California's 'Dream for All' Home Loan Program Ran Through $300 Million in 11 Days. Who Got the Money?

California lawmakers marketed their new loan program for first-time home buyers as a “Dream for All.”

But just 11 days after applications opened, the initial pot of money is tapped out, sucked dry by eager house hunters. It turns out the dream was only for a lucky couple thousand borrowers — a disproportionate number of them white, non-Latino and living in the Sacramento area.

The Dream for All program was paused on April 6, less than two weeks after the California Housing Finance Agency said it would make the program available to lenders. About $288 million in initial funding will be provided to 2,564 homebuyers, according to an internal document obtained by CalMatters.

The complicated program involves the state paying some or all of the upfront costs for buying a home — namely, the down payment — in exchange for a share in the home’s value when it is sold, refinanced or transferred. If the home appreciates in value, those gains to the state would then be used to fund the next borrowers.

The program was meant, in part, to help address California’s ethnic and racial wealth gap, with Black and Latino families having fewer net assets than the national average. Participation in the program was limited to households earning less than 150% of median earnings in their county. According to the initial characteristics shown in the agency document obtained by CalMatters, roughly two-thirds of the beneficiaries went to those making less than $125,000. The average loan was a little more than $112,000.

But those figures also show that the program was disproportionately used by white home-buyers. Senate President Pro Tempore Toni G. Atkins, of San Diego, said in a statement Monday that the program was intended to reach those historically shut out of the housing market.

“While this program has been immensely successful in getting new homebuyers into the market quickly and in places with low homeownership rates like the Central Valley, clearly more work needs to be done to make sure that there is statewide awareness, particularly in communities of color,” Atkins said.

The fact that the program ran out of cash in a two-week spree speaks to just how voracious demand is for housing in California. It also suggests that some of the people who made use of the program were already well into the house-hunting process.

That raises an important question: How many of the people who benefited from the loan program actually needed the help and how many would have purchased a home anyway?

“I would guess that 30% to 50% of the people who are using it could qualify or buy without it because I had plenty like that,” said Matt Gougé, a Sacramento loan officer, referring to his own clients.

California prohibits affirmative action, limiting the housing agency’s ability to direct the money to communities of color.

“We’d like to do something we’re not allowed to do in California, and this is not the fault of CalHFA or anybody else,” said Micah Weinberg, chief executive of California Forward, a nonprofit hired by the state treasurer to create an initial framework for the program. “When those of us outside of government talked about what the intention of the program is — it is to really, very specifically, target those demographic communities, African Americans and others — who have been locked out of the home-buyer marketplace for a variety of different reasons.”

“You actually can’t do that directly in California,” he said.

Who got California first-time home-buyer loans?

Demographic data in the document obtained by CalMatters showed that 65% of initial buyers identified as white, 18% as Asian, 4% as Black, 1% as Native Hawaiian or Other Pacific Islander and 1% American Indian or Alaska Native. Ethnically, 62% of homebuyers identified as not Hispanic or Latino while about 34% did. The document indicated that some of the data was preliminary and might change once all the transactions closed.

Eric Johnson, an agency spokesperson, confirmed on Monday that the program would be paused until more funding could be allocated. He pointed to the fact that 25% of homeowners in California are of Hispanic or Latino origin, and said the fact that 34% of the loans were made to these groups meant the program was “outperforming in that category.” Asian families make up about 16% and Black families about 4%.

That means the program initially outperformed with white and Latino homebuyers and did a bit better than average with Asian families but only matched the average with Black buyers.

“The program is doing a pretty decent job of representing California,” Johnson said, though he agreed that there is “definitely a gigantic wealth and homeownership gap” and that the program is aimed at addressing that issue.

Sacramento leads the pack

Geographically, the funds weren’t spread out evenly across the state, either.

Sacramento County, home to the state capital, received 11% of the program’s funds, despite making up just 4% of the state population. Los Angeles County, in contrast, received 9% of the money, despite being home to a quarter of all Californians. Johnson, of CalHFA, said Sacramento County consistently sees higher participation rates than other counties, and that the overrepresentation of loans from the county “tracks with our other loan programs.”

That geographic disparity is hard to explain. Ryan Lundquist, a Sacramento appraiser and real estate analyst, said the demographics and current price trends across the region make Sacramento County “a prime target for first-time buyers” and therefore a natural beneficiary of the program.

Gougé, the local loan officer, said news of the program spread by word of mouth throughout the capital community in the days before the state officially launched the program on March 27. The regional rumor mill may have been churning especially quickly given how much more plugged-in locals are to matters of state bureaucracy.

“Sacramento and the surrounding area’s loan officers and realtors probably got a jump start,” he said.

While the initial funding for the program might be tapped out, the size and scope of the Dream for All program will likely be a subject of negotiations between Gov. Gavin Newsom and the overwhelmingly Democratic Legislature. In January, Newsom proposed a significantly smaller version of the 10-year, $10 billion program originally envisioned by Atkins. The governor proposed spending an initial $300 million on the program, a cut from the $500 million compromise signed last year.

Atkins, in her statement, told CalMatters that she was seeking to get more funding for the program in upcoming budget negotiations. The governor is expected to offer a revised state spending plan and a new financial forecast in May. Lawmakers must pass a balanced budget by June 15 to get paid.