Homeownership, often the first step for generational wealth, is ever-more unaffordable for California families — especially those of color.
Now, the California Housing Finance Agency (CalHFA) is changing that for first-generation homebuyers with its Dream For All Shared Appreciation Loan Program.
Dream For All
The program, now in its second round thanks to $250 million from the state legislature, helped 2,000 homebuyers in its first round in April 2023. Dream For All is aimed to help another 2,000 now through a mortgage-lowering loan of up to $150,000 or 20% of a house purchase price, whichever is less.
“With this program, we’re trying to jumpstart the generational wealth that owning a home can get you,” said CalHFA Information Officer Eric Johnson. “If it’s a 20% loan, for example, you do have to pay that 20% when you sell or refinance the home, plus 20% of what you’ve gained in the sale, so we can use that money to fund the next generation of new homebuyers.
To be considered a first-generation homebuyer, applicants must not have owned their first home in the last seven years, and their parents must not currently own a home — or, if they died, must not have owned one at their passing. Those who were in the foster care system at any time also qualify.
To qualify for the loan, at least one person on it must be a California resident and at least one person must be a first-generation homebuyer, but these need not be the same person.
Income limits also apply per county, though they are as high as $287,000 for buyers in Santa Clara County and $280,000 for San Francisco and Marin.
“It does feel a little bit strange that a low-to-moderate-income homebuyer can make that much, but that’s where California is these days,” said Johnson.
Unlike the “first come, first served” first round of loans in 2023, this application period will be a lottery randomly drawn from applications filed between April 3 and April 29, so that funds are distributed more fairly. Although no announcement date for drawn names is set after they’re audited, it will likely be the first or second week of May.
To enter the lottery, first-time homebuyers will need a credit approval letter from one of CalHFA’s approved lenders. Those who win the loan have 90 days to find and buy a home.
There are so many Californians who have a good income, who have good jobs and credit, but haven’t been able to save up for a downpayment, not having the advantage of intergenerational wealth,” said Johnson.
Generational and racial wealth gaps
A disproportionate amount of these homebuyers are from communities of color, said Maeve Elise Brown, Executive Director and Founder of Housing and Economic Rights Advocates (HERA).
In 2023, the homeownership rate for Black U.S. households was at 45.9% — 28.6 percentage points below the white rate of 74.4%. For Latino households, the gap was a similar 25.8% below the white rate.
A 2022 poll with similar results found that 38% of white adults said they’d received at least $10,000 in gifts or loans from a relative for large expenses like a down payment, while only 14% of Black, 16% of Latino and 19% of Native American adults had.
“Though homeownership has been a generational economic driver, property values are outpacing our ability to pay them” — the average California home price is over $765,000 as of March 2024 — “and the debt people of color carry, especially student debt, creates a downpayment and safe loan credit barrier,” said Brown.
Black bachelor’s degree holders, for instance, have an average of $52,000 in student debt, and four years after graduation they hold nearly twice as much debt as their white peers. 46% of Black student borrowers are likely to put off buying a home due to this debt.
As this wealth gap expands, the racial homeownership gap is stagnating, said Ria Cotton, a broker and owner of Cotton Realty.
As of 2022, 72% of white Americans, 63% of Asian Americans, 51% of Hispanic Americans and 44% of Black Americans owned a home.
While the overall American homeownership rate rose from 64.7% a decade prior to 65.5% in 2022, the Black-white homeownership gap rose from 26% to 29%, according to the National Association of Realtors.
“The Dream For All loan lets people historically disadvantaged from buying a home leverage that generational wealth, but we can’t stop there,” explained Cotton. “We have to start with helping communities build credit, minimize debt-to-income and save for a downpayment, and talk about what happens after you buy — from foreclosure prevention, to developing more property, to using your credit for equity, like buying a car for lower interest rates.”
“Our message with this loan program is: ‘There’s hope. It’s still possible to buy a house in California,’” added Johnson.
“We have a wealth gap in this country that’s driving unequal homeownership, and this loan shows us how much your generational legacy matters in powering through it,” said Cotton.
