Sacramento
Former legislative leaders express that fellow Democrats in Sacramento have largely overlooked the housing needs of middle-class Californians. They put forth a plan aimed at assisting these individuals in purchasing new homes.
To their credit, Governor Gavin Newsom and Democrats have reduced regulatory barriers for housing construction recently, especially in the latest legislative sessions.
Nevertheless, the pace of development remains inadequate. This issue has been a concern since Newsom first campaigned for governor seven years ago. Supply consistently falls short of demand, which inevitably drives up home prices to levels that many middle-class families simply can’t afford.
Housing costs haven’t skyrocketed for many, a significant reason why a lot of middle-class Californians are leaving the state for more affordable options.
“Recent efforts by governors and legislatures have largely centered on homelessness and affordable housing,” one leader mentions, “which usually need taxpayer funding and ultimately leave the middle class behind.”
“Middle-class families struggle to save enough for down payments, and existing government programs aimed at them are often confusing, underfunded, and typically limited to first-time buyers.”
They observe that the political ramifications are clear—Democrats haven’t done enough for this demographic, reflected in their voting patterns.
The trend of the middle class leaning politically to the right is noticeable across the country, and housing affordability issues are especially acute in California.
As of July, the median price for existing detached homes in California hit $884,050, according to a real estate association. A standard 20% down payment requires an upfront cost of $176,810, which many young or even middle-aged couples find challenging to gather.
Price variations across the state are stark: San Mateo County boasts a median of $2.1 million, San Francisco at $1.6 million, and other counties like Orange at $1.4 million, Riverside at $630,000, Ventura at $949,500, and Sacramento at $559,000.
Hertzberg has proposed a voting initiative for the upcoming 2026 election.
This initiative would allow buyers to borrow only 3% of the sale price upfront—approximately $26,522 based on the statewide median—and then take on an additional loan for the remaining 17%, around $150,289.
Buyers would usually have a primary mortgage covering 80% of the selling price, plus a second mortgage through the down payment program.
For instance, Hertzberg estimates that purchasing a three-bedroom, three-bath home in Santa Clarita priced at $700,000 would result in monthly payments of about $4,253 on both mortgages, assuming a total interest rate of 7%.
The program also includes new townhouses and condos, with a statewide median for these at $647,000.
Hertzberg argues for the focus on new homes, noting the crucial need for increased housing supply, which also generates construction jobs.
This approach could garner support from developers, real estate agents, and construction unions.
Additionally, local governments stand to gain more from property and sales tax revenue.
Who qualifies as middle class? Buyers with household incomes below 200% of the local median—statewide, that’s about $193,000. This varies by location: $213,200 in Palmdale, $262,600 in Camarillo, and $177,000 in Fresno, among others.
Uniquely, this initiative isn’t restricted to first-time buyers; it requires that purchasers be California residents and occupy the home as their primary residence—rentals are excluded.
California Housing Finance Institutions will oversee the administration of this program.
“The key point is to ensure the taxpayers aren’t burdened,” Hertzberg stated.
The “Middle Class Homeownership” Act will be financed through the sale of $25 billion in revenue bonds, creating a fund for loans. Borrowers must repay the second mortgage if they sell or refinance their home within a 15-year window.
A standard lending agency will handle loans and keep fees minimal.
“Government bureaucracy can be tough to navigate, so we’re delegating the paperwork to banks,” Hertzberg explained.
He believes this plan will be self-sustaining, as loan repayments will reinvigorate funds for new buyers, and he anticipates that this $25 billion initiative could lead to around 150,000 new homes.
In response to California’s housing crisis, Dan Dunmoyer, president and CEO of the California Building Industry Association, notes that about 437,000 new homes need to be constructed annually to fulfill promises made during Newsom’s first campaign, yet only 112,000 are currently being built.
Reflecting on past efforts, Hertzberg recalls trying to champion legislation for middle-class homeownership five years ago. “It became bogged down with affordable housing proposals that relied heavily on taxpayer money and special interest groups, so I eventually stepped back,” he remarked.
“Whenever there’s money on the line, interest groups inevitably find a way to benefit.” He adds, “I was a Senate majority leader; I know how things work and how to push for changes that focus on the middle class.”
“Owning a home is more than just a shelter; it’s a nest egg, a part of the American dream.” He emphasizes the validity of his plan, connecting it back to support for veterans—if aid can be extended to them, why not to the middle class struggling to stay afloat?
Until next week,
