program, which subsidizes down payments for first-time home buyers.
The program was supposed to help black households, but in the first year of the program’s implementation, 35% of the program’s $300 million went to white households, 33% to Latino households, 19% to Asian households, and just 3% to black households.
Also, the $300 million allotted to the program lasted only 11 days and was spent almost entirely in the Sacramento area.
Most states would have abandoned this expensive failure, especially when facing a $68 billion deficit, but California Democrats are a special breed of arrogant. This year, the program is being tweaked to make it fairer.
Instead of down payments being awarded on a first-come, first-served basis (maximum award is $150,000), down payments will be awarded by lottery, by county, with each county receiving a percentage of down payments that match their percentage of population in the state.
Recipients will also have to prove that at least one member of the household has parents who don’t own a home. The thinking is this requirement will better direct the program toward families who have never owned a home.
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The down payments are actually, technically, loans that are paid off when the house is resold. So if a home is bought for $600,000 with a $150,000 down payment from the state, the recipient must pay that $150,000 when they sell the house, plus 20% of any increase in the home’s value.
While this program will now doubt help some 2,000 families who win their county’s lottery, it will not lower home prices at all. If anything, it will only raise them higher.