Whenever he gets the chance, Gov. Arnold Schwarzenegger likes to
say his prime goal is seeing that every Californian has
”
a great job.
”
Whenever he gets the chance, Gov. Arnold Schwarzenegger likes to say his prime goal is seeing that every Californian has “a great job.”
He almost never notes that one big reason young people want great jobs is so they can afford to own a nice house in a pleasant neighborhood.
But that second major goal is fast fading away from young Californians. Take Seth and Maria (real people, but not their real names), a couple in their early 30s who grew up and married in Marin County north of San Francisco. Seth makes a bit more than $70,000 per year in a sales related job and Maria, a former schoolteacher and bank executive, stays home with their two small children.
They bought a three-bedroom, 1,400-square-foot house for $630,000 in San Rafael a year ago and now they can’t keep it. “We just can’t make all the payments and still repair anything or even do anything else,” complained Maria. “So we’re selling and moving to Seattle. We can buy a bigger house there for less than half what we paid here.”
Meanwhile, Seth will keep his job, which involves a lot of computer work, telephone sales and travel. Net loss for California: two highly educated, talented young adults and two bright and promising kids.
Or take Cathy and Rick, also a real couple. Born, reared and educated in Southern California, these two Cal State graduates married last month and now live in a Long Beach apartment, near both their jobs. “We can’t afford any kind of house in a decent neighborhood anywhere near the ocean,” said Rick. “So we’re moving to Portland this summer.” Again, net loss to California: two highly educated, industrious young adults.
Call this problem housing affordability. The California Association of Realtors reports that fewer Seths and Marias and Cathies and Ricks than ever can now buy California homes.
And if they can’t buy homes here, it’s a good bet that like those two couples they’ll soon be leaving, no matter how much they like their jobs.
How bad is the situation? The CAR says just 26 percent of potential homebuyers now in the market are first-timers, an all-time low. That’s largely because the median price of a California house at year’s end was $474,480, an all-time high. Only 19 percent of California households today could afford to buy the state’s median-priced home. Translated, these numbers mean only dual income families with two high-paying jobs can afford to buy into the market for the first time.
Anyone else buying a California home will likely be someone who already owns and is trading up to a bigger house or a leafier neighborhood.
Unless something is done to help the Seths and Ricks and Marias and Cathies get into the home market, it will soon be hard for employers to find educated and qualified workers here. That could produce two responses: Either companies will import more foreign workers willing to share housing costs, or they’ll move plants to locales where their well-paid, skilled workers can afford to buy.
But the state is not helpless to stop all this. Two immediate measures might quickly ease the burdens on first-time buyers and open the housing market without lowering property values:
One would be to grant a one-time five-year reduction in property taxes to first-time buyers. When Seth and Maria paid $630,000 for their first house, they not only took on monthly mortgage payments topping $2,300 per month, but they were also hit with a $6,300 annual property tax bill, 1 percent of their purchase price. That added more than $500 monthly to their house payments, the difference between living comfortably within their income and not being able to make it.
“For sure, $500 a month would have made a big difference in our lives and our decision,” said Maria.
Reduce the property tax to one-fourth of one percent for the first five years for first-time buyers and life would be much easier on them. Most would gladly stay in California, keep working at the same jobs and lessen the need for companies to move jobs out of state.
Another promising tactic would be to raise the homeowners exemption which now allows owners to lower the assessed value of their homes by $7,000 – an amount that’s stayed constant since 1974. One county assessor observed that to be equivalent to the $7,000 of the ’70s, today’s exemption would have to be well over $80,000. The idea of a huge exemption increase is now floating around Sacramento in the form of a bill by Republican Assemblywoman Audra Strickland of Ventura County.
Either tactic or both could be managed with a single new law, if Schwarzenegger and the Democrats who control the Legislature are more interested in helping solve a serious problem than they are in mere rhetoric.
