Embracing the California Dream for All
Seeing the greater possibilities of a bold idea
California Housing 3: Where We Go From Here 3
In my first newsletter, I listed 11 ideas which I think are important for California housing in 2022. These are areas where we can make the housing economy work better, make housing policy function better, and make housing politics less toxic and self-defeating. Over the next 22 weeks, I will write longer pieces about each idea. If you have a 12th idea and want me to consider it, leave a comment or contact me - perhaps we can even write it together.
Embedded in a 2021 budget document from Sen. Atkins and Senate leadership lies a very interesting idea for California housing: Have the State of California become an equity partner with aspiring homeowners, working families who can’t even imagine buying in the current market.
It’s an idea that it’s originator, Sen. Bob Hertzberg, calls the California Dream for All initiative.
It’s a massive and ambitious $25 billion initiative that has largely flown under the radar, with limited media coverage and even less public attention. The crux of the issue is that the old way of doing homeowner assistance - small grants to cover closing costs, other in-kind technical assistance, etc. - can’t make up a $250k gap between what folks can afford and what the average home costs. The Treasury is currently studying the idea, with a report due this spring.1
The proposal has two major pieces. There is a demand-side component where the State would set up a funding mechanism to become an equity partner with qualified homeowners, owning a minority share of the house. There is a supply-side component where the State would create a new infrastructure funding pool to encourage development of for-sale homes.
This is not the time or the place to get into all of the details - many of which are in formation, and many of which I don’t know - or the specific debates about one mechanism or another. Early visions of the plan are too focused on new construction, in lower-income communities and rural areas, and use exclusively older ideas of what homeownership looks like.
But these are all fixable issues - what I am hoping to do here is to convince progressive housing leaders and activists to embrace the possibilities of this idea. Imagine what this plan could be if we all engaged in good faith? Whether you are a social housing activist, a YIMBY, a tenant organizer who believes in TOPA/COPA, a builder looking to increase homeownership, a non-profit houser looking for acquisition/rehab dollars, or a prospective homeowner that isn’t rich, this plan could have something for you - but only if we approach it constructively, and collectively.
Here are 5 reasons why all California housers should embrace the possibility of the California Dream for All plan:
It puts the ownership of housing and land at the center. It is a mistake to read this bill only as a ‘homeownership’ plan in the traditional sense. This bill is fundamentally about using the power of the State treasury to buy homes with and for Californians. All homes have to be owned by someone, and more and more those someone’s are larger and larger investors. This is the single best chance we have to buy out owners whose primary motivation is high profits, and move in an incredibly diverse set of new owners. Who owns all the new homes being legalized is as important as land use changes and accountability. Owning + Zoning is the way forward.
It can be the biggest boost to community ownership in state history. There is no reason why this initiative couldn’t support Tenant Opportunity to Purchase (TOPA) or Community Opportunity to Purchase (COPA) programs. It could be the biggest source of revenue that the community land trust (CLT) movement has ever seen, and the pathway to true scale. After all, those are homeownership too. It could support all manners of limited-equity ownership, and there is no reason why it couldn’t be used for Acquisition/Rehab projects, or to stabilize low-income homeowners who are at risk of losing their properties. It could fit seamlessly with existing programs that try to support these efforts - like the TOPA/COPA funding for SB1079 - but at an order of magnitude large enough to actually put a dent in the crisis. Social housing activists should see this plan as part of the larger continuum of state funding for housing, as part and parcel of the new paradigm that is beginning to emerge - including any Statewide Housing Corporation that comes along. We can build all manners of community-supported, less risky and less extractive forms of land ownership into this plan for those who want that option, but only if we embrace its possibilities and allow for a true diversity of tenures. Community ownership and individual ownership don’t have to be opposites.
This is the best chance we have to fix the damage from 2008. The foreclosure crisis was a historic loss of wealth for people of color, especially in California. (Somehow it feels like too many in the housing space have forgotten what happened). Half of Black Californians owned their homes in 2004 - that number in 2019 was only 41%. Latinx homeownership fell 7% - for a community with more than 15 million people, we’re talking about more than a million people. We will never make this right for some households, but this is the one and only plan that even comes close to recognizing the need to fix this. So many of those who lost homes are still facing housing precarity, and homeownership rates for communities of color don’t show any signs of going the other direction, especially with the terrifying growth of wealthy investors in this space.
Shared equity is here to stay, and this is a chance to regulate it. The madness that is the global real estate market - California is just more extreme, but not alone - has produced so many new ways of owning and buying homes. Shared equity - where a company or organization owns a piece of this - has emerged through companies like Landed. Since the State is unlikely to hold onto its share of the homes, shared equity partners will be required. Like many parts of the real estate economy, shared equity can be a helpful way of producing and preserving housing and reducing wealth inequality - or it can become exploitative, wasteful, and harmful to people, property and politics. California has a chance to get out in front with this segment of the industry. Let’s set up a program and a set of regulations that build a better system before people get hurt. If you are a real estate industry person who wants to see a more just industry, I beg of you to embrace this approach of building new asset classes with equity in mind from the beginning. Breaking things and then putting them back together may be great in the electronics industry, but it doesn’t work in real estate - it just hurts people.
Racialized wealth inequality matters, and this can help in two ways. Team progressive has at times been slow to center the racial wealth gap in its work. Owning a home or a piece of a home isn’t the only way to do that, but it is a way, and a way that millions want and can’t even come close to accessing. (I’m also not going to pretend that it isn’t a core foundation of my privilege and my quality of life). More and more foundations, non-profit developers, and tenant advocates see this, and this is an unprecedented opportunity for them to help communities of color build wealth. This wealth-building isn’t going to just be through owning the homes, but building them too. The supply-side provisions of this plan could be the foundation for BIPOC and women-owned development companies to finally get a fair piece of a massive industry. We can rebuild the housing industry in a more equitable and sustainable manner if we have a program of this magnitude.
It’s big enough to actually work. The folks behind this program deserve credit for thinking at this scale, and trying to make history. $25 billion is actually probably too little, but it is enough to produce real changes in how the homeowning and homebuilding industry works. It makes all of us a partner in the future of California homes, which is where we need to be.
Too often people judge policy proposals based on what they are, not what they could be.
Most proposals have a kernel of possibility. This one has a lot more than a kernel - but only if we embrace that possibility in good faith from the beginning.
A few great things to read
I’ve just discovered the work of Elena Botella, a journalist who writes about economic issues, and particularly issues of exploitation. Her piece about her own experiences working for a major subprime credit card company is a must read. We need to think more about the day-to-day thinking of regular folks who are working for unethical companies.
A new report has come out on the economic status of construction workers. I know how painful the ‘labor’ issue is for so many in the housing space. But as the grandson of someone who swung a hammer building suburban New Jersey in the 1950s, we have to understand how difficult the work is, and how unfair this economy has been. I’ll write more about this issue coming up.
I imagine many saw Emily Badger’s latest in the New York Times on our housing struggles. The most important thing about this piece is that it focuses on the big picture. Inequality is build into our housing system, and we have to address it at the systematic level. More on that coming soon!
The Trailer Bill SB140 (2021) has details of what the Treasury is meant to study.