Berkeley City Council
June 30, 2026

Attachment 2Page 94 of 311

64 Figure 38: More Conservative Case Over 40 Years
Taxpayer Funding
of New Loans
for 10 years
Taxpayer Funding
with Revenue Bonds
for 12 years
Taxpayer Funding
Only
for 15 years
Option 1 Option 3 Option 1 plus 5 years
Taxpayer Funding
For loans $10.0 billion $6.6 billion $15.0 billion
For revenue bond interest 0 6.8 billion 0
For administration, origination and
servicing costs 4.1 billion 4.1 billion 4.1 billion
Total over 40 years 14.1 billion 17.4 billion 19.1 billion Present value at 3.0% 10.8 billion 12.2 billion 14.3 billion CA Dream for All loan originations
Total over 40 years $31.4 billion $30. 0 billion $42.0 billion Present value at 3.0% 18.1 billion 18.1 billion 23.6 billion Borrowers Assisted
Total over 40 years 144,000 144,000 188, 000
Average annual 3,600 3,600 4,700
Borrower Share of Home Appreciation
Total over 40 years 61.8 billion 61.3 billion 81.4 billion Pr
esent value at 3.0% 31.2 billion 32.1 billion 40.2 billion PV of borrower appreciation / taxpayer cost 2.9x 2.6x 2.8x Note: This analysis does not include a terminal
value of residual assets and liabilities after the
40-year projection period. The borrower share of
home appreciation is (a) for loans paid off, the
total appreciation on homes at time of payoff
minus the appreciation owed to the program, and
(b) for loans outstanding at end of 40 years, the
total appreciation on homes with loans at that
time minus the amount that would be owed to the
program if the loan was paid off at that time.

Impact on borrower household wealth. In
addition to comparing the impact of the program
in helping buyers purchase homes, the model
provided a way to project the impact on the
household wealth generated for such households
over a 40-year period.

In the expected case, the net appreciation
received or accrued by borrowers over the 40-
year period (after subtracting the portion of
appreciation due back to the program) is about
$133 billion for both the 10-year taxpayer funding
and the revenue bond approach. On a present
value basis, this is about $65 billion.

This means that for a present value
investment of $10.8 billion, the State
helps generate about six times that
amount in household wealth for low- and
moderate-income homebuyers, while still
continuing to receive future repayments
to assist later borrowers.

In the more conservative case, the net
appreciation received or accrued by borrowers
over a 40-year period is about $61 billion in the
10-year taxpayer funding and revenue bond
approaches. The present value is about half that.

Even if appreciation over this period is two thirds
what it has historically averaged over the last 40
years, the $10.8 billion present value taxpayer
investment in the CA Dream for All Fund will
help generate about three times that amount in
household wealth.

Attachment 2Page 95 of 311

65 Figure 39: Projected Borrowers Served Under the Expected Case Figure 40: Projected Borrowers Served More Conservative Case

Attachment 2Page 96 of 311

66 Figure 41: Dollar Amount of Projected CA Dream for All Originations Expected Case (# Billions) Annual Figure 42: Dollar Amount of Projected CA Dream for All Originations Expected Case ($ Billions) Cumulative

Attachment 2Page 97 of 311

67 Figure 43: Dollar Amount of Projected CA Dream for All Loan Originations More Conservative Case ($ Billion) Annual Figure 44: Dollar Amount of Projected CA Dream for All Loan Originations More Conservative Case ($ Billion) Cumulative

Attachment 2Page 98 of 311

68 Figure 45: Borrower Share of Home Price Appreciation Expected Case ($ Billions) Annual Figure 46: Borrower Share of Home Price Appreciation Expected Case ($ Billions) Cumulative

Attachment 2Page 99 of 311

69 Figure 47: Borrower Share of Home Price Appreciation: More Conservative Case ($ Billions) Annual Figure 48: Borrower Share of Home Price Appreciation: More Conservative Case ($ Billions) Cumulative

Attachment 2Page 100 of 311

70 Impact of requiring higher share of home
appreciation. All these analyses have assumed
the simplest version of SALs, in which CA Dream
for All receives a pro rata share of appreciation.

We also looked at what the impact would be
if CA Dream for All received 1.5 times pro rata
appreciation.

Using the expected case for a basic revolving
fund (Option 1), the total number of borrowers
helped would likely increase. Instead of 131,000
first-time buyers, CA Dream for All might be able
to assist 14% more buyers and increase the dollar
amount of loans by about 20%.

Given the relatively modest additional amount of
CA Dream for All lending that would result from
a higher share of appreciation and the impact on
borrower household wealth, we do not think the
decision on the share of appreciation should be
based on trying to help more borrowers in the
future, but rather on policy grounds.
114
Limiting Financial Risks
A final key dimension for how the program is
designed and funded is to limit risks to the State.

Since the possibility of any such risks ever arising
is ultimately based on what happens on the
underlying SALs, it is instructive to consider risks
at the individual borrower level.

Borrower risks. The program is designed to
avoid creating any risks for buyers beyond
those in conventional mortgage lending and
homeownership. The most important feature
of the program in this regard is that it requires
Fannie Mae or Freddie Mac first mortgages. Such
mortgages involve a significantly higher standard
of loan underwriting, credit scores and front-
end and back-end ratios than FHA, VA and Rural
Development loans used by the vast majority of
first-time homebuyers. This underwriting protects
the borrower as well as the mortgage lender (and
because a default on the first mortgage is what
would trigger a default on the SAL, it protects the
program as well).

Because the SAL is deferred and only due upon
sale or cash-out refinancing, it does not involve
any monthly payments or create any ongoing
financial costs or burdens on the homebuyer.

As with any mortgage lending, there is naturally
a risk that if the borrower defaults on the
first mortgage, the home value may not be
sufficient to repay the first mortgage and the
114 Adding to the uncertainty is that a higher share of appreciation may affect the average life of CA Dream for All loans in ways that are hard to project. Some borrowers may be incentivized to pay off their loans earlier as they see the amount potentially due increase more rapidly. Others, looking at these larger amounts, may decide to live in their house longer.
second mortgage. To limit such exposure to the
homeowner, the CA Dream for All SAL would be
designed to provide three protections:
§ There is no possible deficiency judgment
against an
y borrower;
§ There is no appreciation payment unless the
property has incr
eased in value; and
§ Even if the property has dropped in value, the
CA Dr
eam for All loan is subordinated to the
borrower recovering the full amount of their
original cash down payment.

The homeowner has every incentive to
continue making first mortgage payments and
maintenance on the home, since the borrower
receives the vast majority of the gain on the
property.

One natural question is what happens if the
borrower does not sell the home, pays off the
first mortgage at the end of 30 years and still
owes the SAL. At that point, since the borrower
has no monthly payments on the original first
mortgage, they can take out a new first mortgage
that pays off the SAL. Alternatively, the borrower
can always sell the home, pay off the shared
appreciation loan and receive the remaining gain
on the property.

A further, more basic question is whether the
program is putting the borrower at risk by making
it possible to buy a larger or more expensive
home than would otherwise be possible. Helping
overcome the financial barriers to homeownership
is, of course, the very purpose of any down
payment assistance program, from CalHFA’s
MyHome assistance to larger SALs. The question
is whether being able to access a larger amount
of assistance may create a greater risk for the
potential buyer, in a way that is not reflected in
the loan underwriting. Since the major possible
risk is that of unanticipated repairs, one benefit of
the CA Dream for All Program is that it enables
buyers to have a wider range of choice and
thus be able to buy homes with less deferred
maintenance or current repair needs.

Risks to the State of California. The program
itself and the funding options we ha
ve modeled
are designed to avoid creating future or
unanticipated financial risks to the State. If loan
los
ses are greater than projected, there is no
additional financial cost to the State’s General
Fund. Rather, the amount of future CA Dream for
All lending from loan repayments will be reduced.

Attachment 2Page 101 of 311

71 We recognize that including revenue bonds in the
program may raise additional questions about
risk. If revenue bonds are included, the principal
on them will be payable solely from a senior
security interest in a highly overcollateralized level
of SALs (and the interest by a state appropriation
pledge). As a result, there is no financial or legal
risk to the General Fund. Nevertheless, having
such a large outstanding amount of such revenue
bonds issued by a state agency, ultimately over $6
billion, secured by second mortgage loans brings
reputational concerns. Very large loan losses, even
if far below the 40% loss level that could affect
ultimate repayment of principal, would make it
more difficult to sell additional series of revenue
bonds and continue funding CA Dream for All
loans in this way. For these reasons, and because
inclusion of revenue bonds does not increase the
number of borrowers who can be assisted with
the same amount of taxpayer monies, we advise
using taxpayer money to fund the program.

There is a final reputational concern about
whether borrowers will clearly understand the
nature of the loan obligations they are assuming.

The program would need to make an exceptional
effort to educate potential buyers about the loan
obligation and what is due upon payment, and to
inform borrowers regularly about the estimated
amount that would be due under their loan if
paid off in the current market. The websites and
educational efforts of several fintech companies
offer models for how this can be done.

Perhaps most important to note in thinking about
perceptions by borrowers is to compare SALs
with other ways of assisting the same potential
buyers. SALs subordinate to the borrower’s
original down payment pose far less risk to the
borrower than a deferred second mortgage with
an accruing interest rate, since no appreciation is
due if the house does not increase in value, unlike
accrued interest at a fixed interest rate.

Finally, SALs provide a way for the State to
reduce the risk to itself (and future homebuyers)
of being unable to provide resources that keep up
with the rate of home appreciation, and to reduce
cost of making homes affordable in the future.

The funding options described here are based
on the State providing the same fixed amount of
taxpayer funds each year ($1 billion for new loans
during the initial phase of the program and $100
million for ongoing administrative costs), without
any increases, while also being in a position to
provide larger and larger CA Dream for All loans
to buyers as California house prices increase. The
program can therefore provide the same level of
affordability without requiring more and more
taxpayer dollars each year.

Recommended Funding Option
Based on this extensive analysis, the recommended
approach for funding the CA Dream for All
Program is also the simplest: investing state
taxpayer monies in a revolving investment fund,
without requiring revenue bonds secured by CA
Dream for All loans. This approach would involve
the State investing $1 billion per year for new loans
for 10 years, together with an ongoing contribution
of $100 million per year for administrative costs.

Methods of Funding Taxpayer Investment
There are three funding methods by which
the State can provide these taxpayer monies:
budget funds for new loans each year, issue GO
bonds or issue bonds backed by a state annual
appropriation pledge.

State annual budget fund. The Legislature can
directly appropriate the monies to fund CA Dream
for All loans in each year’s budget (for example,
by including $1 billion in each year’s budget for
the first 10 years). This method has the highest
annual cost during those years, but avoids
requiring the State to pay interest on any bonds.

General Obligation Bonds. The State can request
voter authorization of GO bonds to fund CA
Dream for All loans. Such bonds could then be
issued in the amount needed each year, up to the
maximum total amount approved by the voters.

Interest on the bonds would be federally taxable.

Each series of bonds would typically be issued
with annual maturities through a final 20-year
maturity. The State would be obligated to fund
the annual debt service on these bonds as a GO
of the State. This approach spreads out the cost
to the State of its investment in each year’s CA
Dream for All lending over many years.

State appropriation pledge bonds. This method
is frequently used to fund state investments by
spreading out the cost over many years without
requiring voter authorization. California and other
states have often issued bonds backed by a state
appropriation pledge for capital facilities.

Under this approach, the Legislature authorizes
the issuance of state appropriation pledge bonds
for the CA Dream for All program and establishes
a maximum annual limitation on the debt service
that the State will pay on such bonds. The
State is committed to making such debt service
payments, but only to the extent that they are
budgeted and appropriated each year by the
Legislature. These bonds are effectively viewed as
‘moral obligations’ of the State, and are typically
rated by rating agencies one notch below the
rating on the State’s GO bonds.

Attachment 2Page 102 of 311

72 This type of State pledge is the same as that
described earlier for revenue bonds for the CA
Dream for All program, but would cover both
principal and interest on the bonds. As a result,
bondholders would receive scheduled principal
payments funded by the State’s budget—not from
principal repayments of CA Dream for All loans.

This is an important distinction in several ways.

This appropriation pledge approach is commonly
used for certificates of participation and lease
revenue bonds for major projects, and it has
been used successfully over the last 10 years by
the State of Minnesota for housing infrastructure
bonds. The principal and interest on the bonds are
paid by the State, and the proceeds are used to
make soft second loans for permanent supportive
housing and other types of housing projects.

Under the appropriation pledge approach, the
Legislature would decide on a maximum annual
debt service. For example, if the maximum
annual amount was initially set at $480 million,
this would enable the State to issue bonds for $1
billion per year of CA Dream for All lending over
the course of approximately seven years. In the
future, the Legislature could decide to increase
the cap amount in order to continue investing in
the CA Dream for All program.

Like GO bonds or revenue bonds for the CA
Dream for All Program, appropriation pledge
bonds would be federally taxable.

Choice of funding method. Any
of these methods
for investing taxpayer monies could be used
for the CA Dream for All Fund. Ultimately, they
simply reflect different ways of authorizing and
spreading out the cost of the same investment.

Figure 49: Comparison of State Appropriation Pledge Bonds and Revenue Bonds Overcollateralized by CA Dream for All Fund
State Appropriation Pledge
Bonds
Revenue Bonds Overcollateralized by CA
Dream for All Fund
Purpose Fund the full amount of CA
Dream for All loans made in
a year
Fund a portion of the cost of CA Dream
for All loans (together with direct taxpayer
monies)
Security for the Bonds State annual appropriation
pledge for both principal
and interest
Principal is secured by and depends on
borrower repayments of CA Dream for All
loans. Bonds must be overcollateralized (e.g.,
can only be issued for up to approx. 60% of
the amount of CA Dream for All loans).

Interest is paid by a state annual
appropriation pledge
Are Bondholders Affected by:

Timing of Repayment of CA
Dream for All loans?
No Yes
Losses on CA Dream for All
loans?
No Yes
Would there need to be a fixed 30-
year maturity on CA Dream for All
loans?
No Yes
Do bondholders have a lien on
repayments of CA Dream for All
loans?
No Yes
Maturity on Bonds Serial bonds through a final
maturity (such as 30 years)
Single term bond in 30 years that would be
redeemed earlier from CA Dream for All loan
repayments
Rating on Bonds One notch below California’s
general obligation rating
Significantly lower, investment grade rating
Is this a type of credit and security
that bond investors and rating
agencies are highly familiar with?
Yes No. Deferred payment second mortgage
loans have rarely been security for large-
scale bond issues

Attachment 2Page 103 of 311

73 Comparing Shared
Appreciation to Fixed Interest
Beyond the funding option itself, we compared
the process and impact of using those same
taxpayer monies for two different types of second
loans to homebuyers:
a) Deferred payment second mortgages with a
fixed simple interest rate, such as 3%, and
b) SALs, where there is no interest and the
borrower repays a pro rata portion of the
appreciation on the home.

In exploring these options, we considered a range
of questions, including the differences in risks
involved, the total number of households who
could buy homes with CA Dream for All loans,
the total amount of these loans and the net
appreciation received by borrowers.

Risk
Loans that accrue interest at a fixed rate are
fundamentally different from SALs. With a fixed
interest rate loan, the borrower has to pay the
same amount of accrued interest at the loan
rate regardless of what happens to the value of
the home. The interest that accrues each year is
“hard,” meaning that it is due regardless of what
happens to the value of the home.

Accruing fixed rate loans creates two significant
risks compared to a shared appreciation loan. One
is a risk to the individual borrower; the other is a
risk to the ability of the CA Dream for All program
to help future borrowers.

Risk to the Borrower. A fixed interest rate on a
CA Dream for All loan creates considerably more
risk to individual homeowners if prices don’t
increase significantly.

Consider a scenario in which a home purchased
for $650,000 doesn’t increase in value when
re-sold 10 years later—for example, during a
recession. With shared appreciation, the borrower
owes nothing beyond paying back the original CA
Dream for All loan principal amount. With a 3%
simple fixed interest rate, however, the borrower
owes $39,000 in accrued interest, even though
there is no gain on the house. This amount is
about twice the value of a typical borrower’s
original down payment.

Risk to CA Dream for All being able to help
future borrowers. On the other hand, consider
a scenario in which home prices increase
dramatically—for example, by 6% a year over the
course of 10 years. With shared appreciation, the
CA Dream for All Fund would receive enough to
help a similar buyer purchase an equivalent home.

With a 3% simple fixed interest rate, however, the
Fund would be $64,000 short in trying to help a
new buyer.

The bottom line is that if home prices increase
at a faster rate than that on a fixed rate
loan, repayments will not be enough to help
subsequent buyers buy equivalent homes.

The last few years have underscored this risk.

Between 2018 and 2021, home prices in California
increased by 38%. A SAL program would have
allowed the CA Dream for All program to keep
pace during this time in order to help future first-
time homebuyers. Under a 3% fixed interest rate
loan program, however, the amount that the CA
Dream for All program would ultimately be able
to help future buyers would have gone up by only
9% at a time when prices increased by more than
four times that amount.

Nature of the risk. Setting a different rate on
a fixed interest rate loan does not eliminate
these risks. An interest rate of 5% instead of 3%,
for example, would increase borrower risk. If a
borrower purchases a home for $650,000 and
the value has not increased when reselling the
home 10 years later, a buyer with a 5% simple
interest loan would lose $65,000, reducing their
household wealth by $65,000. The same buyer
with a shared appreciation loan would not have
lost anything, and would recover their initial
down payment. Meanwhile, if home prices were
to rise faster than the fixed interest rate, the Fund
would not be able to help a new buyer afford an
equivalent home.

The higher one sets the fixed interest rate in
order to assist future buyers, the greater the risk
to any individual borrower. The risks created by
an accruing fixed interest rate on large deferred
payment second mortgage loans are thus
fundamental. If appreciation turns out to be less
than the fixed rate, the low/moderate-income
borrower loses money, compared to shared
appreciation. On the other hand, if appreciation
turns out to be more than the fixed rate, the CA
Dream for All Fund will not have enough to help
the next buyer purchase a similar home.

In essence, an accruing fixed rate second loan
creates a greater upside and a greater downside
for the borrower, while also making it much
more difficult for the State’s investment in the
CA Dream for All program to keep pace with
inflation. Shared appreciation creates fewer risks
to individual homebuyers and to the CA Dream
for All program’s ability to help families overall,
because it is linked to what actually happens to
the price of each borrower’s home.

Attachment 2Page 104 of 311

74 Overall Impact of Fixed Interest vs.

Shared Appreciation
Expected case. Figure 50 shows key overall
impacts of these two different types of lending,
with the same amount of State investment in the
CA Dream for All Fund in the expected case.

If homes appreciate at 4.5% per year—slightly
less than the statewide average for the last 40
years—a shared appreciation CA Dream for All
program will assist approximately 32,000 more
borrowers than a 3% fixed interest rate loan
program. That number represents 26% more first-
time buyers who could purchase homes.

More striking still, a shared appreciation program
would provide $15 billion more in CA Dream for All
loans—46% more than the fixed rate program. This
program would help future borrowers keep up
with the increasing price of homes in California,
allowing buyers to purchase homes costing a total
of $238 billion compared to $163 billion.

Perhaps the most important part of this
comparison is the impact on borrower household
wealth; that is, how much borrowers receive
from the total appreciation of their homes
after subtracting what would be owed to the
program, either as a share of appreciation or as
accrued interest. The aggregate appreciation
that borrowers would be able to realize under a
shared appreciation program would be $133.8
billion—about 10% more than with a fixed rate
loan program.

Why does a shared appreciation program help
borrowers realize more total appreciation? After
all, any individual borrower in an escalating
housing market would be better off owing a
low interest rate rather than a pro rata share of
appreciation. But because a shared appreciation
program helps so many more borrowers, the total
borrower share of appreciation the CA Dream
for All program can generate over 40 years is
significantly greater.

Figure 50: Shared Appreciation and 3% Fixed Interest Loans Over 40 Years: Expected Case Shared
Appreciation
Fixed Simple
Interest 3%
Difference
CA Dream Loan Originations
Borrowers assisted over 40 years 157,200 124,800 32,400 $ of homes purchased $238 bill. $163 bill. $75 bill.

CA Dream loans 47.6 bill. 32.6 bill. 15.0 bill.

Present value at 3.0% 25.3 19.2 6.1
Borrower Share of Home Appreciation Through Year 40
Borrower share $133.8 bill. $120.6 bill. $13.2 bill.

Present value at 3.0% 64.2 60.8 3.4

Attachment 2Page 105 of 311

75 Figure 51: Shared Appreciation v. 3% Fixed Interest Loans Over 40 Years: More Conservative Case Shared
Appreciation
Fixed Simple
Interest 3%
Difference
CA Dream Loan Originations
Borrowers assisted over 40 years 144,000 133,900 10,100 $ of homes purchased $157 bill. $141 bill. $16 bill.

CA Dream loans $31.4 bill. $28.2 bill. $3.2 bill.

Present value at 3.0% 18.1 16.9 6.1
Borrower Share of Home Appreciation Through Year 40
Borrower share $ 61.8 bill. $ 61.8 bill. $0 bill.

Present value at 3.0% 31.1 31.6 -0.4
More conservative case. Figure 51 shows the
results in the more conservative case, where home
prices rise at 3%—the same rate as that on an
assumed fixed rate loan program.

If home prices rise slowly—at about the same rate
as that on accruing fixed rate loans—there is much
less of a difference between shared appreciation
and fixed rate programs. In this case, shared
appreciation helps about 10,000 more first-time
buyers, or about 8% more. There is virtually no
difference in the total borrower share of home
appreciation over this 40-year period.

This point underscores the very purpose of a
shared appreciation program: to be able to keep
pace with the changing price of homes and thus
reduce the risk that loan repayments will not be
enough to help a similar buyer purchase a home.

In the same way that the fundamental purpose of
the CA Dream for All program is to help insulate
families from rising housing costs, the shared
appreciation feature helps insulate the CA Dream
for All program from being unable to help future
buyers in the kind of escalating market California
has experienced for decades.

Residual long-term benefits. The analysis up
to this point has only considered the impact on
appreciation by borrowers through 40 years.

Perhaps the most significant difference between
shared appreciation and fixed interest is in the
residual amount accrued by the CA Dream for
All Fund at the end of 40 years. These are the
repayments the CA Dream for All Fund would
ultimately receive from loans outstanding at that
date.

In the expected case, a shared appreciation
program would generate five times more
resources from repayments after year 40 than
a fixed rate program: $35.8 billion versus $7.6
billion. This difference is the extra amount that a
shared appreciation program would have to help
subsequent buyers.

In the conservative case, the difference is less but
still substantial. A shared appreciation program in
this case would generate about 75% more residual
resources than a fixed rate program, or about
$13.0 billion versus $7.5 billion.

Efficiency of State Investment in
Generating Household Wealth
Figure 52 takes into account these various
impacts. It envisions the program making loans
through year 40, but with any repayments
received after that date acting as repayments to
the State for its investment.

Attachment 2Page 106 of 311

76 Figure 52: Present Value Comparison of State Investment in Generating Household Wealth State
Investment
Residual to
State After
Year 40
Net State
Investment
Borrower
Appreciation
Through Year 40
Borrower Appreciation
Divided by Net State
investment
Expected Case
Shared appreciation $10.8 billion $7 .5 billion $3.3 billion $64.2 billion 19.4x Fixed interest $10.8 billion $1.7 billion $9.1 billion $60.8 billion 6.7x More Conservative Case
Shared appreciation $10.8 billion $2 .7 billion $8.1 billion $31.2 billion 3.9x Fixed interest $10.8 billion $ 1.6 billion $9.2 billion $31.6 billion 3.4x What this shows is that in the expected case, in
present value terms, the State’s net investment
in a shared appreciation CA Dream for All Fund
would have been $3.3 billion, and would have
generated more than 19 times that amount in
borrower household wealth. The State’s net
investment in a fixed rate CA Dream for All
Fund, on the other hand, would have been $9.1
billion, and would have generated 6.7 times that
investment.

In the more conservative case, the State would
generate 3.9 times its investment using a shared
appreciation approach versus 3.4 times its
investment under a fixed rate approach.

Conclusions: Appreciation vs.

Fixed Interest Loans
In all these analyses, a few insights into fixed rate
programs stand out.
§ If the fixed interest rate turns out to be lower
than the average rate of appreciation (such
as in the expected case, with 3% simple
interest vs. 4.5% compounded appreciation), a
fixed rate program will help significantly fewer
buyers and generate much less household
wealth.
§ If the fixed interest rate turns out to be close
to the average rate of appreciation, such
as in the more conservative case (e.g., 3%
simple interest vs. 3% compounded home
appreciation), the differences from shared
appreciation are more modest. In the more
conservative case, shared appreciation helps
about 8% more borrowers over 40 years than
a fixed rate program and accrues significantly
more resources for helping subsequent
borrowers or for repaying the State. It is
also somewhat more efficient in generating
household wealth.
§ If the fixed interest rate turns out to be higher
than the actual appreciation on an individual
borrower’s home, there is a significant
adverse impact on that borrower’s household
wealth. Shared appreciation does not pose
this risk.

By being linked to what actually happens to
borrower homes, shared appreciation can be
seen as creating fewer risks both to individual
borrowers and to the program’s ability to
generate household wealth overall.

Attachment 2Page 107 of 311

77 VI. OUTREACH, EQUITY AND

IMPLEMENTATION
Community and Stakeholder Feedback
115 A special thanks goes to those experts that agreed to be interviewed for the purpose of this report. These individuals include Blanca Arellano, Hope Through Housing Foundation; Carolyn Patton, West Angeles CDC; Al Abdullah at the San Diego Urban League; Sergio Szyrko at Fairway Independent Mortgage Corporation; Anne Vilagut, Montebello Housing Development Corporation; Maureen Sedonaen, Habitat for Humanity San Francisco; Dennis Santiago, National Asian American Coalition; Hyepin Im, Faith and Community Empowerment; Kaith Berghold, Fresno Metro Ministries; Clemente Mojica, Neighborhood Partnership Housing Services; Leah Miller, Habitat for Humanity Sacramento; Nikki Beasley, Richmond Neighborhood Housing Services; Bertha Garcia, Ventura County Community Development Corporation; Esther Carver, Lowell CDC; Leo Goldberg, California Community Land Trust Network; Farrah Wilder, California Association of Realtors.

Summary of Community Comments
and Themes
California Community Builders staff spoke to
stakeholders throughout the state from January
through March of 2022. These stakeholders
included housing counseling agencies, community
development corporations, mortgage originators,
Community Development Financial Institutions
(CDFI), real estate brokers and representatives of
community land trusts.
115
Interviewees almost universally supported the
program at a high level. In fact, even those who
did not think the program would be directly
applicable to their organizations and/or target
communities were supportive.

Two organizations brought up notable structural
questions. One organization asked whether the
proposed CA Dream for All program would do
enough to prioritize wealth building overall and in
all cases—and specifically, whether the CA Dream
for All program should ensure that in all cases,
including early home sales and cases of hardship,
the borrower’s financial equity is maximized.

On the other end of the spectrum, a separate
organization asked whether the program’s
intended flexibility would protect against highly-
educated-but-not-rich-yet borrowers (HENRYs)
over-subscribing to the program, and specifically
whether the CA Dream for All program would
inadvertently over-subsidize borrowers from
higher wealth communities that have already
historically been able to access homeownership.

These critiques were in the minority, and the
program team is confident that an equitable
approach informed by community input—as
described below—will address these more
systemic concerns. The remainder of the feedback
primarily addressed smaller-scale program details,
and even those interviewees with the strongest
concerns did not disagree with the overall
concept or argue that a shared appreciation
mortgage program should not exist.

Primary Interview Themes
California needs more tools to meet our
homeownership crisis. Stakeholders all voiced
the need and support for a new tool to address
the homeownership crisis.

Equity for disadvantaged communities needs
to be prioritized. Stakeholders agreed that
historically redlined and other marginalized
communities have specific needs and are not well
served by the existing mortgage market, while
existing down payment assistance programs
leave significant room for improvement. It’s clear
that any new mortgage product must ensure
outcomes that maximize accessibility, protection
and wealth building for these populations.

Housing practitioners need flexibility and
support. Stakeholders agreed that housing
professionals need diverse options to serve
diverse communities, and that programs with
built-in flexibility allow them to serve a variety
of unique borrower needs. Housing counselors,
who are on the front lines of supporting low-
and moderate-income families, need increased
resources to ensure maximal help to communities
that are often hard to reach, experience language
access issues or have little experience successfully
attaining homeownership. Stakeholders often
remarked during interviews that housing
counselors do two to three times more work than
they are compensated to perform.

The CA Dream for All program must work within
the context of the market as it exists today.

Stakeholders continually acknowledged the
extreme disadvantage facing low- and moderate-
income borrowers in every region of the state,
including those considered “low-cost.” A successful
program will need to ensure that borrowers can
compete in the private market efficiently and
effectively. Considerations like the timing of funds,
ease of execution and competition from borrowers
using only private-sector mortgages (as well as all-
cash buyers) must be taken into account.

Attachment 2Page 108 of 311

78 Areas of Significant Support
Income flexibility. In general, interviewees were
most pleased with the flexibility the program
would provide around eligible borrower incomes,
since existing programs are very restrictive and
often targeted at families at or below 80% AMI.

Interviewees felt that this flexibility would either
be a tool to serve existing clients or an alternative
for those clients that would otherwise have been
turned away for having an income that is too high.

Further, several interviewees brought up the lack of
existing programs to serve 80-120% AMI families.

Student debt relief. Interviewees generally
supported a potential set-aside to help borrowers
convert expensive student loan debt into low-
cost, non-interest-bearing CA Dream for All debt,
although the issue was less pertinent for some
populations. Several interviewees suggested
that student debt could be a constraining factor
for their clients. Feedback from down payment
assistance administrators in Illinois indicated that
adding direct student debt support lowered the
average age of their borrowers and brought in
more diverse populations.

Average size of a CA Dream for All loan. Most
interviewees noted that one of the biggest, most
straightforward benefits of the program is that
it would remove the need forPrivate Mortgage
Insurance (PMI), which would result in significant
cost savings for borrowers and a larger overall
loan. The size of the CA Dream for All’s average
loan, approximately 17%, is big enough to ensure
that the majority of borrowers avoid an often
large and unnecessary cost.

CBO and nonprofit participation. Interviewees
thought a program that provided the above
benefits and included a significant role for
nonprofit community organizations could
serve populations and potential homeowners
that are not currently well served. Interviewees
generally spoke very highly of CalHFA’s
community collaboration structure and thought a
continuation of that approach would be beneficial
and necessary for this type of program.

Areas of Concern and Potential
Approaches to Address Those
Concerns
Complexity. Interviewees flagged the complexity
of the program as a potential obstacle to
maximizing positive benefits for targeted families.

While shared appreciation is relatively simple in
some ways (e.g., no interest paid, loan amount
is directly tied to purchase price, not payable
until sale, etc.), target borrowers will likely come
from families where homeownership may not be
common. Several interviewees suggested that
most borrowers will forget about the second
mortgage if they are not paying it, especially
after more than 10 years. Perhaps even more
importantly, SALs are not widely available, and
so borrowers, real estate professionals, housing
counselors and administrators will generally be
unfamiliar with the structure and concept at the
outset of the program.

To address the complexity of this program, the
CA FWD team recommends that a CA Dream
for All program maximize pre-and post-purchase
counseling. During the homebuying process, the
program should prioritize clear, simple marketing
materials, loan descriptions and documents, and
should resource home counseling organizations
to provide enhanced support to borrowers.

Post-purchase outreach and counseling will be
especially critical for inexperienced buyers if
problems arise. This should include regular written
communications to borrowers indicating that they
have a shared appreciation obligation, as well
as annual check-ins with housing counselors. It
will be useful to contact borrowers periodically
(ideally through post-purchase counseling) to
ensure this detail is not lost.

First-generation set-aside. The CA FWD team
was asked to evaluate a potential set-aside for
first-generation homebuyers, or buyers who
had not owned a home in the past three years
and whose parents had not owned a home in
three years. Interviewees were generally neutral
or opposed to the first-generation component.

Feedback indicated that a first-generation
component would be impractical to verify, would
further complicate an already complicated
program and would not add much value since
the majority of
first-time homebuyers are already
likely to be first-generation.

To address what could be a significant
administrative burden for small overall equity
impacts, the CA FWD team recommends the CA
Dream for All program focus primarily on first-
time homebuyers to avoid a logistical quagmire.

If a first-generation set-aside is included, it should
be structured as a self-certification to reduce the
administrative burden.

Down payment and closing costs. Most
interviewees mentioned the overall cost of a down
payment and closing costs being an impediment,
especially in high-cost markets. While a CA Dream
for All loan would only leave 3% for a borrower to
contribute as a down payment, even this amount
could be prohibitive for low-wealth borrowers and
communities, considering the average home cost
in the Bay Area, Los Angeles and most areas of
the state.

Attachment 2Page 109 of 311

79 To address the remaining down payment cost,
the CA Dream for All program should maximize
flexibility so that it can be paired with other
programs providing down payment assistance
and financial support. This could mean educating
housing counselors so that they can help potential
buyers with all existing subsidy programs for
which they are eligible, increasing the size of the
CA Dream for All loan up to 30% for lower-income
borrowers, or some combination of the two
Marketing and Outreach
The RFP stated that “Outreach efforts to
target beneficiaries of the Program will be
made to: (1) underrepresented homeownership
communities, (2) those who have not returned to
homeownership after losing homes in the Great
Recession and (3) those with high student debts.”
Issues and Needs in Targeting
Disadvantaged Communities
Keep in mind lack of experience. Stakeholders,
especially housing counselors, emphasized the
importance of understanding that first-time
homebuyer programs target individuals who
have no personal experience in the homebuying
process and who likely come from communities
that have been formally and informally shut out
of homeownership. In addition, many potential
borrowers may come from families negatively
impacted by the Great Recession, and so their only
personal connection to homeownership may be
through the lens of foreclosure and its aftermath.

Simplicity will be key. A shared appreciation
mortgage is a new concept for most housing
professionals, so outreach and marketing to first-
time homebuyers (who have almost certainly
never heard the term) must use plain language,
simple visuals and a clear articulation of the
process (including benefits and drawbacks of the
program). Resources should be set aside for the
design of clear, explanatory visual materials.

Leverage existing networks and nonprofit
organizations. A critical component to success
will be the program’s ability to work with existing
organizations and networks that are based in
and trusted by disadvantaged populations. To do
so, it will be important that these organizations
and networks, especially housing counselors, be
educated on the program and understand how to
relay and guide potential borrowers. Resources
must be set aside to help these organizations and
their staff learn about the programs.

Cultural competency. A new statewide program—
especially one based on targeting disadvantaged
communities, non-English speaking communities,
communities that have been historically targeted
by predatory lenders and those from families that
have never owned homes—will need to prioritize
cultural competency in marketing and outreach,
service delivery and administration of the program.

Suggestions to promote this outcome include:
§ Translation services: A successful CA Dream
for All program needs to ensure adequate
resources for translation services and prioritize
culturally competent marketing and outreach.

Language access was a common theme
throughout our interviews, especially related
to the Asian American and Pacific Islander
community. There are numerous economically
and culturally diverse communities within
the Asian American and Pacific Islander
community whose unique language needs
often go overlooked.
§ Ethnic media: Often, first-time borrowers
come from communities that are not well
served by the mainstream media. It is
important that ethnic media—both English
and non-English outlets—be incorporated into
the outreach and marketing of the CA Dream
for All program.
§ Big impact of digital divide: Digital access
and the impact of the digital divide vary
greatly across communities. The CA Dream
for All program should balance the need
for efficiency through digital and online
services with the understanding that, for
many families, particularly those that come
from disadvantaged and formerly redlined
communities, these services are not always as
readily accessible.

Educate the real estate community on the
program. Several interviewees working in the for-
profit real estate sector noted that the flexibility
built into this program would likely be appealing to
brokers and mortgage originators, but that there
should still be a concerted effort to reach out to
and educate real estate professionals, including
real estate brokers. There was consensus that this
program could be underutilized and less effective
without buy-in from the realtor community.

Marketing and outreach need to be resourced
to facilitate effective partnerships. Interviewees
consistently noted that without resources
dedicated to marketing and outreach, the onus
will fall on nonprofit and community-based
organizations that are often stretched thin.

Interviewees pointed out that some local down
payment assistance programs, such as San
Francisco’s program, include marketing as a
reimbursed cost, and recommended that the CA
Dream for All program follow that model.

Attachment 2Page 110 of 311

80 Housing Counseling
Primary Themes We Heard From Counselors
Complexity. All interviewees agreed this would
be a very complex program to explain, with
borrowers who know less than average compared
to the typical buyer. The program needs to
maximize outreach, education and support for
these borrowers. Participants also emphasized
making the program as simple as possible so
that buyers who have never purchased a home,
and potentially come from families that have
never purchased homes, can easily understand
and evaluate the program. That said, one
interviewee noted that the proposed program is
not especially more complicated than other public
DPA programs that require repayment and that
many of the fundamental issues were the same:
lack of general borrower knowledge, excitement
to purchase a home obscuring critical issues
that need consideration and the likelihood that
borrowers will forget the specifics of what they
agreed to post-purchase.

Protection against predatory instruments.

A number of interviewees noted that, in their
experience, families that have recently purchased
a home often begin to receive offers for home
renovation loans, reverse mortgages and other
costly products that do not necessarily benefit the
borrower. Interviewees reported that people who
are unfamiliar with the process and excited to own
a home can be very trusting and overwhelmed
with information. Since most housing counselors
do not see first-time homebuyer clients again
unless they need foreclosure prevention help,
new homebuyers are often left without support.

Further, since everyone in the real estate
industry aside from housing counselors works
on commission, there is a real need to protect
borrowers. The simplest, most effective way
to protect against these predatory financial
instruments is for the CA Dream for All program
to invest in resource-enhanced, long-term access
to housing counselors and homeowner education.

Resources for Housing Counselor Services and
Capacity Building. Interviewees consistently noted
that the lack of resources for housing counselors
is a significant inhibiting factor in the number of
families helped and support provided. Stakeholder
feedback called for current homebuyer education
funds to be significantly increased due to the high-
touch nature of the work and inherently inefficient
process of working with people who are both low/
moderate income and have never purchased a
home. Language barriers and the digital divide
also require more time and energy to serve clients.

Interviewees also called for additional funds for
capacity building. Lastly, numerous interviewees
mentioned that there should be investment in
capacity building for nonprofit organizations
serving these populations since the current
funding structure is not conducive to helping these
organizations grow the infrastructure needed to
serve clients in the long term.

Leverage housing counselors, CDFIs, and
other community groups beyond just
homebuyer education and outreach. The most
straightforward way to engage housing groups
is through their role in marketing, outreach
and homebuyer education, but numerous
interviewees also requested that the broader
housing community be engaged on issues around
administration of the program and given the
opportunity to provide feedback on operations
through formal administrative channels.

Timing and ease of execution. Real estate is a
field full of deadlines, and in almost all markets
in California there is no room for error. For the
program to work, it must be run by people who
understand how these transactions operate and
who recognize that delays hurt the people the
program intends to help, in addition to harming
the program’s reputation among real estate
professionals.

CA Dream for All must be accepted by the
real estate industry to be successful. Several
interviewees noted that if the CA Dream for
All program does not successfully integrate
the realtor community, mortgage originators
and other real estate professionals then many
families that could otherwise benefit may
miss out. There were also examples given of
how existing programs were not favored by
realtors representing home sellers due to timing
inefficiencies, and so families with down payment
assistance loans were often left with few options.

At least one interviewee stated there should be
an incentive for realtors and sellers to work with
this program. Interviewee sentiment was that
the CA Dream for All program will only reach its
maximum potential if it is seen as an effective and
efficient program by the real estate community.

Additional Feedback We Received
Interviewees also shared additional observations
that did not arise as consistent themes in every
interview, but were still valuable and worthwhile
to consider as the program is implemented.
§ “Low-cost areas”: Even “low-cost” regions
of the state have expensive markets where
buyers at 120% AMI have a difficult time
finding opportunities.

Attachment 2Page 111 of 311

81 § The reality of the market: Buyers in Los
Angeles and other high-cost markets are
routinely asked to engage in a bidding war
with other buyers. It is important that CA
Dream for All borrowers are able to compete
effectively in the market as it exists today.
§ Lender participation: Large banks do
participate widely in existing down payment
assistance programs, and these programs
often have high-cost fees.
§ Reporting: Reporting can be burdensome
on small nonprofits, and streamlining should
be prioritized. CalHFA was highlighted as a
reasonable reporting agency.
§ Implementation: For some down payment
assistance programs that were not structured
well, money does not actually make it out to
borrowers and allocated funds are not used.
§ Hardship and mortgage modification: If a
borrower is selling to pay for hardship such as
medical debt, the CA Dream for All program
could carve out an exception and lower the
requirement on some or all of the shared
appreciation paid back.
§ Community Land Trusts: The CA Dream for
All program should be structured to ensure
that limited equity co-ops and Community
Land Trusts can participate fully, including
allowances for long term ground leases and
other cooperative structures.
§ Prioritizing wealth building: The CA Dream
for All program should strike a balance
between providing as much support to
families as needed without over subsidizing
and eliminating the wealth building potential
of the program.
§ Bank participation: Large bank participation
would significantly improve the program’s
reach, effectiveness and uptake by borrowers.

The administrator of the CA Dream for All
program should explore ways to ensure large
bank participation.
§ Synergy with existing programs: There are
numerous down payment assistance programs
at the state and local levels, especially in large
cities. The CA Dream for All program should
consider how these programs can integrate
into its statewide program and add value
where possible to borrowers.
§ Multifamily homeownership: The CA Dream
for All program should be flexible in the type
of home purchased and be useful for condo
and co-op buyers, along with more traditional
single-family homes.
§ Geographic awareness: While a buyer may
live in a high-cost market like Los Angeles,
many low- and moderate-income borrowers
are looking to purchase in lower-cost areas,
such as the Inland Empire.

Monitoring and Evaluation
Post-Purchase Counseling
The project team has intentionally designed the
CA Dream for All program to be as accessible,
affordable and adopted as broadly as possible
throughout the state’s various regions and
communities. Since examples of well-run pre-
purchase and outreach counseling programs
exist throughout the state, traditional housing
counseling is not likely to be especially difficult
for the program administrator to institute and
run. What may require more time, effort and
innovation will be a new post-purchase counseling
program that can be a resource for buyers—ideally
throughout the life of their CA Dream for All loan.

Housing counselors interviewed reported that
most of the financial support for their work was
limited to pre-purchase counseling. When available
for post-purchase counseling, most resources were
limited to pre-foreclosure support or restricted
to the first few years after the home purchase.

Housing counselors also reported that even for
pre-purchase counseling, resources did not cover
the full time and energy spent to qualify first-
time buyers. One interviewee noted that, once a
program ends, borrowers have old phone numbers
and emails to reach out to, and often receive no
response from the administering agency.

With additional resources, housing counselors
can remain a touch point for homebuyers as they
navigate the process, especially if there is no
additional support from loan servicers.

Trade-Offs of Long-Term Housing
Counseling and Support
While long-term, well-resourced housing counseling
and borrower outreach can address issues around
program unfamiliarity and complexity, they also
involve significant financial costs. That said, the
driving purpose of the CA Dream for All program
is to create wealth through homeownership in a
safe and sustainable manner. To truly achieve that
primary objective, adequate resources—detailed
in other sections of this report—must be set aside
for the administration of this program, including
all necessary funding for long-term, appropriate
counseling and outreach for borrowers who have
taken out a CA Dream for All loan.

Attachment 2Page 112 of 311

82 Additional Efforts to Ensure Equity:

HMDA Disclosure and Community
Advisory Boar
d
There are additional ways in which a
program administrator can ensure equitable
implementation of the CA Dream for All program
during the monitoring and evaluation phase. First,
the project team recommends that the program
administrator release an annual report using
Home Mortgage Disclosure Data to disclose,
in the aggregate, the program’s uptake among
different geographies throughout the state by
ethnicity, gender and income. This information
is already collected by mortgage lenders and
should not be particularly onerous to aggregate
and publish annually, especially considering
the overall size and cost of the program. If the
annual HMDA data shows that the program is not
reaching priority disadvantaged communities,
then solutions can be proposed and implemented
to address that misalignment.

Second, the CA FWD team strongly recommends
the program administrator create a community
advisory committee made up of housing
professionals—including nonprofit housing
counselors, realtors, CDFI professionals and
mortgage originators—directly serving low-
and moderate-income clients to ensure that
the implementation of the program meets its
strategic vision and goals. Consistent feedback
provided during stakeholder interviews noted that
programs are often well designed on paper but
do not meet the realities of the housing market in
different regions. By creating an advisory council
of nonprofit and for-profit organizations, the CA
Dream for All program administrator can ensure
that feedback from stakeholders essential to the
success of the program is given a formal channel
to be evaluated and potentially implemented.

Equity Analysis
Building on 2021’s successful CA House
Resolution 39 (Gipson) – “Equity Impact Analysis
of Legislation,” the CA Dream for All program can
use an equity analysis framework to help ensure it
is reducing or eliminating inequities experienced
by historically marginalized communities. The
equity analysis below, adapted from questions
that could also be asked by a committee
consultant reviewing potentially enabling
legislation, is intended to: provide space to
consider specific, structural questions concerning
the program and the equity outcomes it could
produce; summarize the feedback received
116 Questions adapted from March 26, 2022 “Equity Impact Assessment of Bills” briefing held by PolicyLink/Greenlining/EdTrust West. from stakeholder interviewees and proposals
from the project team into recommendations
that will pr
ovide a minimum baseline for the
project to achieve equitable outcomes; and offer
suggestions for the CA Dream for All program
that will provide enhanced equity outcomes in
excess of what would be accomplished by only
adopting the baseline.
116
TARGETED SUPPORT: Will the CA Dream for
All program increase opportunities, services
or support for low- or moderate-income
communities?
Baseline: The underlying and structural goal of the
CA Dream for All shared appreciation mortgage
program is to directly target low- and moderate-
income communities, including enhanced support
for borrowers that struggle with student debt
and other significant obstacles to achieving
homeownership.

Enhancement: To maximize equity and benefits
delivered to disadvantaged communities, the
CA Dream for All program administrator should
track borrower demographics through annual
HMDA demographics information and make that
data public. While the unequivocal goal of the
program is to support low- and moderate-income
communities, the implementation of public policy
goals can often fall short. Annual HMDA data
disclosures directly tied to the CA Dream for All
program would allow for adjustments to be made
to the program’s targeting and improvements to
its overall adoption by target communities.

WEALTH BUILDING: If implemented, will
this program help close the wealth gap for
communities historically impacted by redlining?
Baseline: The program framework has been
structured to maximize wealth building
opportunities for current disadvantaged
borrowers while still protecting the ability of the
program to generate enough returns to serve
future borrowers. For instance, the project team
has not imposed resale restrictions related to
income on CA Dream for All borrowers, which
would have limited the homeowner’s ability to
realize the equity they have built in their home.

Enhancement: To further enhance wealth building,
housing counselors should be provided with long-
term resources (direct and capacity building)
to support buyers in making financial decisions
that will most benefit them. Annual contact and
long-term relationships between borrowers and
housing counselors will mean that homebuyers

Attachment 2Page 113 of 311

83 will have at least one resource to call on that
is not motivated by profit. This is especially
important since the wealth building benefits of
the CA Dream for All program accrue slightly
more slowly than those of standard fixed interest
rate down payment programs, and it is important
that homeowners understand the benefits and
drawbacks of paying off their CA Dream for All
mortgage in the first ten years.

BORROWER PROTECTIONS: Are there
protections embedded in the program to ensure
that borrowers are educated and protected from
predatory lending?
Baseline: Pre-purchase borrower education
through accredited housing counselors will be
required, and the program has been structured
so that it will be limited to lenders approved by
the public agency administering the program.

As discussed earlier in this report, shared
appreciation mortgages ensure that borrowers
are also more protected in a market downturn
compared to traditional fixed interest rate down
payment assistance programs.

Enhancement: In the same way that long-
term access to housing counseling can help to
maximize wealth creation for CA Dream for All
borrowers, long-term counseling can also help
to protect borrowers from the type of predatory
offers that interviewees indicated often start
to appear after a borrower purchases a home.

Investing the resources necessary to create a
strong, long-term infrastructure of borrower
resources and support—primarily through long-
term access to housing counselors—will be vital.

LANGUAGE DIVERSITY: Will this program
have any limitations or negative impacts for
households that are predominantly non-English
speaking?
Baseline: No, but there should be resources to
ensure cultural competency, including translation
services for outreach, counseling organizations and
all program materials. Without specific targeted
117 Park, K. A., & Quercia, R. G. “Who Lends Beyond the Red Line? The Community Reinvestment Act and the Legacy of Redlining.” Housing Policy Debate 30, no. 1: 4–26, 2020. https:/ /doi.org/10.1080/10511482.2019.1665839. As cited in Reid, Carolina. “Crisis, Response, and Recovery: The Federal Government and the Black/White Homeownership.” The Terner Center for Housing Innovation, UC Berkeley, 2021. Retrieved from: https:/ /ternercenter.berkeley.edu/research-and-policy/crisis-response-and-recovery-the- federal-government-and-the-black-white-homeownership-gap/ 118 Krimmel, J. “Persistence of Prejudice: Estimating the Long Term Effects of Redlining.” Working Paper. Philadelphia, PA: University of Pennsylvania., 2018. Retrieved from:
https:/ /osf.io/uxeaz/. As cited in Reid, Carolina. “Crisis, Response, and Recovery: The Federal Government and the Black/White Homeownership.” The Terner Center for Housing Innovation, UC Berkeley, 2021. Retrieved from: https:/ /ternercenter.berkeley.edu/research-and-policy/crisis-response-and-recovery-the-federal-government-and- the-black-white-homeownership-gap/
119 “Redlining and Neighborhood Health.” National Community Reinvestment Coalition, 2010. Retrieved from: https:/ /ncrc.org/holc-health/.

As cited in Reid, Carolina. “Crisis, Response, and Recovery: The Federal Government and the Black/White Homeownership.” The Terner Center for Housing Innovation, UC Berkeley, 2021. Retrieved from: https:/ /ternercenter.berkeley.edu/research-and-policy/crisis-response-and-recovery-the-federal-government-and-the-black-white- homeownership-gap/
120 Aaronson, D., Hartley, D., & Mazumder, B. “The Effects of the 1930s HOLC ‘Redlining’ Maps.” Chicago, IL: Federal Reserve Bank of Chicago, 2020. Retrieved from:
https:/ /www.chicagofed.org/publications/working-papers/2017/wp2017-12.

As cited in Reid, Carolina. “Crisis, Response, and Recovery: The Federal Government and the Black/White Homeownership.” The Terner Center for Housing Innovation, UC Berkeley, 2021.. Retrieved from: https:/ /ternercenter.berkeley.edu/research-and-policy/crisis-response-and-recovery-the-federal-government-and-the-black-white- homeownership-gap/
resources for non-English speaking communities,
the CA Dream for All program will not be able to
reach all Californians, especially those that come
from low- and moderate-income communities the
program is directly charged with serving.

Enhancement: Maximize the use of ethnic
media to advertise and outreach to non-English
speaking communities and other communities not
well served by mass media outreach strategies,
especially those in languages other than English.

This approach will not only expand outreach to
eligible borrowers; it will also offer Californian
communities that are often left out of housing
conversations information about the benefits of a
shared appreciation mortgage program.

HEALTH AND QUALITY OF LIFE: If implemented,
will this program reduce health inequities and
disparities in quality of life for communities that
have been historically impacted by redlining and
environmental injustice?
Baseline: As noted earlier in this chapter,
neighborhoods that were previously redlined
still have higher poverty rates, less economic
mobility for children,
117 reduced housing supply,118
lower life expectancy, higher incidence of chronic
diseases
119 and lower quality broadband access as
well as lower house values and homeownership
rates.
120 The CA Dream for All program intends
to implement special targeting to areas
identified by CalEnviroScreen as Disadvantaged
Communities, which are defined as areas with
higher rates of pollution and illness and lower
socioeconomic assets.

Enhancement: Identify additional resources for
Disadvantaged Communities that can be used
to strengthen the CA Dream for All program,
such as additional funds that can be used for
environmental remediation or other issues directly
related to past environmental injustice.

Attachment 2Page 114 of 311

84 Conclusion & Final
Recommendations
The stakeholders we interviewed broadly agreed
that the CA Dream for All program could fill
a critical need in California’s difficult housing
market, in which 20% down payments have
become a nearly insurmountable obstacle for
otherwise qualified buyers. Sustainable down
payment assistance can make it possible for
many who otherwise have no viable path to
homeownership to make use of this critical
avenue for building wealth and financial security.

We discovered considerable consensus around
elements the program will need in order to
be truly successful and maximize benefits to
disadvantaged communities. In brief, these crucial
recommendations are:
§ Prioritize disadvantaged communities,
including previously redlined neighborhoods
and historically marginalized groups.
§ Support and fund housing counseling and
incorpor
ate counseling into every stage of
the program. Because this progr
am revolves
around a concept that is unfamiliar to many,
participants will need ongoing support and
information, not just during the initial purchase
but long after. The CA Dream for All program
must ensure that counseling efforts are
adequately resourced and should work closely
with nonprofits and CDFIs.
§ Make marketing and other program materials
clear and easy t
o understand. Use plain
language and clear, s
traightforward visuals.

Ensure that the benefits and drawbacks of
participation are explained in a way that is
easy to grasp.
§ Emphasize cultural competency. Use of
translation services will be critical, as many
in the target audience do not speak or read
English as their first language, but that is just
a start. Cultural knowledge and awareness
will also be crucial. Make use of ethnic media
outlets, which may be the most trusted in
certain communities and can reach those not
well served by the mainstream media. To do
all of this properly, marketing efforts must be
adequately resourced.
§ Make sure the real estate industry
understands and ac
cepts the program. This
goal will r
equire education and outreach. Real
estate professionals need to be able to trust
that the program will be run efficiently and
not cause unnecessary delays in transactions—
meaning that administration and operations
must be well-planned and adequately
resourced. If the program works well, they will
use it; if it does not, they will not use it.
§ Build equity analysis into the program
and its ev
aluation. Follo
wing the lead of
HR-39, passed in 2021, the program must
systematically examine its impact in delivering
benefits to disadvantaged communities.

Existing data collection and analysis tools
such as the Home Mortgage Disclosure Act
and CalEnviroScreen can be used to help
facilitate this process.

The CA Dream for All program can go a long
way toward alleviating one major obstacle to
homeownership that has disproportionately
impacted marginalized communities, but getting
the details right will make the difference between
a program that creates a positive impact and
a disappointing effort with only marginal
benefits. The concerns and recommendations
that emerged from these stakeholder interviews
provide important guidance to help ensure
maximum impact as the program is finalized.

Attachment 2Page 115 of 311

85 APPENDIX A
Glossary
121 “FHA Single Family Housing Policy Handbook: Glossary.” Federal Housing Administration, 2016. https:/ /www.hud.gov/sites/documents/40001GAHSGH.PDF 122 Lush, Minnie. California Real Estate Finance, 9th Edition. 2016. 123 “Accessory Dwelling Units (ADUs) and Junior Accessory Dwelling Units (JADUs).” California Department of Housing and Community Development. 2021. https:/ /www.hcd.ca.gov/policy-research/accessorydwellingunits.shtml#adu 124 “Mortgage Key Terms.” Consumer Financial Protection Bureau. https:/ /www.consumerfinance.gov/consumer-tools/mortgages/answers/key-terms/ 125 Cornell Legal Information Institute. https:/ /www.law.cornell.edu/ 126 “Mortgage Key Terms.” Consumer Financial Protection Bureau. https:/ /www.consumerfinance.gov/consumer-tools/mortgages/answers/key-terms/ 127 “Mortgage Key Terms.” Consumer Financial Protection Bureau. https:/ /www.consumerfinance.gov/consumer-tools/mortgages/answers/key-terms/ 128 Ibid.
129 Ibid.
130 Lush, Minnie. California Real Estate Finance, 9th Edition. 2016. 131 “What is Area Median Income?” Planetizen, 2022. https:/ /www.planetizen.com/definition/area-median-income-ami 132 Lush, Minnie. California Real Estate Finance, 9th Edition. 2016.

Acquisition Price: The purchase
price of the real property, including
closing costs, prepaid costs,
and commissions, if paid by the
purchaser, but not including
the cost of any repairs that the
purchaser makes to the property
subsequent to acquisition.
121
Administrative Cost: Costs incurred
to support the functioning of a
program or fund, but which are not
directly related to the production or
servicing of a mortgage.
122
Accessory Dwelling Units (ADUs):

Housing options also known as
granny flats, in-law units, backyard
cottages, secondary units and more.

ADUs are an innovative, affordable,
effective option for adding much-
needed housing in California.
123
Amortization: Paying off a loan
with regular payments over time,
so that the amount a borrower
owes decreases with each payment.

Most home loans amortize, but
some mortgage loans do not fully
amortize, meaning that a borrower
would still owe money after making
all of a borrower’s payments. Some
home loans allow payments that
cover only the amount of interest
due, or an amount less than the
interest due. If payments are less
than the amount of interest due
each month, the mortgage balance
will grow rather than decrease.
124
Amortizing Loan: An amortized
loan is a type of loan with
scheduled, periodic payments
that are applied to both the loan’s
principal amount and the interest
accrued. An amortized loan
payment first pays off the relevant
interest expense for the period,
after which the remainder of the
payment is put toward reducing the
principal amount.
125
Annual Income: Annual income
is a factor in a mortgage loan
application and generally refers to
a borrower’s total earned, pre-
tax income over a year. Annual
income may include income from
full-time or part-time work, self-
employment, tips, commissions,
overtime, bonuses or other sources.

A lender will use information about
a borrower’s annual income and a
borrower’s existing monthly debts
to determine if borrowers can
repay the loan. Whether a lender
will rely upon a specific income
source or amount when considering
a borrower for a loan will often
depend upon whether a borrower
can reasonably expect the income
to continue.
126
Appraisal: An independent
assessment of the value of a
property. The appraisal gives a
borrower useful information about
the property, and describes what
makes it valuable. It may also show
how the property compares in
value to other properties in the
neighborhood.
127
Appraisal Fee: The cost of a home
appraisal of a house a borrower
plans to buy or already owns. In
most cases, the selection of the
appraiser and any associated costs
is up to the lender.
128
Appreciation: The increased
value of a property determined by
subtracting the purchase price from
the sales price at the time of resale
or the fair market value upon other
events triggering repayment.
129
Appreciation Share: The share of
the appreciated home value split
between a SAL originator and the
homebuyer.
130
Area Median Income (AMI):

The Area Median Income (AMI)
describes the midpoint of an area’s
income distribution, where 50% of
households earn above the median
figure while 50% earn less than the
median. The Department of Housing
and Urban Development (HUD)
defines “area” as a Metropolitan
Statistical Area (MSA).
131
Back-End Ratio: A ratio that
indicates what portion of a person’s
monthly income goes toward
paying debts. Total monthly
debt includes expenses, such as
mortgage pa
yments (principal,
interest, taxes, and insurance),
credit card payments, child support,
and other loan payments. Back-
End Ratio = (Total monthly debt
expense / Gross monthly income) x
100.
132

Attachment 2Page 116 of 311

86 Balloon Payment: A balloon
payment is a larger-than-usual
one-time payment at the end of
the loan term. A mortgage with a
balloon payment may charge lower
payments in the years before the
balloon payment comes due, but
a large amount at the end of the
loan.
133
Borrower Share of Appreciation:
(or Wealth Accumulation) The
portion of the increase in the value
of the home that would be retained
by the borrower after repaying the
Fund’s share of appreciation at the
particular date of calculation.

CalHFA: The California Housing
Finance Agency is an independent
state agency within the California
Department of Housing and
Community Development that
provides low-rate housing
financing.
134
California Comeback Plan: An
outline of major strategic state
investments, including $3 billion
towards affordable housing
development.
135
Cash-Out Refinance: A mortgage
refinance option that allows
homeowners to convert their equity
into cash, increasing borrower
liquidity and taking out a new
mortgage at a higher value than the
previous balance.
136
Capitalization: A property
appraisal method that determines
property value by dividing annual
net operating income by a
capitalization rate.
137
133 “Balloon Mortgage Loans.” Fannie Mae, 2022. https:/ /mfguide.fanniemae.com/node/8406 134 California Housing Finance Agency. https:/ /www.calhfa.ca.gov/ 135 “California Roars Back: Governor Newsom Presents $100 Billion California Comeback Plan.” Office of Governor Gavin Newsom, 2021. https:/ /www.gov.ca.gov/2021/05/14/california-roars-back-governor-newsom-presents-100-billion-california-comeback-plan/ 136 Lush, Minnie.California Real Estate Finance, 9th Edition. 2016. 137 Ibid.
138 Ibid.
139 “FHA Single Family Housing Policy Handbook: Glossary.” Federal Housing Administration, 2016. https:/ /www.hud.gov/sites/documents/40001GAHSGH.PDF 140 Cornell Legal Information Institute. https:/ /www.law.cornell.edu/ 141 “Mortgage Key Terms.” Consumer Financial Protection Bureau. https:/ /www.consumerfinance.gov/consumer-tools/mortgages/answers/key-terms/ 142 “Mortgage Loans.” Fannie Mae, 2022. https:/ /mfguide.fanniemae.com/node/10711 143 Lush, Minnie.California Real Estate Finance, 9th Edition. 2016. 144 “Mortgage Key Terms.” Consumer Financial Protection Bureau. https:/ /www.consumerfinance.gov/consumer-tools/mortgages/answers/key-terms/ 145 Lush, Minnie.California Real Estate Finance, 9th Edition. 2016. 146 “Mortgage Key Terms.” Consumer Financial Protection Bureau. https:/ /www.consumerfinance.gov/consumer-tools/mortgages/answers/key-terms/ Closing Costs: All of the costs paid
at closing. This includes origination
charges, appraisal fees, credit report
costs, title insurance fees, and any
other fees required by the lender
or paid as part of a real estate
mortgage transaction.
138
Combined Loan-to-Value (CLTV):

The first mortgage principal at
origination plus the outstanding
principal balance of all subordinate
mortgage(s) divided by the
Adjusted Value.
139
Conforming Loan: A mortgage that
is below the conforming loan limit
established by the Federal Housing
Finance Agency (FHFA) and abides
by other restrictions of Fannie
Mae (Federal National Mortgage
Association) and Freddie Mac
(Federal Home Loan Corporation).

These agencies reduce the risk to
creditors, driving down interest
rates for home loans.
140
Conventional Loan: Any mortgage
loan that is not insured or
guaranteed by the government
(such as under Federal Housing
Administration, Department of
Veterans Affairs, or Department of
Agriculture loan programs).
141
Conventional Financing: In real
estate, mortgage financing that
is not insured or guaranteed by a
government agency such as HUD,
FHA, VA, or the Rural Housing
Service.
142
Cost Approach: A real estate
valuation method that estimates
the price a buyer should pay for a
piece of property is equal to the
cost to build an equivalent building.

In the cost approach, the property’s
value is equal to the cost of land,
plus total costs of construction,
less depreciation. It yields the most
accurate market value for when
a property is new than through
alternative methods.
143
Credit Score (or FICO Score):

A credit score predicts how
likely a borrower is to pay back
a loan on time. Companies use a
mathematical formula—called a
scoring model—to create a credit
score from the information in a
borrower’s credit report. There
are different scoring models, so a
borrower does not have just one
credit score. A score depends on a
borrower’s credit history, the type
of loan product, and even the day
when it was calculated.
144
Community Land Trust (CLT):

A non-profit organization that
holds land and acts as a long-term
steward of retaining housing that is
affordable in the communities they
represent.
145
Debt-to-Income Ratio: All borrower
monthly debt payments divided by
their gross monthly income. This
number is one way lenders measure
a borrower’s ability to manage
the monthly payments to repay
borrowed funds.
146

Attachment 2Page 117 of 311

87 Deed-Restricted: a provision in
a real property conveyance that
limits the grantee’s use of the
property. The beneficiaries of a
restrictive covenant obtain rights
from such covenants, and this may
be the parties who agreed to the
restrictive covenant or adjunct
property owners who benefit from
the restrictive covenant.
147
Default: The failure to make
payments on a mortgage, triggering
the remaining loan balance to be
due in full.
148
Delinquent: Late on mortgage
payments. A loan can become
delinquent when a borrower misses
a payment or does not make a full
payment by the due date. After
a loan becomes delinquent for a
certain period of time, a lender or
servicer may begin the foreclosure
process. The amount of time can
vary by state.
149
Denial Rate: The share of home
mortgage applications denied a
loan.
150
Depreciation: A sum representing
presumed loss in the value of
a building or other real estate
improvement, resulting from
physical wear and economic
obsolescence.
151
Down Payment: The difference
between the sale price of a property
and the sum of outstanding loan
principal at property acquisition. A
borrower puts a percentage of the
home’s value down and borrows
the rest through a mortgage loan.

Generally, the larger the down
payment a borrower makes, the
lower the interest rate received and
the more likely a borrower is to be
approved for a loan.
152
147 Cornell Legal Information Institute. https:/ /www.law.cornell.edu/ 148 Lush, Minnie. California Real Estate Finance, 9th Edition. 2016. 149 “Mortgage Key Terms.” Consumer Financial Protection Bureau. https:/ /www.consumerfinance.gov/consumer-tools/mortgages/answers/key-terms/ 150 “Mortgage Glossary.” Mortgage Bankers Association, 2022. http:/ /mbabluegrass.org/mortgage-glossary/ 151 “Mortgage Loans.” Fannie Mae. 2022. https:/ /mfguide.fanniemae.com/node/10711 152 “Mortgage Key Terms.” Consumer Financial Protection Bureau. https:/ /www.consumerfinance.gov/consumer-tools/mortgages/answers/key-terms/ 153 Ibid.
154 “Effective Annual Interest Rate.” Investopedia. https:/ /www.investopedia.com/terms/e/effectiveinterest.asp#:~:text=What%20Is%20an%20Effective%20 Annual,card%2C%20or%20any%20other%20debt.
155 Lush, Minnie. California Real Estate Finance, 9th Edition. 2016. 156 Cornell Legal Information Institute. https:/ /www.law.cornell.edu/ 157 “Mortgage Loans.” Fannie Mae, 2022. https:/ /mfguide.fanniemae.com/node/10711 158 “Mortgage Key Terms.” Consumer Financial Protection Bureau. https:/ /www.consumerfinance.gov/consumer-tools/mortgages/answers/key-terms/ 159 Landed. https:/ /www.landed.com/
160 Cornell Legal Information Institute. https:/ /www.law.cornell.edu/ 161 “Mortgage Key Terms.” Consumer Financial Protection Bureau. https:/ /www.consumerfinance.gov/consumer-tools/mortgages/answers/key-terms/ 162 “Mortgage Loans.” Fannie Mae, 2022. https:/ /mfguide.fanniemae.com/node/10711 Down Payment Assistance: A
down payment grant or program
typically refers to assistance
provided by an organization such
as a government or non-profit
agency, to a homebuyer to assist
them with the down payment for
a home purchase. The funds may
be provided as an outright grant
or may require repayment, such as
when the home is sold.
153
Effective Interest Rate (EIR): An
EIR reflects the real percentage rate
owed in interest on a loan when the
effects of compounding are taken
into account. The more frequent the
compounding periods, the higher
the rate.
154
Eligible Borrower: A borrower
meeting the financial requirements
to qualify for a mortgage at the
property of their choice.
155
Environmental Justice: The
fair treatment and meaningful
involvement of all people regardless
of race, color, national origin,
or income, with respect to the
development, implementation, and
enforcement of environmental laws,
regulations, and policies.
156
Equity: Ownership interest in a
property. This is the difference
between the home’s market value
and the outstanding balance of the
mortgage loan (as well as any other
liens on the property).
157
Escrow: An escrow account is
set up by a mortgage lender
to pay certain property-related
expenses, like property taxes
and homeowner’s insurance. A
portion of a borrower’s monthly
payment goes into the account.

If a mortgage doesn’t have an
escrow account, a borrower pays
the property-related expenses
directly.
158
Essential Professional: Essential
professions in the report specifically
referred to healthcare professions,
municipal employees, education
professions that are qualified for
a private shared appreciation
program, Landed.
159
Fair Market Value (FMV): The
value of property as determined
by the marketplace (or objective
purchasers) rather than as
determined by a subjective
individual. This is what an informed
and unpressured buyer would pay
to an informed, unpressured seller.
160
Freddie Mac (FHLMC): Also
known as the Federal Home
Loan Mortgage Corporation, a
Government-Sponsor Enterprise
which provides a secondary
market for savings banks and other
institutions.
161
Federal Housing Administration
(FHA): A division of the U.S.

Department of Housing and Urban
Development (HUD) that insures
residential mortgage loans issued
by approved lenders against
loss through foreclosure. FHA
loans have lower down payment
and financing requirements and
are popular among first-time
homebuyers.
162

Attachment 2Page 118 of 311

88 Fannie Mae (FNMA): The Federal
National Mortgage Association
(Fannie Mae) purchases and
guarantees mortgages from lending
institutions in an effort to increase
affordable lending. Fannie Mae is not
a federal agency. It is a government-
sponsored enterprise under the
conservatorship of the Federal
Housing Finance Agency (FHFA).
163
Financial Counseling: A course to
help households develop financial
literacy skills and establish strong
financial habits.
164
Finder’s Fee: A fee paid by a lender
or broker for referring a borrower to
a certain lending institution or real
estate office.
165
First Mortgage: Also known as the
primary loan or senior loan; the
first recorded loan. As the primary
loan that pays for a property, it
has priority over all other liens or
claims on a property in the event of
default.
166
Fixed Rate Loans: A type of home
loan for which the interest rate is
set when a borrower takes out the
loan and will not change during the
term of the loan.
167
Forbearance: A loss mitigation
measure when the servicer allows
a borrower temporarily to pay
their mortgage at a lower rate or
temporarily to stop paying their
mortgage altogether. A servicer
may grant a borrower forbearance
if, for example, a borrower has
suffered a recent job loss, disaster,
illness or injury that increased
health care costs.
168
163 “Mortgage Key Terms.” Consumer Financial Protection Bureau. https:/ /www.consumerfinance.gov/consumer-tools/mortgages/answers/key-terms/ 164 “Mortgage Glossary.” Mortgage Bankers Association, 2022. http:/ /mbabluegrass.org/mortgage-glossary/ 165 “Mortgage Loans.” Fannie Mae, 2022. https:/ /mfguide.fanniemae.com/node/10711 166 Ibid.
167 “Mortgage Key Terms.” Consumer Financial Protection Bureau. https:/ /www.consumerfinance.gov/consumer-tools/mortgages/answers/key-terms/ 168 Ibid.
169 Ibid.
170 “Mortgage Glossary.” Mortgage Bankers Association, 2022. http:/ /mbabluegrass.org/mortgage-glossary/ 171 “Mortgage Key Terms.” Consumer Financial Protection Bureau. https:/ /www.consumerfinance.gov/consumer-tools/mortgages/answers/key-terms/ 172 “Mortgage Glossary.” Mortgage Bankers Association, 2022. http:/ /mbabluegrass.org/mortgage-glossary/ 173 “FHA Single Family Housing Policy Handbook: Glossary.” Federal Housing Administration, 2016. https:/ /www.hud.gov/sites/documents/40001GAHSGH.PDF 174 Cornell Legal Information Institute. https:/ /www.law.cornell.edu/ 175 Ibid.
176 U.S. Department of Housing and Urban Development. https:/ /www.hud.gov/ Foreclosure: When the lender
or servicer takes back property
after the homeowner fails to make
mortgage payments. In some
states, the lender must go to
court to foreclose on a borrower’s
property (judicial foreclosure), but
other states do not require a court
process (non-judicial foreclosure).

Generally, borrowers must be
notified if the lender or servicer
begins foreclosure proceedings.
169
Forgivable Loan: A loan that allows
borrowers to partially or completely
forgive the balance upon meeting
tenure or equity requirements.
170
Fund Sustainability: The ability of
the Fund to continue making new
loans without relying on increasing
new contributions from the State.

Freddie Mac (FHLMC): The Federal
Home Loan Mortgage Corporation
(Freddie Mac) is a private
corporation founded by Congress.

Its mission is to promote stability
and affordability in the housing
market by purchasing mortgages
from banks and other loan makers.

The corporation is currently under
conservatorship, under the direction
of the Federal Housing Finance
Agency (FHFA).
171
Front-End Ratio: A ratio
representing the borrower’s
mortgage payment divided by
gross monthly income.
172
Government-Backed Loan: A
government mortgage is a federal,
state, or municipal governmental
agency, a Federal Reserve Bank,
a Federal Home Loan Bank, the
Federal Home Loan Mortgage
Corporation (FHLMC, or Freddie
Mac), or the Federal National
Mortgage Association (FNMA, or
Fannie Mae).
173
Government-Sponsored Enterprise
(GSE): A corporate entity created
by a law of the United States that—
(i) has a federal charter authorized
by law; (ii) is privately owned, as
evidenced by capital stock owned
by private entities or individuals;
(iii) is under the direction of a board
of directors, a majority of which is
elected by private owners.
174
Gross Income: The broad total of all
income sources for the taxable year
which above-the-line deductions
are subtracted from to get a
person’s adjusted gross income.

Gross income includes essentially
all income such as from wages,
dividends, alimony, capital gains,
and pensions. Many deductible
items such as charitable giving
must still be included in gross
income. Deductions are applied
after calculating gross income.
175
Homebuyer Education: A course
to help prospective homebuyers
or new homeowners understand
the path to homeownership and
responsibilities as a homeowner.
176
Housing Expense Ratio: A
calculation of how much of a
borrower’s monthly gross income
is going toward their monthly
mortgage payment, including
principal, interest, taxes and
mortgage insurance. Ideally, a
borrower’s housing expense ratio
should be less than 28%.

Attachment 2Page 119 of 311

89 HUD: The Department of
Housing and Urban Development
(HUD) is a federal agency that
administers national programs
aimed at reducing homelessness,
providing housing that is safe and
affordable to all persons, improving
opportunities to access affordable
homeownership, and granting
subsidize to lower-and moderate-
income families to give them equal
opportunities in the rental and
purchase housing markets.
177
HMDA: Abbreviated term for the
Home Mortgage Disclosure Act,
enacted in 1975 to provide home
mortgage data to the public to help
determine if financial institutions are
serving the housing needs of their
communities, to help public officials
distribute public investments
and to identify possible lending
discrimination.
178
Income Approach: A type of real
estate appraisal method that allows
investors to estimate the value of
a property based on the income
the property generates. It’s used
by taking the net operating income
(NOI) of the rent collected and
dividing it by the capitalization rate.
(Investopedia)
Inflation: The rate of change in
the price of goods and services
resulting from a change in the
supply of money and/or cost of
resources.
179
177 “Mortgage Loans.” Fannie Mae. 2022. https:/ /mfguide.fanniemae.com/node/10711 178 “Download HMDA Data.” Consumer Financial Protection Bureau. https:/ /www.consumerfinance.gov/data-research/hmda/historic-data/ 179 “Mortgage Glossary.” Mortgage Bankers Association, 2022. http:/ /mbabluegrass.org/mortgage-glossary/ 180 “Mortgage Key Terms.” Consumer Financial Protection Bureau. https:/ /www.consumerfinance.gov/consumer-tools/mortgages/answers/key-terms/ 181 “Mortgage Loans.” Fannie Mae. 2022. https:/ /mfguide.fanniemae.com/node/10711 182 Cornell Legal Information Institute. https:/ /www.law.cornell.edu/ 183 “Mortgage Loans.” Fannie Mae. 2022. https:/ /mfguide.fanniemae.com/node/10711 184 “Limited equity cooperatives.” 2021. Local Housing Solutions. https:/ /localhousingsolutions.org/housing-policy-library/limited-equity-cooperatives/#:~:text=A%20 limited%20equity%20cooperative%20(LEC,and%20over%20the%20long%20term. 185 “Mortgage Glossary.” Mortgage Bankers Association, 2022. http:/ /mbabluegrass.org/mortgage-glossary/ 186 Cornell Legal Information Institute. https:/ /www.law.cornell.edu/ 187 Ibid.
188 Investopedia. https:/ /www.investopedia.com/
189 Ibid.
190 Ibid.
191 Ibid.
192 “Mortgage Key Terms.” Consumer Financial Protection Bureau. https:/ /www.consumerfinance.gov/consumer-tools/mortgages/answers/key-terms/ Interest Rate: An interest rate
on a mortgage loan is the cost
a borrower will pay each year to
borrow the money, expressed as a
percentage rate. It does not reflect
fees or any other charges borrowers
may have to pay for the loan. For
example, if the mortgage loan is for
$100,000 at an interest rate of 4
percent, that consumer has agreed
to pay $4,000 each year he or she
borrows or owes that full amount.
180
Junior Mortgage: A mortgage
that is subordinate to a first or
prior (senior) mortgage. A junior
mortgage often refers to a second
mortgage, but it could also be a
third or fourth mortgage. In the
case of a foreclosure, the senior
(first) mortgage will be paid down
first. (Investopedia)
Lender: An organization or
person that lends money with the
expectation that it will be repaid,
generally with interest.
181
Leverage: The use of borrowed
money or debt to purchase assets
or undertake an investment creating
the relationship between an owner’s
equity and total debt on a property.

The higher the leverage, the higher
the debt in relation to the value of
the property.
182
Lien: A legal hold or claim of a
creditor on the property of another
as security for a debt. Liens are
always against property, usually real
property.
183
Limited Equity Cooperative (LEC):

A homeownership model in which
a resident purchases a share in a
collection of units opposed to an
individual unit. LECs often restrict
the future sale value of a property
to maintain housing affordability.
184
Liquidity: The measure of readily
available assets that can be
converted into cash.
185
Loan Assumption: The lender’s
approval of a new borrower who
takes over an existing loan.
186
Loan Closing: The time agreed
upon by the borrower and lender
when the execution of the loan
documents by the borrower
occurs.
187
Loan Commitment: An agreement
by a commercial bank or other
financial institution to lend a
business or individual a specified
sum of money.
188
Loan Exit: (or Exit) The termination
of a loan agreement often through
sale of the asset, refinance, transfer,
or default.
189
Loan Origination: The multi-step
process that every individual must
go through to obtain a mortgage
or home loan. The term also
applies to other types of amortized
personal loans. Origination is often
a lengthy process and is overseen
by the Federal Deposit Insurance
Corporation (FDIC).
190
Loan Origination Fee: A charge,
usually 1% of the loan, that is
intended to compensate the
lender for the work involved in the
process.
191
Loan Servicer: A loan servicer
typically processes loan payments,
responds to borrower inquiries,
keeps track of principal and
interest paid and manages escrow
accounts. The loan servicer may
initiate foreclosure under certain
circumstances. A servicer may or
may not be the same company that
originated a loan.
192

Attachment 2Page 120 of 311

90 Loan Servicing: Supervising and
administering a loan after it has
been made. This process involves
collecting payments, conducting
property inspections, foreclosing
on defaulted loans, and all other
processes after escrow.
193
Loan-to-Value Ratio: The loan-
to-value (LTV) ratio is a measure
comparing the outstanding
mortgage amount with the
appraised value of the property.

The higher the down payment,
the lower the LTV ratio. Mortgage
lenders may use the LTV in deciding
whether to lend to a borrower and
to determine if they will require
private mortgage insurance.
194
Loss Mitigation: The steps
mortgage servicers take to work
with a mortgage borrower in order
to avoid foreclosure. Loss mitigation
refers to a servicer’s responsibility
to reduce or “mitigate” the loss to
the investor that can come from a
foreclosure. Certain loss-mitigation
options may help borrowers stay
in their homes. Other options may
help borrowers leave their homes
without going through foreclosure.

Loss mitigation options may
include deed-in-lieu of foreclosure,
forbearance, repayment plan, short
sale or a loan modification.
195
Low-Income Household: Persons
and families whose gross income
is greater than 50% up to 80% of
area median income, adjusted for
household size appropriate for the
unit.
196
193 Ibid.
194 Ibid.
195 “Mortgage Key Terms.” Consumer Financial Protection Bureau. https:/ /www.consumerfinance.gov/consumer-tools/mortgages/answers/key-terms/ 196 “Income Limits.” California Department of Housing and Community Development. https:/ /www.hcd.ca.gov/income-limits 197 Cornell Legal Information Institute. https:/ /www.law.cornell.edu/ 198 “Mortgage Key Terms.” Consumer Financial Protection Bureau. https:/ /www.consumerfinance.gov/consumer-tools/mortgages/answers/key-terms/ 199 “Income Limits.” California Department of Housing and Community Development. https:/ /www.hcd.ca.gov/income-limits 200 “Mortgage Loans.” Fannie Mae. 2022. https:/ /mfguide.fanniemae.com/node/10711 201 “Mortgage Key Terms.” Consumer Financial Protection Bureau. https:/ /www.consumerfinance.gov/consumer-tools/mortgages/answers/key-terms/ 202 “Mortgage Glossary.” Mortgage Bankers Association, 2022. http:/ /mbabluegrass.org/mortgage-glossary/ 203 “Mortgage Key Terms.” Consumer Financial Protection Bureau. https:/ /www.consumerfinance.gov/consumer-tools/mortgages/answers/key-terms/ 204 “FHA Single Family Housing Policy Handbook: Glossary.” Federal Housing Administration, 2016. https:/ /www.hud.gov/sites/documents/40001GAHSGH.PDF 205 Ibid.
206 “Mortgage Loans.” Fannie Mae. 2022. https:/ /mfguide.fanniemae.com/node/10711 Market Price: An estimate of
what a property would sell for in
a competitive market based on
the features and benefits of that
property (the value), the overall
real estate market, supply and
demand and what other similar
properties have sold for in the same
condition.
197
Maturity Date: The date that an
investor’s investment is to be paid
back in full in accordance with its
agreement.
198
Moderate Income Household:

Persons and families whose gross
income is greater than 80% and
does not exceed 120% of area
median income, adjusted for
household size appropriate for the
unit.
199
Monthly Mortgage Payments:

Monthly mortgage obligations
including principal and interest and
possibly taxes and insurance.
200
Mortgage: An agreement between
a borrower and a lender that allows
a homebuyer to borrow money to
purchase or refinance a home and
gives the lender the right to seize
the property if the borrower fails to
repay the money borrowed.
201
Mortgage Credit Availability
Index (MCAI): A barometer on the
availability or supply of mortgage
credit at a point in time, using
criteria from institutional investors
who purchase loans through the
broker and/or correspondent
channels. The MCAI is calculated
using several factors related to
borrower eligibility (credit score,
loan type, loan-to-value ratio, etc.)
using data made available by ICE
Mortgage Technology.
202
Mortgage Insurance (MI):

Protections for lenders in the event
a borrower falls behind on their
payments. Mortgage insurance is
typically required if a borrower’s
down payment is less than 20
percent of the property value.

Mortgage insurance is typically
required on FHA and USDA loans.

However, with a conventional loan
and down payment less than 20
percent, a borrower will most likely
have private mortgage insurance
(PMI).
203
Mortgage Insurance Premium
(MIP): The annual premium on an
FHA-required mortgage insurance
policy required over the life of
the loan and equal to ~0.45-1.05%
of the loan amount. MIPs protect
FHA against higher-risk borrowers
who are more likely to default on
loans.
204
Upfront Mortgage Insurance
Premium (UPMIP): The upfront
fee on an FHA-required mortgage
insurance policy equal to 1.75% of
the loan amount.
205
Mortgage Modification: A change
made to the terms of a loan
because the borrower is unable
to meet the payments under the
original terms. The modification
is a type of loss mitigation. A
modification can reduce monthly
payments to an amount affordable
to the borrower. Modifications may
involve extending the repayment
term, reducing the interest rate,
and/or forbearing or reducing the
principal balance.

Mortgage-Backed Securities:

Investment securities representing
an interest in a pool of
mortgages.
206

Attachment 2Page 121 of 311

91 Mortgage Servicer: The company
that sends borrowers their
mortgage statements and handles
the day-to-day tasks of managing
mortgages.
207
Nominal Interest Rate: Also known
as the note rate. The interest rate
before taking inflation into account
that appears on the mortgage
note.
208
Non-recurring Closing Costs:

Costs that are one-time charges
paid at the close of escrow. One-
time costs include the appraisal
fee, title insurance, origination
fees, underwriting fee, notary fee,
recording fee, and transfer taxes,
among other items.
209
Operating Costs: The recurring
owner’s expenses to maintain a
property in good condition, such as
utilities, repairs and replacement of
furnishings.
210
Origination Fee: What the lender
charges the borrower for making
the mortgage loan. The origination
fee may include processing the
application, underwriting and
funding the loan, and other
administrative services. Origination
fees generally can only increase
under certain circumstances.
211
Outstanding Principal Amount: The
amount of principal due under a
loan after taking into account prior
payments of principal.

PITI: An abbreviation for principal,
interest, taxes and insurance,
commonly used when referring to
the monthly loan obligation.
212
Points: Amount paid by the
borrower or the seller, with each
point equal to one percent of the
loan.
213
207 “Mortgage Key Terms.” Consumer Financial Protection Bureau. https:/ /www.consumerfinance.gov/consumer-tools/mortgages/answers/key-terms/ 208 “Mortgage Glossary.” Mortgage Bankers Association, 2022. http:/ /mbabluegrass.org/mortgage-glossary/ 209 “Mortgage Loans.” Fannie Mae. 2022. https:/ /mfguide.fanniemae.com/node/10711 210 Cornell Legal Information Institute. https:/ /www.law.cornell.edu/ 211 “Mortgage Key Terms.” Consumer Financial Protection Bureau. https:/ /www.consumerfinance.gov/consumer-tools/mortgages/answers/key-terms/ 212 “Mortgage Key Terms.” Consumer Financial Protection Bureau. https:/ /www.consumerfinance.gov/consumer-tools/mortgages/answers/key-terms/ 213 “Mortgage Loans.” Fannie Mae. 2022. https:/ /mfguide.fanniemae.com/node/10711 214 Ibid.
215 Ibid.
216 “Mortgage Key Terms.” Consumer Financial Protection Bureau. https:/ /www.consumerfinance.gov/consumer-tools/mortgages/answers/key-terms/ 217 Investopedia. https:/ /www.investopedia.com/
218 “FHA Single Family Housing Policy Handbook: Glossary.” Federal Housing Administration, 2016. https:/ /www.hud.gov/sites/documents/40001GAHSGH.PDF 219 “Mortgage Key Terms.” Consumer Financial Protection Bureau. https:/ /www.consumerfinance.gov/consumer-tools/mortgages/answers/key-terms/ 220 “Mortgage Key Terms.” Consumer Financial Protection Bureau. https:/ /www.consumerfinance.gov/consumer-tools/mortgages/answers/key-terms/ 221 Ibid.
222 Lush, Minnie. California Real Estate Finance, 9th Edition. 2016. 223 “Mortgage Glossary.” Mortgage Bankers Association, 2022. http:/ /mbabluegrass.org/mortgage-glossary/ Pre-approval: Pre-approval is a
bigger step than pre-qualification,
but it is a better commitment
from the lender. This involves
borrowers completing a mortgage
application and providing the lender
with income documentation and
personal records. If the borrower
qualifies, the lender can provide
the amount of financing, potential
interest rate, estimated monthly
payment (before taxes and
insurance because the property is
unspecified.
214
Pre-qualification: With pre-
qualification the lender provides
the borrower’s qualifying mortgage
amount (and the process is usually
quick and free) but does not
actually qualify a borrower for a
mortgage until pre-approval.
215
Prepayment Penalty: A fee that
lenders may charge if a borrower
pays off all or part of their
mortgage early. A prepayment
penalty is agreed upon at closing
and not all mortgages have a
prepayment penalty.
216
Primary Mortgage Market: The
market where borrowers can
directly obtain a mortgage loan
from a primary lender. Banks,
mortgage brokers, mortgage
bankers and credit unions are all
primary lenders and are part of the
primary mortgage market.
217
Principal Residence: A dwelling
where the borrower maintains or
will maintain their permanent place
of abode, and which the borrower
typically occupies or will occupy for
the majority of the calendar year. A
person may have only one principal
residence at any one time.
218
Principal: The amount of a
mortgage loan that a borrower
has to pay back. When a payment
is made towards a borrower’s
principal, the borrower owes less,
and will pay less interest based
upon a lower loan size.
219
Private Mortgage Insurance (PMI):

A type of mortgage insurance
that benefits the lender. Borrowers
may be required to pay for PMI if
their down payment is less than
20% of the property value on
a conventional loan. Borrowers
may be able to cancel PMI upon
accumulating 22% equity in their
home.
220
Property Taxes: Taxes charged
by local jurisdictions, typically at
the county level, based upon the
value of the property being taxed.

Often, property taxes are collected
within the homeowner’s monthly
mortgage payment, and then paid
to the relevant jurisdiction one or
more times each year. This is called
an escrow account. If the loan
does not have an escrow account,
then the homeowner will pay the
property taxes directly.
221
Purchase Price: A borrower’s
cost of purchasing the property
excluding usual and reasonable
settlement or financing costs.
222
Rate Lock: A lender’s written
guarantee that allows the borrower
to lock in the interest rate on a
mortgage for a specified time
period at the prevailing market
interest rate.
223

Attachment 2Page 122 of 311

92 Real Property: (or Property) A
parcel of land and everything that is
permanently attached to the land.

The owner of real property has all
of the rights of ownership, including
the right to possess, sell, lease and
enjoy the land.
224
Recycling: Using the proceeds
from sales of some properties in a
portfolio to finance loans to new
borrowers.
225
Recurring Closing Costs: Repeating
expenses paid by the borrower
at close of escrow such as tax
reserves, hazard insurance, and
prepaid interest.
226
Refinance: When a new loan is
taken out to pay off and replace
an old loan. Common reasons to
refinance are to lower the monthly
interest rate, lower the mortgage
payment, or to borrow additional
money. Upon refinance, borrowers
typically pay closing costs and
fees. If borrowers refinance and
get a lower monthly payment there
should be an understanding of what
portion of the reduction is from a
lower interest rate and because the
loan term is longer.
227
Regulation Z: Federal rule
prohibiting compensation to
a loan originator based on a
mortgage transaction’s terms or
conditions (except the amount of
credit extended) and prohibiting
a mortgage originator steering a
consumer to a loan that provides
greater compensation.

Replacement Cost: Amount
required to replace improvements
of comparable quality at today’s
prices.
228
Second Mortgage: A second
mortgage or junior lien is a loan
taken out using the house as
collateral while another loan is
secured by the house.
229
224 Cornell Legal Information Institute. https:/ /www.law.cornell.edu/ 225 Ibid.
226 “FHA Single Family Housing Policy Handbook: Glossary.” Federal Housing Administration, 2016. https:/ /www.hud.gov/sites/documents/40001GAHSGH.PDF 227 “Mortgage Key Terms.” Consumer Financial Protection Bureau. https:/ /www.consumerfinance.gov/consumer-tools/mortgages/answers/key-terms/ 228 Lush, Minnie. California Real Estate Finance, 9th Edition. 2016. 229 “Mortgage Key Terms.” Consumer Financial Protection Bureau. https:/ /www.consumerfinance.gov/consumer-tools/mortgages/answers/key-terms/ 230 “Secondary Mortgage Market.” Investopedia. https:/ /www.investopedia.com/terms/s/secondary_mortgage_market.asp 231 “Securitization.”Investopedia. https:/ /www.investopedia.com/terms/s/securitization.asp 232 “Mortgage Loans.” Fannie Mae. 2022. https:/ /mfguide.fanniemae.com/node/10711 233 Ibid.
234 “Mortgage Key Terms.” Consumer Financial Protection Bureau. https:/ /www.consumerfinance.gov/consumer-tools/mortgages/answers/key-terms/ 235 “Mortgage Loans.” Fannie Mae. 2022. https:/ /mfguide.fanniemae.com/node/10711 236 “Underwriting Standards.” Investopedia. https:/ /www.investopedia.com/terms/u/underwriting-standards.asp Secondary Mortgage Market: The
purchasing and selling of existing
mortgages secured by deeds of
trust promoting a constant flow of
funds allowing lenders to continue
to provide new loans to ready
borrowers.
230
Securitization: The procedure
through which an issuer designs a
marketable financial instrument by
merging or pooling various financial
assets into one group. The issuer
then sells this group of repackaged
assets to investors.
231
Shared Equity: An arrangement
under which a borrower receives a
portion but not all of the increased
value of the home, whether
through terms of the loan or other
restriction on the property.

Shortage: The deficit compared to
what would be required, such as
in housing construction related to
demand or to be able to provide an
equivalent loan to a new borrower.

Significant Student Debt:

Outstanding debt on a prospective
homebuyer’s student loans such
that the aggregate monthly
payments exceed an amount
specified in the rules for the CA
Dream for All Fund, such as $100
per month.

Silent Second Mortgage: A second
mortgage loan with no monthly
payments that is due upon sale of
the property or maturity together
with accrued interest (if any) at
a fixed interest rate. The second
mortgage is called “silent” because
the borrower does not disclose its
existence to the original mortgage
lender.

Single-Family Home: A property
with one dwelling unit, whether
detached or attached, including a
condominium or townhome.

Surplus: The amount beyond
what is required, such as to meet
statewide requirements or to be
able to provide an equivalent loan
to a new borrower.

Term: The term of the mortgage
loan is how long a borrower has
to repay the loan. For most types
of homes, mortgage terms are
typically 15, 20 or 30 years.
232
Title Insurance: Insurance
written by a legal reserve
title company and lenders
against losses due to title
defects.
233
Truth in Lending Act (TILA): Title I
of the Consumer Credit Protection
Act protects borrowers against
inaccurate and unfair credit billing
and credit card practices. It requires
lenders to provide loan cost
information so that borrowers can
comparison shop for certain types
of loans.
234
Underwriting: In mortgage
banking, the analysis of the risk
involved in making a mortgage
loan to determine whether the
risk is acceptable to the lender.

Underwriting involves the evaluation
of the property as outlined in
the appraisal report and of the
borrower’s ability and willingness to
repay the loan.
235
Underwriting Requirement: Rules
and requirements of a lender,
secondary market institution (such
as Fannie Mae and Freddie Mac) or
mortgage insurer for determining if
a loan is credit-worthy, such as as
maximum loan-to-value or loan-to-
price ratio, debt to income ratio,
etc.
236

Attachment 2Page 123 of 311

93 Upfront Cost: One-time expenses in
connection with the purchase of or
loan on a property. These out-of-
pocket costs, which include a down
payment and various closing costs,
occur before a home buyer can take
title on a piece of property.
237
Upfront Mortgage Insurance
Premium (UPMIP): A one-time
payment equal to 1.75% of the base
loan amount due when closing on a
home that is financed with an FHA
home loan. Given the lower down-
payment requirements for an FHA
loan, UFMIP helps protect lenders if
a borrower is unable to repay their
mortgage.
238
237 “Upfront Cost.” Investopedia. https:/ /www.investopedia.com/terms/u/upfront-pricing.asp#:~:text=What%20Is%20Upfront%20Pricing%3F,the%20onset%20of%20the%20 relationship.
238 “FHA Single Family Housing Policy Handbook: Glossary.” Federal Housing Administration, 2016. https:/ /www.hud.gov/sites/documents/40001GAHSGH.PDF 239 “Mortgage Key Terms.” Consumer Financial Protection Bureau. https:/ /www.consumerfinance.gov/consumer-tools/mortgages/answers/key-terms/ 240 Ibid.

USDA Loan: The Rural Housing
Service
, part of the U.S. Department
of Agriculture (USDA) offers
mortgage programs with no down
payment and generally favorable
interest rates to rural homebuyers
who meet the USDA’s income
eligibility requirements.
239
VA Loan: A loan program offered by
the Department of Veterans Affairs
(VA) to help servicemembers,
veterans, and eligible surviving
spouses buy homes. The VA does
not make the loans but sets the
rules for who may qualify and the
mortgage terms. The VA guarantees
a portion of the loan to reduce the
risk of loss to the lender. The loans
generally are only available for a
primary residence.
240

Attachment 2Page 124 of 311

94 APPENDIX B
Case Studies
Case study research on public and private shared appreciation models operating both within the state and beyond provided invaluable context in the design of the fund. Research focused on identifying the general parameters of a shared appreciation program, including underwriting standards, terms of appreciation sharing, investment timeline, maximum investment amount, and property eligibility criteria.

On top of desktop research, interviews with relevant public agencies, program administrators, and private firms further supplemented our research.

Private Programs
Hometap Unison Landed The P oint
(Various locations, U.S.)
Funding Type Unknown Institutional
investors, including
pension funds
and university
endowments
Chan Zuckerberg
Initiative, others
Endowments,
pension funds,
insurers, REITs,
and investment
managers
Fees 3% 2.5% 1.25% of home purchase
price if not using a
Landed partner agent
3%-5%
Maximum
Investment
Between 5% and
30% of home value
(up to $600k)
Up to 17.5% of home
value (up to $500k)
Up to 15% of home value
(up to $120k)
$25k to $500k
Underwriting
Standards/
Borrower Eligibility
Criteria
• 600+ credit score
• Max. 75% LTV
• 620+ credit score
• Max. 80% LTV
• 620+ credit score
• Max. 95% LTV
• “Essential
Professionals”
(educators, healthcare
professionals,
government
employees)
• 500+ credit score
• Max. 80% LTV
Property Eligibility
Criteria
Single-family homes
and condos. Must be
primary residence.

Single-family
homes, condos, and
townhomes. Must be
primary residence.

Single-family homes,
condos, townhomes,
and duplexes. Must be
primary residence.

Single-family
homes, condos,
townhomes,
missing middle (1-4
units) structures.

Minimum $155k
home value.

Investment Term 10 years 30 years 30 years 30 years
Shared
Appreciation Terms
Structured on a
case-by-case basis
depending on
property value and
initial investment
amount but may
range between 13.9
– 16.7% of home
value at the time of
repayment.

Appreciation split:
4:1
Appreciation split: 2.5:1 Principal
investment +
~15% – 40% of
appreciation
Program Webpage
https:/ /www.
hometap.com/
https:/ /www.unison.
com/
https:/ /www.landed.com/ https:/ /point.com/

Attachment 2Page 125 of 311

95 Public Programs
Homeownership
Opportunities
Progr
am
Help to Buy:

Equity Loan
Down payment
Loan Assistance
Program
(General)
AC Boost Empower
Homebuyers
Downpayment
Assistance
Program
(Pasadena, CA) (England) (San Francisco,
CA)
(Alameda
County, CA)
(Santa Clara
County, CA)
(Seattle, WA)
Funding
Type
Public:

Local funds
(redevelopment
or inclusionary)
Public: Homes
England
Public: local
funds
Public: $580
million general
obligation bond
Public: Initially
funded in
2016 through
affordable
housing bond
Public: initially
funded from
federal HOME
$, later by
affordable
housing tax
levy, linked with
funds from
Washington
State Housing
Finance
Commission
Shared
appreciation
feature was
used from 2004
– 2017 (funding
3 to 4 loans
annually before
terminated)
Maximum
Investment
Unknown Varies by region.
program will fund
up to 20% of
the home value
(increases to
40% in London)
$375k-$500k $210K for
households <=
100%AMI

$160K for
households
>100% AMI
Up t
o 17% down
payment; Home
price up to $1.1
million
Up to $45,000
from Seattle,
and $60,000
total
Maximum
purchase price
of 95% of
area median
(due to HOME
requirements)
Underwriting
Standards/
Borrower
Eligibility
Criteria
• First time
homebuyer
• Income eligible
households
(income ranges
determined by
household size)
• First time
homebuyer
• Min. 5% down
payment
contribution
• 75% mortgage
maximum LTV
• First-time
homebuyer
• Annual income
up to 175% AMI
• Min. 3% down
payment
contribution
• Min. LTV 50%
• 30%-40% front
end debt ratio
• Max. $300k
liquid assets
before closing
• First-time
homebuyer
• Annual income
up to 120% AMI
• Min. 0-3%
down payment
contribution t
o
a max. of 50%
• Min. LTV 50%
• Min. 25% front
end debt ratio
• Max. $300k
liquid assets
before closing
• First-time
homebuyer
• Annual income
up to 120% AMI
• Min. 3% down
payment
contribution
• 70%-87% LTV
• 28%-38% front
end debt ratio
• >=620 credit
score
• First-time
homebuyer
• Annual income
up to 80% AMI
• Minimum cash
contribution of
greater of 1%
or $2,500
Property
Eligibility
Criteria
Unknown New construction
by approved
homebuilders
• Single family
homes
• Condominiums
• Townhomes
• Single family
homes
• Condominiums
• Townhomes
• Single family
homes
• Condominiums
• Townhomes
• Single family
homes
• Condominiums
• Townhomes
Investment
Term
30-45 years 15 y
ears Upon sale or
transfer (had
originally been
limited to 30
years)
30 years 30 years 30 years

Attachment 2Page 126 of 311

Homeownership
Opportunities
Program
Help to Buy:

Equity Loan
Down payment
Loan Assistance
Program
(General)
AC Boost Empower
Homebuyers
Downpayment
Assistance
Program
Appreciation
Sharing/
Repayment
Terms
Appreciation
split 1:1 (Pro-rata)
Interest free
for the first 5
years; then 1.75%
interest annually
with an increase
of CPI plus 2%;
Pro-rata at time
of sale plus
interest on the
balance of the
equity state.

Appreciation
split 1:1 (Pro-rata)
Unknown Appreciation
split 1:1 (Pro-rata)
Borrower owed
both:
• 3% simple
interest, plus
• pro rata
appreciation
(forgiven 1/9
per year over
9 years),
With
combination
not to exceed
equivalent of 6%
simple interest
Program
Webpage
https:/ /www.
pasahop.com/
https:/ /www.gov.
uk/help-to-buy-
equity-loan
https:/ /sfmohcd.
org/dalp
https:/ /www.
acboost.org/
https:/ /
housingtrustsv.
org/programs/
homebuyer-
assistance/
empower-
homebuyers-scc/
https:/ /www.
wshfc.org/
buyers/Seattle.
htm

STAKEHOLDERS INTERVIEWED
*A special thanks goes to the following individuals that agreed to be interviewed for the purpose of this report.

ORGANIZATION INTERVIEWEES
Landed Alex Lofton, Ian Magruder, Annee Kim and Jack Woodruff Noah Rahul Parulekar
City of San Francisco Aneka Harrell, Cissy Yin, and Tammie Little The Point Eoin Matthews
Mortgage Bank Association Susan Milazzo and Pete Mills
City of Pasadena Jim Wong and William Huang
Heritage Housing Partners Charles Loveman
Chan Zuckerberg Initiative Ruby Bolaria Shifrin
Silicon Valley Housing Trust Noni Ramos, Julie Mahowald, and Fathia Macauley Help to Buy: Equity Program SImon Walley
96

Attachment 2Page 127 of 311

97 APPENDIX C
Program Guidelines
Below is a summary of how a CA Dream for All program can provide Shared Appreciation Second Loans.

This overview is provided to suggest how detailed program features could be designed.

ILLUSTRATIVE PROGRAM GOALS & TERMS
Program Purpose
The purpose of the program is to make
homeownership more accessible and affordable
to income-qualified first-time homebuyers in
California and promote diversity—and to do so
in such a way that the State can continue to
sustainably assist future generations of first-time
buyers despite rising home prices.

Investment: Shared appreciation second
mortgage loans are intended to enable the State
to invest in affordable homeownership in a way
that can help future eligible buyers.

Experience: The shared appreciation approach
outlined here reflects and is meant to work
with the long-standing requirements of both
Fannie Mae and Freddie Mac for publicly funded
shared appreciation second mortgages. Shared
appreciation second mortgages for first-time
homebuyers have been used successfully by San
Francisco for almost four decades, and more
recently by both Alameda County and Santa
Clara County.

How a State Shared Appreciation Program Can
Work: These suggested terms are meant as a
starting point for decisions on detailed program
specifics. They indicate how a shared appreciation
program can be used to address homeownership
needs, meet secondary market requirements, and
can be financially structured.

Shared Appreciation Second Loan Terms
Overview: The program would provide a shared
appreciation second loan (SASL) with no monthly
payments, paired with a Fannie Mae/Freddie Mac
first mortgage.

The SASL would mature and be due when the
property is sold or transferred, there is a cash out
refinancing, or program requirements are violated.

Upon repayment, the program receives the
original principal amount of the SASL plus a share
of the property’s price appreciation in order to be
able to provide SASLs to subsequent first-time
homebuyers.

Basic Terms
§ Appreciation Share: The program’s share of
appreciation could initially be the program’s
percentage of the original purchase price
(pro rata appreciation). This approach is the
simplest to market, explain and administer.
§ After several years of experience with this
basic model, the progr
am could consider
increasing the percentage on new SASLs,
but not to exceed 1.5 times the program’s
percentage of the original purchase price.

The purpose of considering such higher
shares would be to enable the State to
assist more buyers over time.
§ A single multiple should be applicable to
all SA
SLs being offered.
§ In no case would the program’s share of
apprecia
tion ever exceed 45% of the total
appreciation.
§ Repayment Events: Repayment will be due
upon sale, transfer or cash-out refinancing, or
upon violation of program requirements as
determined by the program administrator.
§ Prepayment: The homebuyer may prepay
the loan at any time based on a fair market
appraisal by the program without penalty.
§ Loan Amount: The amount of the SASL
would be subject to limits established by the
administrator. The loan amount for a borrower
would not exceed the lesser of:

Attachment 2Page 128 of 311

98 § The program’s maximum specified
perc
entage of the purchase price. This
maximum percentage would generally not
exceed 17%, but could be increased up to
[27%] for borrowers below 100% AMI. We
would recommend that these percentages
could be increased up to an additional
[3%] for borrowers with significant student
loan debt.
§ The amount needed together with the
borro
wer’s minimum down payment and a
Fannie/Freddie first mortgage based on a
“front-end ratio” of [30%].
§ The maximum specified percentage times
the median purchase pric
e of homes in the
region.
§ Borrower Minimum Down Payment: The
homebuyer must meet Fannie Mae/Freddie
Mac requirements for cash down payment
and closing costs. The borrower can use
local down payment assistance, gifts or other
sources permitted by Fannie Mae/Freddie
Mac (but not the SASL or other state funds)
to meet Fannie Mae/Freddie Mac minimum
requirements.
§ Borrower Protections:
§ Repayment of the principal amount of the
SA
SL is subordinate to the outstanding
first mortgage and to the borrower’s
original cash down payment.
§ There is never any deficiency judgment
against the borr
ower.
§ If the program’s share of appreciation is
set higher than pro r
ata, in order to meet
Fannie Mae requirement the borrower
would receive all of the following before
the program receives any share in the
appreciation: recovery of the borrower’s
original down payment, amortization of
the first mortgage, and the appreciated
value resulting from capital improvements
that increased livable square footage by at
least 10%.
§ There are no program restrictions on
property r
esale.

Key Considerations
Purpose of SASL Amount: The SASL in
combination with the borrower’s minimum down
payment is intended to allow households to utilize
a conforming Fannie/Freddie first mortgage
without private mortgage insurance.

Significant Student Loan Debt. Increasing the
maximum SASL loan percentage for borrowers
with significant student loan debt payments (e.g.,
more than $100 per month) can help offset the
negative impact of this debt on the borrower’s
maximum first mortgage amount.

Purchase Price Cap: The program does not
include a purchase price cap on properties being
acquired. However, the program’s loan amount
restrictions constrain the amount of the SASL.

Repayment: The financing for the program
recognizes that many borrowers will only repay
the SASL when the home is sold. The program
allows non-cash out refinancing to enable
borrowers to take advantage of lower-rate first
mortgages. The program administrator would also
provide access to ongoing mortgage counseling
and quarterly updates on estimated potential
repayment to ensure that homebuyers are fully
aware of the benefits of repaying their SAL.

Program Descriptions and Homebuyer
Counseling: Since many borrowers are unfamiliar
with SALs, it is essential that all program materials
and documents be extremely clear as to the
nature of the borrower’s repayment obligation. In
addition, the program would provide and pay for
both pre-purchase and post-purchase counseling
for buyers.

Attachment 2Page 129 of 311

99 ELIGIBLE BORROWERS & PURCHASES
Borrower Eligibility Requirements
To qualify for a shared appreciation loan, the
prospective homebuyer would need to meet all of
the following criteria:
§ Residency: The homebuyer has been a
resident of the State of California for at least
one year.
§ First-Time Homebuyer: No member of the
homebuyer’s household has had an ownership
interest in a residential property for three prior
years (the program will make exceptions for
a legally separated head of household who
was displaced from a jointly-owned property
through the separation process).
§ Principal Residence: The homebuyer is
purchasing the property for use as their
principal residence.
§ Income Limit: The program administrator
would set and update the maximum income
limits for the program. This could initially be
150% of the median income for each high-
cost Region of the state as determined by
FHFA and 120% for other Regions. Income
could be based on the first mortgage lender’s
underwriting income and in accordance with
a standard existing methodology (such as
CalHFA’s income methodology for regions of
the State).
§ Higher Loan Amounts for Lower-Income
Borro
wers. As described under “Loan
Amount,
” the program administrator may set a
higher maximum specified percentage of the
purchase price for borrowers in lower-income
tiers such as those below 100% AMI in order to
meet program objectives (target populations,
regional/geographic considerations, etc).
§ Homebuyer Education Course: All
homebuyers must participate in and complete
a certified homebuyer education program.

Key Considerations
Adjustable Income Limit: The program
administrator would have the ability to adjust
income limits to meet program targets.

Not Limiting Borrower Assets as Condition
for Eligibility: The program would not require
borrowers to meet asset limits. Household assets
are administratively difficult to assess, and
an asset test would both narrow the range of
potential homebuyers and serve as a disincentive
to saving for low- and moderate-income
households.

Priority Homebuyers
Prioritization: The program is designed to allow the
program administrator to target support to priority
households. These can include such categories as
households that are first generation homebuyers,
those who have been long-term tenants in
historically low-income communities, and those
who have high student debt. The program can
prioritize households either through the reservation
process (described in the reservation process
below) and through product terms.

To illustrate how this can work:
§ Long-Term Residents of Low-Income
Communities
who hav
e resided for at least
five of the last ten years in low-income
census tracts could be eligible for a priority
set-aside in reservations to help buy in their
community or elsewhere as they wish. This
provides a way for the program to increase
opportunities for households who have
lived in areas that have historically faced
discrimination (such as red-lined areas).
§ First Generation Homebuyers, whose parents
have not owned a home, could be eligible for
a priority set-aside in reservations.
§ Homebuyers with Significant Student Debt
that reduces the amount of the first mortgage
for which the borrower can qualify for (e.g.,
with monthly student debt pa
yments greater
than $100) could obtain a larger SASL.

Attachment 2Page 130 of 311

100
Key Considerations
Future Priorities: While priorities could shift over time, administering and marketing the program benefits from program parameters that remain stable from one year to the next.

Property Eligibility Requirements
To qualify for the program, the property must be
a pre-existing or newly constructed one- to four-
unit residential property or condominium (under
Fannie/Freddie guidelines, borrower cash down
payment requirements are higher for purchasing a
two to four unit property).

Key Considerations
Housing Unit Limit: Allowing the purchase of buildings up to four units would accommodate AB1550 and incentivize the construction, financing and purchase of small infill homes that increase residential density.

First Mortgage Requirements
Homebuyers must obtain a first mortgage loan
that meets the following criteria:
§ Loan Type: The first mortgage must be a
fixed rate, fully amortizing 30-year mortgage,
that conforms with Government-Sponsored
Enterprise (GSE) requirements and is
includable in GSE mortgage-backed securities
that can be sold TBA.
§ Loan to Value: The first mortgage may not
exceed 80% of property value.
§ Participating Lenders: The first mortgage
lender must be a qualified lender under
CalHFA requirements.

The program can be designed so that both the
first mortgage and the SASL are sold to the
administering agency and are serviced jointly.

Key Considerations
Program Approval from GSEs: The program will need to be approved by GSEs based on precedents for similar approvals. This is a key step to navigate before finalizing detailed features.

STATEWIDE PROGRAM
Program
The program is designed to be operated across
and assist first-time buyers in all regions of the
state. The number of borrowers assisted would be
approximately the same percentage of mortgage
purchase transactions in each region of the state
(such as 2%); this will help assure that program
lending does not itself inflame housing prices.

To reflect and operate effectively in the wide
range of housing markets in the state:
§ Income limits would be set as a higher
perc
entage of AMI in high-cost areas of the
state.
§ By limiting the loan amount to the maximum
specified perc
entage of the median purchase
price of homes in each region, the program
would reflect the differences in housing prices
in regions across the state.

Key Considerations
These features help assure that the program can be useful for borrowers in each region of the state while having a single standard operating system.

Attachment 2Page 131 of 311

101

REVOLVING INVESTMENT FUND
Program Funding
Overall Design: The program has been structured
to be an ongoing sustainable program that would
make loans over many years, given the long-term
housing affordability pressures in California. It is
designed to make loans throughout economic
cycles, rather than making all loans at the peak of
the market.

Annual Scale: The scale of the program needs to
be limited not only because of limitations on State
resources but so that it does not itself drive up
the prices of homes in California.

For purposes of estimating needed funding
sources, it is assumed that the program could
provide approximately $1 billion of SASL’s in the
first full year after a ramp-up period. This amount
could help approximately 7,500 households if
the average SASL is $130,000. This accounts for
a small share of the state’s 300,000 mortgage
originations per year, but a larger share of the
100,000 mortgages currently originated for
households that earn less than 120% of AMI. It
is approximately the same number of buyers
that CalHFA currently assists, but would provide
significantly deeper assistance for borrowers who
need it, including in the state’s higher cost areas.

Over Ten Years: The program is designed so that
the average loan amount can increase by about

4.5% per year, and the annual total amount of
SASLs would grow accordingly. Over a 10 year
period, this would provide over $10 billion of SASL’s,
helping first-time buyers who need such assistance
purchase approximately $50 billion of homes.

Sources of Money: After extensive analysis, the
simplest and effective way to fund a program
of this annual scale is from taxpayer funds.

These can come from annual state budget
appropriations and/or from voter-authorized GO
bond issues.

Investment Fund. The State would establish a
separate, independent CA Dream for All Fund
(such as that used for tobacco securitization).

This investment fund would receive annual budget
appropriations and/or proceeds of State GO
bonds authorized by the voters.

These monies would be deposited as received into:
§ A loan account to purchase SALs, and
§ An administrative/servicing reserve account to
pay all adminis
trative, origination, marketing
and outreach, counseling and servicing costs
with respect to such SALs.

Repayments of principal and of appreciation
on all SALs would be redeposited in the Fund,
and amounts not needed to replenish the
administrative/servicing reserve fund would be
dedicated to making new SALs each year.

It may be up to ten or fifteen years before the
program produces a significant reliable stream
of repayments to make additional new loans.

As a result, it is appropriate to plan for annual
state appropriations for 10 years (that could be
continued thereafter).

This revolving investment fund is thus a dedicated
endowment for assisting future first-time
homebuyers in California, and would be held in
trust by the State for this purpose.

Key Considerations
Legislation now or in the future could also
authorize the potential use of revenue bonds by
the administering agency as a way to supplement
taxpayer monies—if this proves able to increase
the total future number of borrowers served with
no higher present value expenditure of taxpayer
monies. Discussions with a range of major
investment banks and other sources suggest that
the marketability of such revenue bonds would
require over-collateralization (such as by funding
SASLs 60% from revenue bonds and 40% from
taxpayer monies), and an ongoing assured source
of annual interest payments (through a state
appropriation pledge, the typical way the state
finances lease appropriation bonds). Such revenue
bonds—while reducing the taxpayer funds
needed directly for making SASLs—would require
taxpayer monies for annual interest payments.

Detailed modeling does not indicate that inclusion
of revenue bonds would significantly increase
the number of borrowers assisted with the same
present value of taxpayer monies. Given the
complexity and scale of issuance involved, such
an additional approach is not recommended at
this time. Such revenue bonds, if any, would be
secured by the CA Dream for All Fund.

Attachment 2Page 132 of 311

102
Administrative Costs
Annual state appropriations would provide funds
to be deposited in the administrative/servicing
reserv
e account in order to pay for program
administration, start-up, homeowner counseling
and servicing. An estimated $100 million would
need to be deposited annually on an ongoing
basis.

ADMINISTRATIVE PROCESS
Program
Administering Agency: A statewide program
administrator would be selected to develop a
detailed operating plan for the program, including
a detailed program manual and procedures guide
for use of Fund resources, a start-up plan, and
proposed system and parties for marketing/
outreach, origination of SASLs, homeowner
counseling, and servicing of SASLs.

The detailed operating plan would indicate how
the overall program would establish priorities and
a reservation system to help achieve program
objectives; as well a quarterly reporting system
on program demographics, operations, SASL
performance and use of Fund resources.

Key Considerations
Ongoing Oversight: The program administrator
will play a key role in day-to-day oversight of loan
reservations to help assure statewide distribution
of the program and meeting program targets, so
that the program does not end up concentrated
in a few markets where it may be easiest to make
such loans..

Marketing, Outreach and Homeowner Counseling
Central Importance: Marketing, outreach and clear
explanation of shared appreciation mortgages to
potential borrowers, lenders and real estate agents
is crucial to the success of the program.

State taxpayer funds will provide important
funding for such marketing and outreach efforts,
including by non-profit groups and housing
counselors, who can help prepare potential
homebuyers.

Homebuyer education, including a special section
on how the shared appreciation mortgage works,
will be mandatory for all borrowers. Monies are
budgeted for pre-purchase counseling and post-
purchase counseling.

Reservation System
Purpose: The reservation system would need to
do three things:
§ Enable eligible buyers to reserve SASLs in
conjunction with r
elated first mortgages so
that buyers can move quickly in a highly
competitive housing market to purchase a
home.
§ Make it easy and convenient for lenders to
reserv
e and originate SASLs in conjunction
with related first mortgages, with assurance
that qualified loans are timely purchased by or
on behalf of the program administrator.
§ Assure that the Program meets overall
priorities and targeting objectiv
es.

One way to accomplish these goals is to have
a reservation system that provides set-asides
by region of the state, as well as by priority
categories, such as first generation homebuyers
and long-term residents of low-income areas.

Attachment 2Page 133 of 311

103
Servicing
In addition to collecting loan repayments, the
servicer engaged by the program administrator
will pro
vide ongoing information to borrowers
about their shared equity mortgage, including
estimated amount to be repaid, and how and
when it may be in their interest to pay it off
sooner if possible.

The program will be designed to work
together with other programs for affordable
homeownership, including:
§ Below Market Units: The program can be, but
is not required to be, used for the purchase
of below-market units, such as those created
through inclusionary zoning or Community
Land Trusts.
§ Local Down Payment Assistance Programs:

The pr
ogram can be used with local down
payment assistance programs
§ Local Shared Appreciation Programs: For
counties with their own shared appreciation
programs (such as Alameda, San Francisco
and Santa Clara), the program would pay
for up to half of the amount of any county
shared appreciation loan that meets program
requirements, subject to other loan amount
requirements.

Attachment 2Page 134 of 311

104
Regions of Analysis
Evaluating existing conditions at the regional level helps establish a baseline understanding of geographic variations in income, housing tenure, and housing market activity. Differing regional circumstances can inform how a shared appreciation program might be tailored to respond to unique regional circumstances. The analysis and program framework in this report divide the state into 11 regional markets which consist of aggregations of counties. These regions align with those in California Forward’s “California Dream Index”.

Figure 53: Regions Considered in Analysis
Redwood Coast
Sierra
Nevada
Bay Area
Shasta/
Cascades
Central Valley
Central Coast
Los Angeles
Orange
Inland Empire
San Diego-Imperial
Sierra Nevada
Sacramento
Source: HR&A Advisors
§ Bay Area
§ Central Coast
§ Central Valley
§ Inland Empire
§ Los Angeles
§ Orange County
§ Redwood Coast
§ Sacramento
§ San Diego-Imperial
§ Shasta/Cascades
§ Sierra Nevada

APPENDIX D

Attachment 2Page 135 of 311

105
Financial Analysis
We conducted a comparative analysis of
the household and fund level impacts from
various financing options as well as home price
appreciation rates. The median price of existing
single-family homes in California has increased
more than 225% over the last 20 years, from
$241,800 in 2000 to $786,000 in 2021, which
implies a historic compound annual growth rate
(CAGR) at 5.8% over the course of the past two
decades. Most of the growth occurred in the last
10 years, while the historic CAGR from 2000 to
2010 was only at 2.37%.
241 To be conservative,
we utilize the following home price appreciation
assumptions for three scenarios.
§ Base Scenario: Annual home price
apprecia
tion at 3.0%
§ Upside Scenario: Annual home price
apprecia
tion at 6.0%
§ Downside Scenario: Annual home price
appreciation at 0.0%
We also look
ed at the financial tradeoffs for
a borrower and the program or fund as the
financing structure changes. We analyzed the
following structures:

1. Shared Appreciation: This structure
represents the recommended terms for a CA
Dream for All loan with a 17% down payment
and a 1:1, or pro rata, appreciation split
between the homebuyer and the fund.

2. Fixed Rate: The second mortgage with
deferred payment carries an annual simple
interest rate payment obligation of 3.00%
and offers a 17% down payment.
242 There is
currently no program with this level of down
payment support.

3. FHA: This structure reflects the current costs
to homebuyers with limited down payment
savings, where they are required to make
monthly insurance premium payments as well
as an upfront mortgage insurance premium.

4. Conventional: This structure reflects what is
currently available to homebuyers who can
make a 20% down payment which eliminates
the need for either a second mortgage
or monthly mortgage insurance premium
payments.

The analysis shows that a SAL has the following
tradeoffs compared to other financing options:
241 California Association of Realtors
242 CalHFA’s MyHome Assistance Program is a silent second fixed rate program, currently charging 3% simple interest, while the loan size is much smaller, up to 3.5% of the purchase price or appraised value.
§ Fixed Rate: There is no difference in the level
of income serv
ed by either a fixed interest or a
SAL because both allow the borrower to avoid
mortgage insurance premium and significantly
lower monthly payments. Under our baseline
growth assumption, homebuyers and the state
would receive approximately the same returns,
because the assumed interest rate on the loan
is equal to our growth rate assumptions. In
our upside scenario, homebuyers have a lower
rate of return, but the fund would make a
sufficient return to be able to support the next
homebuyer at the higher prevailing median
price. In our downside scenario, the homebuyer
has a higher return because they have no
interest payment liability while the fund would
have sufficient funds to lend on to the next
buyer because house prices would be similar.
§ FHA: Without the support of any public down
payment assistance programs, homebuyers
who resort t
o FHA loans with a minimum
down payment of 3.5% carry much higher
monthly mortgage payments due to a larger
first mortgage loan size and the required FHA
mortgage insurance premium. This requires
borrowers to have a higher level of income
to get income qualified for the mortgage
and sustain a healthy debt-to-income ratio.

Due to its high leverage, the homebuyer’s
initial down payment realizes higher return
in all scenarios, but at the expense of higher
monthly payments. Shared appreciation allows
borrowers to put down the same amount of
down payment with a much lower monthly
mortgage payment.
§ Conventional: Homebuyers who put down a
20% down pa
yment without any public down
payment assistance program, incur the same
monthly mortgage payment as those with
shared appreciation since they are no longer
required to pay any mortgage insurance
premium. There is no difference in the level of
income required but a significant difference
in the required upfront down payment. Due
to its low leverage, the homebuyer’s initial
down payment realizes the lowest return in
all scenarios despite the benefits of lower
monthly payments. Shared appreciation
provides the down payment funding gap and
enables borrowers with limited savings to
access median priced homes and achieve a
much higher return.

Attachment 2Page 136 of 311

106
Figure 54: Household Level Loan Calculation Base Scenario California Dream for All – Household Level Loan Calculation

BASE SCENARIO

KEY ASSUMPTIONS
Property Purchase Price 1 $786,275
Annual Price Appreciation 3.00%
Cost of Sales 9.00%
California Median Household Income 2 $77,358
Down Payment Required for Next Borrower 17.00%
MORTGAGE ASSUMPTIONS3
Amortization 360 months
Conforming Loan Base Rate 4.42%
Annual Private Mortgage Insurance (PMI) 0.58%
FHA Loan Base Rate 4.40%
Upfront Mortgage Insurance Premium (UFMIP) 1.75%
Annual Mortgage Insurance Premium (MIP) 0.85%
HOUSEHOLD OPTIONS 1 2 3 4
Shared
Appreciation
17% Fixed-Rate
Second
17% FHA Conventional
Multiple 1 Simple Interest 3.00% Down Payment 3.50% Down Payment 20.00% Homebuyer Down Payment $23,588 3.00% $23,588 3.00% $27,520 3.50% $157,255 20.00% 1st Mortgage Amount $629,020 80.00% $629,020 80.00% $758,755 96.50% $629,020 80.00% 2nd Mortgage Amount $133,667 17.00% $133,667 17.00% $0 0.00% $0 0.00% Upfront Mortgage Insurance Premium $13,278
Total Purchase Price $786,275 100.00% $786,275 100.00% $799,553 100.00% $786,275 100.00% 1st Mortgage Monthly Payment $3,157 $3,157 $3,800 $3,157 Mortgage Insurance Premium $0 $0 $537 $0
Total 1st Mortgage Monthly Payment $3,157 $3,157 $4,337 $3,157 Debt-to-Income Ratio 43% 43% 43% 43%
Required Household Income $88,111 $88,111 $121,033 $88,111 Percent of California Median Household
Income %
114% 114% 156% 114%
EXIT (YEAR 10) - Homebuyer Impact
Projected Property Sales Price $1,025,911 $1,025,911 $1,025,911 $1,025,911 Repayment to First Mortgage ($502,487) ($502,487) ($605,734) ($502,487) Repayment to Second Mortgage
Principal ($133,667) ($133,667)
Shared Appreciation / Fixed Interest ($40,738) ($40,100) Total Second Mortgage Due ($174,405) ($173,767)
Cost of Sales ($92,332) ($92,332) ($92,332) ($92,332)
Borrower Net Equity $256,687 $257,325 $327,845 $431,092 Borrower Equity Multiple 10.9 x 10.9 x 11.9 x 2.7 x
Borrower Rate of Return (RoR) 27.00% 27.00% 28.10% 10.60% EXIT (YEAR 10) - Fund Impact (Second Mortgage)
Effective Annual Interest Rate

2.70% 2.66% N/A N/A
Funds Recycled $174,405 $173,767 N/A N/A
Down Payment Required for Next Borrower ($174,405) ($174,405) N/A N/A Surplus/Shortfall $0 $638 N/A N/A
Source

1. Median priced existing single-family home in California in 2021 according to data available to the California Association of Realtors

2. U.S. Census Bureau, Median Household Income in California for 2020, retrieved from FRED, Federal Reserve Bank of St. Louis; https:/ /fred.stlouisfed. org/series/MEHOINUSCAA646N, June 6, 2022.

3. Genworth Mortgage Insurance, Ginnie Mae, and Urban Institute. FHA rate from MBA Weekly Applications Survey. Conforming rate from Freddie Mac Primary Mortgage Market Survey. Note: Rates as of March 24, 2022.

FICO 760+

Attachment 2Page 137 of 311

107
FICO 760+
Figure 55: Household Level Loan Calculation Upside Scenario California Dream for All – Household Level Loan Calculation

UPSIDE SCENARIO

KEY ASSUMPTIONS
Property Purchase Price 1 $786,275
Annual Price Appreciation 6.00%
Cost of Sales 9.00%
California Median Household Income 2 $77,358
Down Payment Required for Next Borrower 17.00%
MORTGAGE ASSUMPTIONS3
Amortization 360 months
Conforming Loan Base Rate 4.42%
Annual Private Mortgage Insurance (PMI) 0.58%
FHA Loan Base Rate 4.40%
Upfront Mortgage Insurance Premium (UFMIP) 1.75%
Annual Mortgage Insurance Premium (MIP) 0.85%
HOUSEHOLD OPTIONS 1 2 3 4
Shared
Appreciation
17% Fixed-Rate
Second
17% FHA Conventional
Multiple 1 Simple Interest 3.00% Down Payment 3.50% Down Payment 20.00% Homebuyer Down Payment $23,588 3.00% $23,588 3.00% $27,520 3.50% $157,255 20.00% 1st Mortgage Amount $629,020 80.00% $629,020 80.00% $758,755 96.50% $629,020 80.00% 2nd Mortgage Amount $133,667 17.00% $133,667 17.00% $0 0.00% $0 0.00% Upfront Mortgage Insurance Premium $13,278
Total Purchase Price $786,275 100.00% $786,275 100.00% $799,553 100.00% $786,275 100.00% 1st Mortgage Monthly Payment $3,157 $3,157 $3,800 $3,157 Mortgage Insurance Premium $0 $0 $537 $0
Total 1st Mortgage Monthly Payment $3,157 $3,157 $4,337 $3,157 Debt-to-Income Ratio 43% 43% 43% 43%
Required Household Income $88,111 $88,111 $121,033 $88,111 Percent of California Median Household
Income %
114% 114% 156% 114%
EXIT (YEAR 10) - Homebuyer Impact
Projected Property Sales Price $1,328,395 $1,328,395 $1,328,395 $1,328,395 Repayment to First Mortgage ($502,487) ($502,487) ($605,734) ($502,487) Repayment to Second Mortgage
Principal ($133,667) ($133,667)
Shared Appreciation / Fixed Interest ($92,160) ($40,100) Total Second Mortgage Due ($225,827) ($173,767)
Cost of Sales ($119,556) ($119,556) ($119,556) ($119,556) Borrower Net Equity $480,525 $532,586 $603,106 $706,353 Borrower Equity Multiple 20.4 x 22.6 x 21.9 x 4.5 x
Borrower Rate of Return (RoR) 35.20% 36.60% 36.20% 16.20% EXIT (YEAR 10) - Fund Impact (Second Mortgage)
Effective Annual Interest Rate

5.38% 2.66% N/A N/A
Funds Recycled $225,827 $173,767 N/A N/A
Down Payment Required for Next Borrower ($225,827) ($225,827) N/A N/A Surplus/Shortfall $0 $52,060 N/A N/A
Source

1. Median priced existing single-family home in California in 2021 according to data available to the California Association of Realtors

2. U.S. Census Bureau, Median Household Income in California for 2020, retrieved from FRED, Federal Reserve Bank of St. Louis; https:/ /fred.stlouisfed. org/series/MEHOINUSCAA646N, June 6, 2022.

3. Genworth Mortgage Insurance, Ginnie Mae, and Urban Institute. FHA rate from MBA Weekly Applications Survey. Conforming rate from Freddie Mac Primary Mortgage Market Survey. Note: Rates as of March 24, 2022.

Attachment 2Page 138 of 311

108
FICO 760+
Figure 56: Household Level Loan Calculation Downside Scenario California Dream for All – Household Level Loan Calculation

DOWNSIDE SCENARIO

KEY ASSUMPTIONS
Property Purchase Price 1 $786,275
Annual Price Appreciation 0.00%
Cost of Sales 9.00%
California Median Household Income 2 $77,358
Down Payment Required for Next Borrower 17.00%
MORTGAGE ASSUMPTIONS3
Amortization 360 months
Conforming Loan Base Rate 4.42%
Annual Private Mortgage Insurance (PMI) 0.58%
FHA Loan Base Rate 4.40%
Upfront Mortgage Insurance Premium (UFMIP) 1.75%
Annual Mortgage Insurance Premium (MIP) 0.85%
HOUSEHOLD OPTIONS 1 2 3 4
Shared
Appreciation
17% Fixed-Rate
Second
17% FHA Conventional
Multiple 1 Simple Interest 3.00% Down Payment 3.50% Down Payment 20.00% Homebuyer Down Payment $23,588 3.00% $23,588 3.00% $27,520 3.50% $157,255 20.00% 1st Mortgage Amount $629,020 80.00% $629,020 80.00% $758,755 96.50% $629,020 80.00% 2nd Mortgage Amount $133,667 17.00% $133,667 17.00% $0 0.00% $0 0.00% Upfront Mortgage Insurance Premium $13,278
Total Purchase Price $786,275 100.00% $786,275 100.00% $799,553 100.00% $786,275 100.00% 1st Mortgage Monthly Payment $3,157 $3,157 $3,800 $3,157 Mortgage Insurance Premium $0 $0 $537 $0
Total 1st Mortgage Monthly Payment $3,157 $3,157 $4,337 $3,157 Debt-to-Income Ratio 43% 43% 43% 43%
Required Household Income $88,111 $88,111 $121,033 $88,111 Percent of California Median Household
Income %
114% 114% 156% 114%
EXIT (YEAR 10) - Homebuyer Impact
Projected Property Sales Price $786,275 $786,275 $786,275 $786,275 Repayment to First Mortgage ($502,487) ($502,487) ($605,734) ($502,487) Repayment to Second Mortgage
Principal ($133,667) ($133,667)
Shared Appreciation / Fixed Interest $0 ($40,100)
Total Second Mortgage Due ($133,667) ($173,767) $0 $0
Cost of Sales ($70,765) ($70,765) ($70,765) ($70,765)
Borrower Net Equity $79,357 $39,257 $109,777 $213,023
Borrower Equity Multiple 3.4 x 1.7 x 4.0 x 1.4 x
Borrower Rate of Return (RoR) 12.90% 5.20% 14.80% 3.10% EXIT (YEAR 10) - Fund Impact (Second Mortgage)
Effective Annual Interest Rate

0.00% 2.66% N/A N/A
Funds Recycled $133,667 $173,767 N/A N/A
Down Payment Required for Next Borrower ($133,667) ($133,667) N/A N/A Surplus/Shortfall $0 ($40,100) N/A N/A
Source

1. Median priced existing single-family home in California in 2021 according to data available to the California Association of Realtors

2. U.S. Census Bureau, Median Household Income in California for 2020, retrieved from FRED, Federal Reserve Bank of St. Louis; https:/ /fred.stlouisfed. org/series/MEHOINUSCAA646N, June 6, 2022.

3. Genworth Mortgage Insurance, Ginnie Mae, and Urban Institute. FHA rate from MBA Weekly Applications Survey. Conforming rate from Freddie Mac Primary Mortgage Market Survey. Note: Rates as of March 24, 2022.

Attachment 2Page 139 of 311

109

APPENDIX E
Analysis of Alternative Funding Options
Option 4. Blended Taxpayer Funds and Private Capital
Purpose of approach. The aim is to supplement
taxpayer funds with private capital to finance
SALs.

How it would work. The state agency that would
oversee and administer the CA Dream for All
Fund would seek to sell participation interests in
the pools of SALs it is making. In the first several
years, all loans would be funded by taxpayer
monies. As a portfolio and track record is
established, the state agency would structure and
sell senior tranches to investors. The net proceeds
received, together with a reduced amount of new
taxpayer monies, would help fund new loans.

Security for private investors. Private investors
would receive the first return from all loan
repayments, including appreciation up to a
specified minimum rate of return; additional
repayments would be split between the CA
Dream for All Fund and investors. If useful in
attracting private investors, taxpayer monies
could also fund a specific loss reserve fund to
cover losses of principal on the loans.

Monies for new loans. Under this leveraged
approach:

In years 1 through 3, new taxpayer monies would
be provided for $1 billion of SALs each year.

In years 4 through 12, the amount needed from
new taxpayer monies would be reduced and used
together with private capital to make loans.

After year 12, no more new taxpayer monies
would be appropriated for loans. All future loans
would be funded from a combination of residual
repayments retained by the CA Dream for All
Fund and new private equity capital.

Origination, servicing and administrative costs. As
with the revolving fund approach in Option 1, the
State would appropriate $100 million per year.

Precedent. We are not aware of any precedent
for this approach.

Taxpayer investment. The total taxpayer
investment would be designed to be similar to
that for Option 1.

Ability to raise adequate capital, feasibility and
legal concerns. There are little grounds, today, to
think that this option can reliably raise significant
amounts of capital for the program. There also
appear to be fundamental structural issues in
seeking to use these two sources together in
funding common pools of loans. Finally, there are
significant potential risks to the State or state
agency in soliciting private equity capital from
multiple investors.

Ability to meet programmatic needs. Utilizing
private equity capital would significantly limit
who can be helped in terms of areas of the state,
lower-income borrowers and those needing larger
amounts of assistance. Such larger amounts of
assistance run exactly counter to investors’ need
for early repayment of SALs.

The program would need to receive well more than
pro rata appreciation in order to provide expected
rates of return to the private investors, and it would
thus significantly limit household wealth.

The program would have to set and enforce a
fixed 30-year maturity on SALs.

The concern is therefore that a program designed
to raise private investor funds would still rely
heavily on taxpayer monies but would not meet
key program needs.

Compatibility with Fannie Mae and Freddie Mac
first mortgages. The Freddie Mac Affordable
Seconds checklist attached to Section 4204
of the Freddie Mac guide specifically prohibits
sharing of appreciation with for-profit entities,
and discussion by CSG Advisors with Freddie
Mac staff indicates they would not approve such
a program. It is unclear if Fannie Mae would
approve such a program.

Ongoing way to help future first-time
borrowers. The high rate of return required by
private investors, and their early time horizon,
would significantly reduce the amount of loan
repayments that can be used to make new
loans. As a simple example, if the rate of home
appreciation is 4.5% (similar to the statewide
average for the last 40 years) and investors

Attachment 2Page 140 of 311

110
require a 9% return on their investment, that
would dramatically reduce the amount of
appreciation available to help subsequent buyers.

Sustainable investment for the State. The
amount of taxpayer funding would be designed
to be sustainable, but the investors’ expected rate
of return would reduce the ability of the State to
help future borrowers.

No future financial risk to the State. There
would be no financial impact on the State from
any defaults or losses on any SALs. If there are
any losses, they reduce the total amount of
repayments that can be used to make loans to
future buyers.

Leverage taxpayer monies with non-taxpayer
monies to expand the number of borrowers
ultimately served. The total number of borrowers
ultimately served is likely to be less than that
of Option 1, given the rate of return needed for
private investors.

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111
Option 5. Private Fund with Significant State Investment Purpose of approach. Taxpayer monies would
pay a portion of the purchase price of those
loans originated by a private fund which meet
CA Dream for All program requirements. The
aim is to make it possible for the private fund to
provide deeper assistance (e.g., a larger SAL) than
it otherwise would if it were operating solely with
private capital.

How it would work. The State would enter into
a leveraging agreement with a private fund that
originates SALs and is raising private capital.

State would fund a portion of the loan amount
for loans that meet CA Dream for All program
requirements.

Consider a fintech company that has a program
for California essential professionals, many of
whom might meet CA Dream for All program’s
income limits, but need deeper assistance than
the amount that private capital can profitably lend
(say 10% of the home purchase price, in return for
25% of the appreciation). Such borrowers might
receive additional resources (say another 7%)
from taxpayer funds on which they only pay pro
rata appreciation.

Security for private investors. Private investors
would receive the first return from all loan
repayments, including appreciation up to a
specified minimum rate of return. Additional
repayments would be allocated between the
fund manager, the private investors and the State
(which would reinvest monies it receives in a
subsequent tranche of new loans).

Monies for new loans. Loans would be originated
by the private fund. The State would provide
funds for a specified portion of those loans that
meet CA Dream for All program requirements,
up to a maximum annual amount of taxpayer
funding.

Origination, servicing and administrative costs.

These are incurred by and paid by the sponsoring
entity.

Precedent. We are not aware of any precedent
for this approach.

Taxpayer investment. The total taxpayer
investment is likely to be much smaller than in
Option 1, simply because the number of loans
would likely be quite small, given the difficulties in
raising private capital.

Ability to raise adequate capital, feasibility
and legal concerns. There are little grounds,
today, to think that this option can reliably raise
significant amounts of private capital. There also
appear to be fundamental structural issues in
seeking to use these two sources together in
funding common pools of loans. Finally, while the
purpose of the State investment is to help lower-
income and other borrowers who need a larger
SAL than would be funded by private capital, the
use of State funds to make a larger loan would
significantly lengthen the expected prepayment.

Therefore, it is unlikely that State and private
funds could be used together.

Ability to meet programmatic needs. Private
equity capital would significantly limit who can be
helped, in terms of areas of the state and those
needing deeper assistance. Borrowers would pay
for more than pro rata appreciation given the
private capital utilized. The program would have to
set and enforce a fixed 30-year maturity on SALs.

Compatibility with Fannie Mae and Freddie Mac
first mortgages. Freddie Mac would not approve
such a program, as it specifically prohibits
sharing of appreciation with for-profit entities. If
the sponsoring entity has a waiver from Fannie
Mae rules, it could use that for loans made with
taxpayer monies as well as private capital.

Ongoing way to help future first-time buyers.

Return on the State’s investment would be highly
limited and would unlikely be relied on for making
new loans. Rather, the State would need to
continue to use General Fund monies to purchase
its participations in subsequent pools of loans.

Sustainable investment for the State. The
amount of taxpayer funding would be designed to
be sustainable, but there would be limited return
on the State’s investment or its ability to help
subsequent borrowers.

No future financial risk to the State. There
would be no financial impact on the State from
any defaults or losses on any SALs. If there are
any losses, they reduce the total amount of
repayments that can be used to make loans to
future buyers.

Leverage taxpayer monies with non-taxpayer
monies to expand the number of borrowers
ultimately served. Total number of borrowers
ultimately served is likely to be less than that
of Option 1, given the rate of return needed for
private investors.

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Option 6. Private Funds with Limited, Indirect State Investment 243 “Servicing Mortgages Credit.” New York State Department of Taxation and Finance. https:/ /www.tax.ny.gov/bus/ct/service_mortgage_credit.htm Purpose of approach. Taxpayer monies, without
funding any SALs, would be used to support
private shared appreciation lending, so that such
lending could help the borrowers that the CA
Dream for All program is intended to assist.

How it would work. The State would incentivize
private SALs for those borrowers who meet
CA Dream for All program income and first-
time buyer requirements. It would enter into an
agreement with the private shared appreciation
entity (fintech, investment bank, hedge fund etc.)
under which it provides specified benefits with
respect to the amount of loans that meet CA
Dream for All program requirements (“eligible
loans”). In addition to borrower eligibility, the
agreement would specify that the loan’s share of
appreciation not exceed a certain ratio (such as

2.5 times its share of the purchase price).

These benefits could include:
§ Payment/reimbursement of a portion of loan
origination, adminis
tration or servicing costs
(most easily paid as a single up-front payment
with respect to the eligible loans made in a
given month or quarter);
§ A loan loss reserve fund that would cover the
first (
say 5%) loss on any eligible loan; or
§ Tax benefits such as relief to investors from
sta
te capital gains tax on the percentage of its
investment that was made for eligible loans.

Private shared appreciation entities would raise all
monies for all SALs. They would make and service
eligible loans in the same way and under the same
standards by which it makes other SALs.

Precedent. We ar
e not aware of any precedent
for this overall approach. With respect to taxation,
New York State provides a business income
tax credit to servicers of first-time homebuyer
mortgages made by the state housing finance
agency.
243 There are many examples of loan loss
reserve funds established by local and state
governments for second mortgage housing
rehabilitation loans.

Taxpayer investment. The total taxpayer
investment is limited to the benefits provided
under such agreements.

Ability to raise adequate capital. The total
amount of private capital raised for shared
appreciation lending has been very limited. This
ability is unlikely to be significantly affected by
State incentives for a subset of such loans.

Ability to meet programmatic needs. Reliance on
private equity capital significantly limits who can
be helped, in terms of areas of the state, lower-
income borrowers and those needing deeper
assistance. Borrowers would pay 2.5 times pro
rata appreciation, affecting their ability to build
household wealth. There would be a fixed 30-year
maturity on loans, and, as at present with private
shared appreciation lending, concerted servicing
efforts to encourage early repayment of loans.

Compatibility with Fannie Mae and Freddie Mac
first mortgages. Private shared appreciation loans
cannot be used with Freddie Mac first mortgages.

If the sponsoring entity has a waiver from Fannie
Mae rules, it could use that for eligible loans as
well as its broader portfolio of SALs in general.

Ongoing way to help future first-time buyers.

Under this approach, the State provides benefits
for each year’s new eligible loans. The State does
not receive any repayments for its benefits, and
there is no need for revolving any funds. Loan
repayments are used to pay private investors.

Sustainable investment for the State. The
amount of taxpayer funding would be designed to
be sustainable, taking into account both out-of-
pocket costs and tax benefits.

No future financial risk to the State. There would
be no financial impact on the General Fund from
any defaults or losses on any SALs. If the State
were to provide a first loss reserve on eligible
loans, actual losses would diminish that reserve.

They reduce the total amount of repayments that
can be used to make loans to future buyers.

Leverage taxpayer monies with non-taxpayer
monies to expand the number of borrowers
ultimately served. The total number of eligible
borrowers is likely to be modest compared to a
State revolving fund (Option 1). Many of those
might be ones who would have received the same
SAL with or without the State incentives.

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113

APPENDIX F
Detailed Financial Comparison of Shared Appreciation vs. Fixed Interest Second Loans
Borrower’s Repayment Obligation.

Before modeling the cumulative effects on the
CA Dream for All program as a whole based
on these two different lending approaches, it is
important to understand the key differences for
the borrower between shared appreciation and a
fixed interest rate.

With shared appreciation, the borrower repays
the original principal amount of the CA Dream
for All loan (say $130,000 on a $650,000 home
purchase) plus a pro rata share of the gain. If the
home is resold in 10 years with no increase in
value after sales costs, then a shared appreciation
borrower repays only the $130,000 principal of
the CA Dream for All loan, since there has been
no gain.

With a fixed interest rate loan, the borrower has
to pay the same amount of accrued interest at
the loan rate regardless of what happens to the
value of the home. The interest that accrues each
year is “hard,” meaning that it is due regardless
of what happens to the value of the home. If
the home resells for $650,000 with no increase
in value, the borrower has to repay both the
$130,000 principal plus the $39,000 of interest
accrued over 10 years, and would thus owe a total
of $169,000. Since the home did not increase in
value, the borrower’s household wealth would be
reduced by $39,000, which is double the amount
of the typical 3% down payment for the purchase
of the home.

If home prices rise dramatically, on the other
hand, a borrower with a fixed interest loan still
only pays back the same $39,000 in interest
while receiving all the appreciation on the home.

A borrower with a SAL owes the same share
of appreciation on the home, whether that
appreciation was small or large.

Comparing Impacts at the Individual
Loan Level.

Figure 57 shows how this works under various
home price rise situations for borrowers who
receive either shared appreciation or fixed interest
rate loans and resell their home at the end of 10
years.

What stands out from this simple set of examples
is that a fixed interest rate loan creates two types
of risks not present with shared appreciation.

Risk to borrower. If a home does not increase
in value, the borrower still owes the accrued
interest on a fixed rate loan. As proposed for a
CA Dream for All SAL, even the recovery of the
principal of the loan (e.g., the $130,000) would
be subordinate to the borrower recovering their
original down payment. This provides significantly
more risk protection to the borrower than with a
fixed rate loan.

Risk to helping future borrowers. With a SAL,
whatever happens to the rate at which homes
go up in value, the CA Dream for All Fund has
sufficient monies to help a similar new buyer
purchase an equivalent home. With a fixed rate
loan, if home prices rise more than the fixed rate,
the CA Dream for All Fund does not have enough
monies to help the next borrower.

Nature of these risks. These two risks are inherent
to CA Dream for All Fund investing in fixed rate
loans. If appreciation turns out to be less than the
fixed rate, the low- or moderate-income borrower
loses money, compared to shared appreciation. If
appreciation turns out to be more than the fixed
rate, the CA Dream for All Fund does not have
enough to help the next buyer purchase a similar
home. As shown in figure 58, these potential
problems cannot be solved by setting a high fixed
interest rate.

Attachment 2Page 144 of 311

114
Figure 57: Impact of Individual Average CA Dream for All Loan of $130,000 0% home price rise 3% home price rise 4.5% home price rise 6% home price rise Fixed
interest
Shared
Apprec’n
Fixed
interest
Shared
Apprec’n
Fixed
interest
Shared
Apprec’n
Fixed
interest
Shared
Apprec’n
Original price 650,000 650,000 650,000 650,000 650,000 650,000 650,000 650,000 Resale price 650,000 650,000 874,000 874,000 1,009,000 1,009,000 1,164,000 1,164,000 Total gain 0 0 224,000 224,000 359,000 359,000 514,000 514,000 Repay to CA Dream for All
Principal 130,000 130,000 130,000 130,000 130,000 130,000 130,000 130,000 Int / Apprec’n 39,000 0 39,000 44,800 39,000 71,800 39,000 102,800 Total due 169,000 130,000 169,000 174,800 169,000 201,800 169,000 232,800 Impact on borrower’s
household wealth -39,000 0 185,000 179,200 320,000 287,200 475,000 411,000 Multiple of borrower’s down
payment -2x 0x 9.5x 9.2x 16.4x 14.7x 24.3x 21.1x
Amount needed for CA Dream
for All to help next borrower
buy equivalent home
130,000 130,000 174,800 174,800 201,800 201,800 232,800 232,800 Surplus or shortfall to fund
next loan 39,000 All funds
required -5,800 All funds
required -32,800 All funds
required -63,800 All funds
required
Figure 58: Impact of Individual Loan Fixed interest at 3% and at 5% vs. Shared Appreciation 0% home price rise 6.0% home price rise
Fixed interest
at 3%
Fixed interest
at 5%
Shared
Apprec’n
Fixed interest
at 3%
Fixed interest
at 5%
Shared
Apprec’n
Original price 650,000 650,000 650,000 650,000 650,000 650,000 Resale price 650,000 650,000 650,000 1,164,00 1,164,000 1,164,000 Total gain 0 0 0 514,000 514,000 514,000
Repay to CA Dream for All
Principal 130,000 130,000 130,000 130,000 130,000 130,000 Int / Apprec’n 39,000 65,000 0 39,000 65,000 102,800
Total due 169,000 195,000 130,000 169,000 195,000 232,800 Impact on borrower’s
household wealth -39,000 -65,000 0 475,000 449,000 411,000 Multiple of borrower’s
downpayment of $19,500 -2.0x -3.3x 0x 24.3x 23.0x 21.1x Funds repaid to CA Dream for
All 169,000 195,000 130,000 169,000 195,000 195,000
Amount needed for CA Dream
for All to help next borrower
buy equivalent home
130,000 130,000 130,000 232,800 232,800 232,800
Surplus or shortfall to fund
next loan + 39,000 +65,000 All funds
required -63,800 -37,800 All funds
required
If the rate is set at 5%, then:
§ If home prices are flat, the borrower owes far
more ac
crued interest and risks losing four
times their original down payment.
§ If home prices increase at 6% per year, the CA
Dream f
or All Fund is still short in helping the
next borrower.

In essence, an accruing fixed rate second loan
creates a greater upside and a greater downside
for the borrower, and makes it much more difficult
for the State’s investment in the CA Dream for
All program to keep pace with inflation. This is
especially visible when home prices increase as
they have by about 40% in the last two years. A
shared appreciation investment would increase
in value to help future buyers; a fixed rate
investment—whether at 3% or 5%—would not,
meaning the CA Dream for All program could help
fewer and fewer buyers with each passing year.

Attachment 2Page 145 of 311

115
Overall Impact of Fixed Interest vs.

Shared Appreciation on CA Dream
for All’s Ability to Help Borrowers
Having seen how fixed interest compares with
shared appreciation on the same initial $130,000
investment by the CA Dream for All Fund, we can
now look at the cumulative impact on the Fund
itself and its ability to assist borrowers.

Time horizon. For helping borrowers overall, the
differences between the fixed interest rate and
shared appreciation approaches emerge over
time.

The differences occur, not when loans are initially
made, but as they are repaid with different
amounts due back to the CA Dream for All Fund,
and the CA Dream for All Fund then uses those
repayments to help subsequent buyers. In the first
year, the two approaches by definition help an
identical number of borrowers; it is the different
payoff amounts over time that show what
happens to the total number of borrowers helped
and to their household wealth.

Figure 59 shows, in the expected case, the
impacts of loans made through year 40 (30 years
after the 10 years of state funding of initial loans)
to see what happens to the CA Dream for All
program’s ability to help borrowers as loans are
repaid.

Figure 59: Overall Impact of Shared Appreciation and Fixed Interest Over 40 Years: Expected Case Shared Appreciation Fixed Simple Interest at 3%
Taxpayer Funding
For loans $10.0 billion $10.0 billion
For administration, origination, counseling and servicing costs for 40 years

4.1 4.1
Total taxpayer funding over 40 years 14.1 14.1
Present value at 3.0% 10.8 10.8
CA Dream for All Loan Originations
Borrowers assisted over 40 years 157,200 124,800
$ price of homes purchased $238 billion $163 billion
Loans to borrowers $47.6 billion $32.6 billion
Present value at 3.0% 25.3 19.2
Borrower Share of Home Appreciation Through Year 40
Borrower share of appreciation through year 40 $133.8 billion $120.6 billion Present value at 3.0% 64.2 60.8
$ price of homes purchased $238 billion $163 billion
Loans to borrowers $47.6 billion $32.6 billion
Present value at 3.0% 25.3 19.2
Borrower share of home appreciation thru year 40 $133.8 billion $120.6 billion Present value at 3.0% 64.2 60.8
Overall Impact
Residual value of program receipts after year 40 to help subsequent borrowers $35.8 billion $7.6 billion
Present value at 3.0% $7.5 $1.7
Net cost to State for 40 years of program $10.8 - $7.5 = $10.8 - 1.7 = Present value at 3.0% $3.3 bill. $9.1 bill.

Net cost to State for investing with borrowers
Borrower share of appreciation / net cost to State
Each present value at 3.0%
$64.2 / 3.3 billion =

19.5 x
$60.8 / 9.1 billion =

6.7 x

Attachment 2Page 146 of 311

116
Borrowers assisted through year 40. In the
expected case, shared appreciation helps
considerably more borrowers and provides greater
assistance than fixed rate seconds. SALs would
help 157,200 borrowers compared to 124,800 with
fixed interest loans, and would help them buy $238
billion of homes compared to $163 billion.

In the more conservative case (Figure 61 below),
the shared appreciation approach helps more
borrowers and provides greater assistance than
fixed rate seconds, but the difference is less
marked. SALs would help 144,000 borrowers
compared to 134,000 with fixed interest loans and
help them buy $157 billion of homes compared to
$141 billion. These smaller differentials reflect the
fact that, in the more conservative case, the fixed
interest rate is much closer to the appreciation rate.

One perhaps surprising finding is that the higher
the appreciation, the fewer the borrowers
a fixed interest program can help. A fixed
interest program would help 134,000 in the
more conservative case and 125,000 in the
expected case. This is because the fixed interest
the Fund receives back is the same in the more
conservative and expected cases, but the cost of
buying a subsequent home in the expected case
is much greater. A shared appreciation program,
by contrast, is able to help more borrowers in the
expected case than in the more conservative case.

Borrower appreciation through year 40.

The direct impact on household wealth generated
through a given time horizon, such as 40 years,
consists of (a) the household wealth of borrowers
who will have paid off their loans by that date (e.g.,
their gain after paying the program its fixed interest
or share of appreciation) and (b) the accreted
wealth of borrowers who have outstanding loans
on that date (e.g., what their homes are projected
to be worth on that date less the accrued fixed
interest or what CA Dream for All Fund’s share of
appreciation would be as of that date).

In the expected case, shared appreciation gener-
ates significantly greater total household wealth
during this time period than fixed interest—$134
billion versus $121 billion, or about 11% more. This
reflects the much greater number of borrowers
that a shared appreciation program helps.

In the more conservative case (where home
appreciation is very similar to the fixed interest
rate), there is no difference in total household
wealth through the 40 year date.

Figure 60: Overall Impact of Shared Appreciation and Fixed Interest Over 40 Years: More Conservative Case Shared Appreciation Fixed Simple Interest at 3%
Taxpayer Funding
For loans $10.0 billion $10.0 billion
For administration, origination, counseling and servicing costs for 40 years

4.1 4.1
Total taxpayer funding over 40 years 14.1 14.1
Present value at 3.0% 10.8 10.8
CA Dream for All Loan Originations
Borrowers assisted over 40 years 144,000 133,900
$ price of homes purchased $157 billion $141 billion
Loans to borrowers $31.4 billion $28.2 billion
Present value at 3.0% 18.1 16.9
Borrower Share of Home Appreciation Through Year 40
Borrower share of appreciation thru year 40 $61.8 billion $61.8 billion Present value at 3.0% 31.2 31.6
Overall Impact
Residual value of program receipts after year 40 to help subsequent borrowers
$13.0 billion $7.5 billion
Present value at 3.0% $2.7 $1.6
Net cost to State for 40 years of program $10.8 – $2.7 billion = $10.8 – 1.6 billion = Present value at 3.0% $8.1 billion $9.2 billion
Net cost to State for investing with borrowers
Borrower Share of Appreciation / Net cost to State 31.2 / 81 billion = 31.6 / 9.2 billion = Each present value at 3.0% 3.9 x 3.4 x

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117
Beyond the borrower appreciation generated
through this time horizon, there is a major
difference in the ability of CA Dream for All Fund
to continue helping borrowers
Resources to help additional borrowers. A
shared appreciation program creates far more
accrued public resources to help subsequent
buyers generate household wealth. The amount of
accrued interest or shared appreciation accrued
by the Fund at the end of 40 years is a cost to
current borrowers—but it is also a resource for
helping future first-time buyers.

In the expected case, a shared appreciation
program will generate five times more resources
from repayments after year 40 to help future
buyers than a fixed interest program ($35.8 billion
versus $7.6 billion). In the more conservative case,
shared appreciation will accrue two times more
resources than a fixed interest program.

Why is this important? Whether the State charges
fixed interest or shared appreciation, investing
alongside borrowers generates a much larger
amount of household wealth than the amount
of state dollars invested. On a present value
basis, the $10 billion initially invested in program
loans generates about six times that amount of
borrower household wealth over 40 years in the
expected case or about three times that amount
of borrower household wealth in the more
conservative case.

Therefore, the amount due back to the Fund
from loans that are outstanding in year 40 is very
significant: those monies helps the State assist
many more subsequent borrowers generate
household wealth thereafter.

In a shared appreciation approach, the amount of
this residual is five times greater than in the fixed
interest approach. In the conservative case, the
shared appreciation residual is two times greater
than with fixed interest.

This residual impact can be viewed in two
different ways:

Efficiency of State investment in generating
household wealth. One way is to picture the Fund
not making new loans after year 40, but rather
paying back to the State what the Fund receives
from outstanding loans. The net effect can be
considered on a present value basis, as shown in
Figure 57 of the body of the report.

Fund continuing to make new loans.

Alternatively, one can picture the program
continuing after 40 years and making new loans,
and compare the household wealth generated
under shared appreciation versus fixed interest.

The following charts show the effect on borrower
appreciation of the Fund continuing to make
loans through year 60. In the expected case, the
cumulative impact on borrower appreciation is
far greater with shared appreciation. In the more
conservative case, there is little difference.

Attachment 2Page 148 of 311

118
Figure 61: Borrower Share of Home Price Appreciation Expected Case CONFIDENTIAL DRAFT WORK PRODUCT, DELIBERATIVE DOCUMENT – NOT FOR PUBLIC DISTRIBUTION Borrower Share of Home Price Appreciation
(net of second mortgage shared appreciation or simple interest obligation)

EXPECTED CASE

Attachment 2Page 149 of 311

119
Figure 62: Borrower Share of Home Price Appreciation Conservative Case CONFIDENTIAL DRAFT WORK PRODUCT, DELIBERATIVE DOCUMENT – NOT FOR PUBLIC DISTRIBUTION Borrower Share of Home Price Appreciation
(net of second mortgage shared appreciation or simple interest obligation)

MORE CONSERVATIVE CASE

Attachment 2Page 150 of 311

120
CONTACT: 916-491-0022 | [email protected] | cafwd.org | @MoveCAFWD

Attachment 2Page 151 of 311

Measure A1 Oversight Committee Presentation
Measure A1 Down Payment Assistance Loan Program
March 24, 2022

Attachment 2Page 152 of 311

Original Program Framework
• Assist First Time Home Buyers to purchase homes in Alameda County • Serve households earning ≤120% AMI (with ability to go up to 150% AMI) • Include design features that:
• encourage Alameda County residents to purchase homes near work or transit that takes them to work.
• benefit former Alameda County residents that have been displaced. • benefit educators and first responders so they may live in the communities in which they work.
• Loan to be structured as a shared appreciation, silent second mortgage.

The Alameda County Board of Supervisors adopted a policy framework in 2018 which drove the Program Design. The program was designed to:

Attachment 2Page 153 of 311

Equity-Centered Policies
Included in the original program design:
3 • Tiered levels of assistance based on household income and market-based need • Multilingual outreach and interpretation services
• Shared appreciation loan to balance wealth-building for individuals with long- term program sustainability
• Robust race data collection throughout the process.

Attachment 2Page 154 of 311

Measure A1 Funding at Work
Closed Loans: $11.41 million (86 homebuyers)
Funds Reserved: $7.43 million (38 applicants)
Funds Remaining: $26.16 million*

41.9%
in 36
months
*Expect remaining funds to be spent within the next three to four years Measure A1 – Down Payment Assistance Loan Program
AC Boost – $50 million of the total $580 million in Measure A1 Program launched March 2019;
Outcome Data as of March 2022

Attachment 2Page 155 of 311

Funding Cycle 2 Update
Significant policy changes were approved by the Board of Supervisors in April 2021
• Increased loan amounts – up to $160k or $210k
• Reduction in required cash to close
• 1.5% Seasoned Funds no longer required
• Layering with other subordinate loan programs allowed, if approved in advance by the County
• Front-end ratio minimum of 25% waived for Section 8
homeownership voucher recipients

Attachment 2Page 156 of 311

Funding Cycle 2 Update
The 2nd Pre-Application Period opened from July 15th-August 30th, 2021. 6,081 Pre-applications received (2,294 during funding cycle #1) 1,000 attendees joined the virtual public lottery held on September 17th, 2021 306 applicants have attended the 5 application workshops we have held to date. 86 full applications have been submitted for underwriting. 36 applicants have been approved for a Reservation of Funds to date 8 applicants are currently in contract to purchase a home. 2 Loans have closed

Attachment 2Page 157 of 311

Policy Changes in Funding Cycle #2

Attachment 2Page 158 of 311

Funding Cycle 1 Analysis
Analysis performed with a goal of increasing the success rates for BIPOC households in Funding Cycle 2.
• Reviewed race data collected at key milestone of the initial Pre-Application. o The data suggested that marketing and outreach strategies were highly effective in reaching Black, Asian and Multi-Racial households, with room for improvement for reaching Latinx, American Indian and Pacific Islander households.
o The data showed significant attrition for Black and Latinx households between attending a workshop and submitting a Full Application.
• Administered Survey to households who attended a workshop but did not submit a Full Application.
• Updated research into the racial wealth gap, disparities in homeownership rates by race, and potential policy solutions.
• Updated analysis of countywide home values, home supply, and necessary loan sizing to ensure AC Boost buyers have access to higher-opportunity neighborhoods.

Attachment 2Page 159 of 311

Changes to Policy

1. Reduction in the amount of cash savings households need to contribute in order to participate in the program.
• The maximum combined loan-to-value (“CLTV”)increased from 97% to 100% to reduce the Buyer’scash-to-close requirements. The required down payment can now range from 0-3% based on need.
• Seasoned funds are no longer required.
• The Buyer’scontribution is required to cover closing costs which can come from gift funds, grants, lender credits and/or seller credits. ü So far, 6 households have purchased homes with 0% down payment.

Attachment 2Page 160 of 311

Changes to Policy

2. Increase in the total down payment assistance available to help low- and moderate-income buyers find success.
• Maximum AC Boost loan amount increased from $100K to $160K for households earning less than 120%
• Maximum AC Boost loan amount increased $150K to $210K for households earning less than 100%
• AC Boost is now allowed to layer with other subordinate down payment assistance programs
ü So far, 9 households have purchased homes with the higher loan amounts. ü The program can now be layered with the WISH and NeighborhoodLIFT down payment assistance loan programs and any grant programs.

Attachment 2Page 161 of 311

Changes to Policy

3. Modification to income ratio requirements to ensure AC Boost can help Section 8 homeownership voucher holders find success in Alameda County.
• Waive AC Boost’s 25% front-end ratio requirement for buyers who are Section 8 homeownership voucher recipients.
ü In an effort to increase Section 8 voucher participation, Hello Housing has engaged with the Participating Lender List to identify lenders that are able to provide loans to Section 8 homeownership voucher
ü Hello Housing is reaching out to Homebuying Counseling agencies to ensure any Section 8 Applicants can receive support with additional lender requirements.

Attachment 2Page 162 of 311

Changes to Process in
Funding Cycle 2

1. Increase marketing & outreach to Latinx, American Indian and Pacific Islander buyers.

Hello Housing engaged in targeted outreach to get the word out about the Pre- Application period for Funding Cycle #2 to more Latinx, American Indian and Pacific Islander households.
ü Public health, community service, and faith-based organizations that primarily serve these communities
ü Presented at an event hosted by the National Association of Hispanic Real Estate Professionals ü Program Interview with KSTS Telemundo 48 Bay Area and KDTV Univision 14 in Spanish for their viewers.

2. Provide applicants with more time and more support to complete their application. ü Application period was increased from 3 weeks to 4 weeks. ü Applicants receive a link to set up one-on-one appointments to speak with program staff directly after the application workshops.

Attachment 2Page 163 of 311

Changes to Process in
Funding Cycle 2

3. Provide more support to applicants when choosing a Participating Lender. ü Applicants now receive a Lender Outreach Guide and Checklist after the application workshop.
ü Hello Housing identified Participating Lenders who offer loans to ITIN holders and listed this information on the AC Boost website.
ü Are collecting information from lenders about their available grant programs ü Identifying lenders with Section 8 homeowner voucher experience and loan underwriting ability. This information will be listed on the website once complete.

4. Update the marketing and outreach plan to reflect the impact of COVID on outreach practices.
ü Hello Housing engaged in a robust social media marketing strategy, which had a sizable impact on the number of pre-applications received (6,081 as compared to 2,294 in the first Funding Cycle).

Attachment 2Page 164 of 311

Changes to Process in
Funding Cycle 2

5. Continue, post-pandemic, to offer workshops by Zoom to accommodate the schedules of a diverse applicant pool and to minimize childcare-related barriers. ü All application workshops are now held on Zoom. If applicants can’t attend, they are allowed to reschedule to the following workshop date.

6. Provide approved buyers with additional time to get into a contract for a home. ü Reservation of Funds period was increased from 90 days to 120 days.

Attachment 2Page 165 of 311

Changes to Process in
Funding Cycle 2

7. Increase awareness about program requirements such as potential buyer down payment, closing costs, debt-to-income ratio, lender pre-approval, supporting documents required, etc. sooner in the process.
ü Hosted 2 Community Roundtable meetings via Zoom during the Pre-Application period, where any interested community members could join to learn about buying a home and how to apply.
ü Links to informational resources were added to the Pre-Application submission auto- responses and the lottery position notification emails, including:
• Consumer Financial Bureau’s Home Loan Toolkit
• 1-page infographic on the AC Boost application process (in 5 languages) • List of application required supporting documents
• List of homebuyer counseling agencies
• Participating Lender List

Attachment 2Page 166 of 311

Changes to Process in
Funding Cycle 2

8. Increase transparency/accessibility of information about the program online. ü Posted the current status of lottery positions that have been invited to apply to-date, which is available from the home page - www.acboost.org/lottery-position-status. ü Recording of the lottery was posted to the home page of program website - www.acboost.org.

Attachment 2Page 167 of 311

Affirmative Marketing Strategies
Key marketing strategies included:
• Outreach to organizations and public agencies with close ties to communities that include underrepresented homebuyers.
• Partnering with Alameda County to push information through their social media channels which included NextDoor, Twitter, and Facebook. • Working with diverse realtors, lenders and housing counseling agencies that serve underrepresented homebuyers.
• Working with “connector” individuals and presenting at meetings to encourage meeting participants to become champions of the program.
• Media advertising based on audience demographics in multiple languages (English, Spanish, Chinese, Vietnamese and Tagalog).

Attachment 2Page 168 of 311

AC Boost Outcomes
to Date

Attachment 2Page 169 of 311

AC Boost by the Numbers
86 homes purchased as of March 2022
Key Statistics Average Median
AC Boost Loan Amounts $132,704 $150,000
Household Size 2.5 2
Percent of Area Median Income 98.12% 97.14%
Based on Median Household Size of 2 $97,626
BOS-adopted program objective was to serve
120% AMI and below which is $120,550 for
household size of 2 in 2021.

Attachment 2Page 170 of 311

Home Purchase Prices to Date
Purchase Prices Condo Single-Family
Lowest (BMR) $290,029 $475,000
Lowest (Market Rate) $332,000 $410,500
Median $457,500 $552,500
Highest $750,000 $860,000
Program launched March 2019;
Data as of March 2022

Attachment 2Page 171 of 311

Locations of Purchased Homes*
* No purchases yet in Albany, Berkeley, Piedmont, and Pleasanton. 36 14
9 5 5 4 3 3 2 2 1 1 1
0 5
10 15
20 25
30 35
40 Oakland Hayward San Leandro San Lorenzo Livermore Alameda Castro Valley Fremont Emeryville Union City Newark Dublin Sunol

Attachment 2Page 172 of 311

Household Composition of
Successful Purchasers
86 Households 86 Households
47%
53%
School-Aged Children at Home
No School-Aged Children at Home
Educator
30%
First
Responder
3%
Displaced from
County
1%
Other
66%

Attachment 2Page 173 of 311

Household Composition of
Successful Purchasers
86 Households86 Households
41%
50%
9%
100% - 120% AMI 80% - 100% AMI <80% AMI
14%
82%
4%
White Non-White Chose Not to Respond

Attachment 2Page 174 of 311

Race composition of Pre-Applicants
compared to Alameda County 2021 Data
Race
Funding Cycle 1:

Submitted Pre-
Application*
Funding Cycle 2:

Submitted Pre-
Application*
Funding Cycle 1:

Submitted Pre-
Application*
Funding Cycle 2:

Submitted Pre-
Application*
Compared to
Alameda County
General
Population
Raw Numbers By Total %Total Households 2294 6081
Asian 1365 3483 22.13% 23.54% 32.3%
Black or African American 1750 4302 28.38% 29.08% 11.0% White 643 1268 10.43% 8.57% 30.6%
Multi-Racial 849 2172 13.77% 14.68% 5.4%
Latinx 1064 2577 17.25% 17.42% 22.3%
American Indian 29 66 0.47% 0.45% 1.1%
Pacific Islander 69 176 1.12% 1.19% 0.9%
Middle Eastern or North African 86 275 1.39% 1.86% N/A
Other Race N/A 7 N/A 0.05% N/A
Chose Not to Respond 312 469 5.06% 3.17% N/A
*Race data reported at the individual level. This includes 6,167 household members for Funding Cycle 1 and 14,795 household members for Funding Cycle 2.

Attachment 2Page 175 of 311

Funding Cycle 2 Next Steps
• Application Workshop #6 to be held on 3/30
• Additional monthly application workshops
• Approximately $12 million in loan funds anticipated to be disbursed • Sign up for our Stay Connected newsletter to receive updates - www.hellohousing.org/stay_connected

Attachment 2Page 176 of 311

Buyer Testimonials

Attachment 2Page 177 of 311

Hello Housing’s AC Boost Team
Sarah Shimmin
Senior Program
Manager
Florence Szeto
Loan Closing
Specialist
Paxcelli Flores
Special Projects
Manager
Jennifer Duffy
President
Karen
Khomsonerasinh
Loan Underwriting and
Compliance Specialist
If you have any questions or suggestions, please email our team at [email protected] or call (510) 500-8840.

Attachment 2Page 178 of 311

Frequently Asked Questions
Black Wealth Builders Fund
A component fund of the Richmond Community Foundation (RCF Connects), established by Arlington Community Church.

What is the Black Wealth Builders Fund?
The Black Wealth Builders Fund is a Donor Fund established at RCF Connects by Arlington Community Church (UCC), to support homeownership opportunities for Black/African American first-time home buyers.

How does the fund support homeownership?
H
ome ownership is one way to build wealth and preserve it for future gen
erations. A ma
jor barrier to home ownership is the lack of funds required for a down payment or closing costs. The fund will provide a no-interest loan of up to $15,000.00 for closing costs, down payment assistance, or other financial needs to ensure the close of escrow on a buyer’s first home.

Where can I purchase my home?
T
he Black Wealth Builders Fund will provide funds for first time home buyers purcha
sing homes in Alameda and Co
ntra Costa Counties
How can I apply for the funds?
The first step is to register for the first-ti
me home buyer program with one of our
partner agencies:
• Neighborhood Housing Services: (510) 237-6459 x 1601
Once you complete the program and have an accepted offer on your first home, our partner agency will submit an application to RCF Connects on your behalf to close any gaps you might have in your financing package.

Do I have to pay back the funds I receive?
Yes, you will have to repay the funds, but only when you sell or refinance your home
in the future. At that time, the loan will be repaid in full (remember, no interest is charged) so that we can recycle the funds and provide this opportunity to the ne
xt group of first-time home buyers.

How can I get more information?
Contact one of our partner agencies or call RCF Co
nnects at 510-234-1200.

Attachment 2Page 179 of 311

Office of the City Manager
2180 Milvia Street, Berkeley, CA 94704 ● Tel: (510) 981-7000 ● TDD: (510) 981-6903 ● Fax: (510) 981-7099 E-Mail: [email protected] Website: https://berkeleyca.gov/

WORKSESSION
September 30, 2025
To: Honorable Mayor and Members of the City Council
From: Paul Buddenhagen, City Manager
Submitted by: Scott Gilman, Director, Health, Housing, and Community Services Subject: Social Housing Study and Recommendations

INTRODUCTION
The Berkeley City Council adopted a staff referral to conduct a study on social housing opportunities in Berkeley. City staff partnered with a consultant team to develop a needs assessment, comprehensive review of social housing models, feasibility models, and implementation strategies reflective of Berkeley’s housing market. This report provides an overview of the study’s findings and outlines strategies for advancing social housing in Berkeley.

SUMMARY
On November 9, 2021, the City Council adopted Resolution No. 70,101–N.S., recognizing housing as a human right and referring several items to the City Manager’s Office related to the development of social housing. In response, staff issued a Request for Proposals and selected a consultant team consisting of The Housing Workshop, Urban Math, and PlaceWorks.

The resulting Social Housing Study includes a market analysis and summary of unmet housing needs; case studies from international and domestic social housing systems; financial modeling of potential Berkeley projects; and short and medium-term strategies for advancing social housing in the local context.

This report does not advance a specific policy for adoption at this time. It outlines different models, trade-offs, and potential strategies for the City to consider as part of future planning and program development.

Council may direct staff to explore specific recommendations in more detail or return with implementation proposals.

CURRENT SITUATION AND ITS EFFECTS
Social housing is a broad term encompassing a range of principles and models. Based on a review of social housing literature and programs, the report defines social housing as:

Social Housing Study and Recommendations WORKSESSION
September 30, 2025

 Publicly or mission-driven owned housing that is protected from transfer to for- profit entities
 Permanently affordable housing that is protected from market speculation  Housing that is inclusive of a broad range of incomes  Housing that is centered on resident stability and self-governance The study evaluates the feasibility of implementing social housing models in Berkeley and outlines a series of potential pathways.

Study Scope and Objectives
The study includes:
 A market analysis and summary of unmet housing needs in Berkeley;  Case studies from Vienna, Denmark, Montgomery County (MD), and other U.S. examples;
 Financial modeling of two prototypical social housing projects in Berkeley; and  Opportunities and strategies for near- and long-term implementation.

Opportunities for Social Housing in Berkeley
The study outlines implementation strategies over two timeframes:

Short-Term (1–3 Years)
 Strategic Partnerships:
o Convene nonprofit housing providers and community land trusts to discuss social housing approaches.
o Engage with larger nonprofit developers to support mixed-income acquisitions and conversions.
o Continue to work with the Berkeley Housing Authority to align efforts and explore joint financing opportunities.
 Pilot Projects:
o Pilot a Mixed-Income Project using CalHFA’s Mixed-Income Program (MIP).
o Partner with the Housing Accelerator Fund (HAF) to pilot a cost-efficient social housing project.
o Pilot a social housing acquisition-rehab ownership conversion project. o Engage in statewide social housing initiatives like the State’s Social Housing Study (SB 555) led by UC Berkeley’s Terner Center to shape policy and funding opportunities.

Social Housing Study and Recommendations WORKSESSION
September 30, 2025

 Tenant Governance:
o Work with operating and pipeline housing projects to pilot strategies including participatory budgeting, rent transparency, annual financial transparency meetings, and/or tenant councils.
 Financing Tools:
o Continue supporting Berkeley’s Small Sites Program (SSP) as a social housing model, review program guidelines, and identify a sustainable funding source.
o Prioritize cost-containment in development through modular construction, smaller units, and design efficiencies.
o Identify publicly owned and underutilized sites for pilot projects, especially those that can be offered at reduced or no cost. Work with other public agencies with land, such as the Berkeley Unified School District.

Medium-Term (4–10 Years)
These strategies are centered on formulating an Affordable Housing Strategic Plan, building on the short-term strategies. A plan is not required to advance these goals. It is recommended to organize a coordinated effort. However, forgoing a plan should not inhibit Council from advancing any of these strategies. This includes:
 Define Policy Goals:
o Funding and program development will reflect policy goals. Establishing clear objectives for income mix, tenure types, and tenant governance will determine funding strategies and prioritize projects (especially given limited funding).
o Set a long-term target for social housing as a percentage of the City’s total rental stock, including goals for specific subpopulations. o Coordinate with UC Berkeley’s research institute’s to conduct a Student Housing Needs Survey to identify more accurate data related to Berkeley’s student population.
 Decommodification Tools:
o Strengthen strategies to decommodify housing by preserving affordability in expiring properties, embedding long-term protection in new developments, and using tools like acquisition loans and community/tenant housing acquisition ordinances (known as Community/Tenant Opportunity to Purchase or COPA or TOPA).  Establish the City’s Role:
o Clarify whether the City should facilitate social housing through partners or expand into direct ownership/development.

Social Housing Study and Recommendations WORKSESSION
September 30, 2025

 Expanded Site Inventory:
o Identify non-City publicly owned, nonprofit, religious, and underutilized sites beyond City-owned sites and Housing Element Opportunity sites.  Innovative Financing:
o Encourage innovative public financing tools to support social housing, such as Enhanced Infrastructure Financing Districts (EIFDs) or low-cost debt (e.g., Community Development Financial Institution (CDFI) partnership) to lower predevelopment and infrastructure costs. o Advocate for dedicated, flexible State acquisition/rehab funding.  Local Funding Strategy:
o Develop a dedicated fund to support social housing (e.g., parcel tax, bond measure).
 Strengthen Cost Controls:
o Refine and strengthen funding guidelines to reduce costs, including unit size limits, per-unit cost ceilings, developer fee caps, and guidance on materials and design.
 System Design:
o Establish a human-centered housing system responsive across life stages.
 Tenant Governance:
o Codify participatory governance and support tenant leadership. o Build on pilot efforts by establishing a clear framework in City policy and funding agreements that includes participatory budgeting, cost-based rent transparency, and support for tenant councils.

Site Analysis and Financial Modeling
Many social housing models leverage access to reduced or no cost publicly-owned land. Consultants and staff conducted an extensive review of City-owned land to model for social housing.

The referral directed staff to model 1011 University Avenue. HHCS was informed other departments were pursuing uses for that site at the time of the study. HHCS met with the Public Works Department to review several other potential City properties that did not move forward due to competing uses.

Social Housing Study and Recommendations WORKSESSION
September 30, 2025

None of the sites identified in previous staff studies were suitable for development or redevelopment for this analysis. Most were either too small (yielding less than 10 units total) or contained City facilities with existing departmental renovation plans (e.g., South Berkeley Senior Center).

Staff shifted the focus to two privately-owned prototype sites:
 Acquisition/Rehabilitation Model: Modeled on the 2023 sale of adjacent apartment buildings at 1626 and 1654 Dwight Way.
 New Construction Model: Modeled on an entitled project at 2655 Shattuck Avenue, in the Adeline Corridor Specific Plan Area.

These prototypes allow for insight into how social housing principles could be adapted to projects in the local market. Each model was evaluated in both rental and ownership formats.

Key Findings of Financial Modeling
 Acquisition-rehab is a cost-effective social housing strategy, offering lower total per-unit costs compared to new construction. However, the current funding ecosystem does not allow the City to leverage funds on par with new construction.
o Trade-offs for costs include displacement prevention and reduced timeline compared to new construction
 Homeownership is most viable through acquisition-rehab. This provides equity- building opportunities for households priced out of the market.  Cost containment and access to low-cost debt are necessary for scalability.  Berkeley needs support from outside funding sources to deliver social housing at scale, particularly for:
o Serving extremely low- and very low-income households, which require greater subsidy.
o Funding acquisition-rehab. Funding ecosystems are not as developed as new construction, and the City currently faces higher local costs.  There are two different strategies for new construction:
o Leveraging the market by including more market-rate units to cross- subsidize lower-income units, with public funds filling the equity gap; or o Relying on larger public investment to serve a higher portion of low- income households.

Social Housing Study and Recommendations WORKSESSION
September 30, 2025

Case Studies
The study reviewed models from Vienna, Denmark, and Montgomery County (Maryland) as well as other burgeoning US efforts. Recurring principles and findings include:
 Government and nonprofit ownership can both sustain effective social housing.  Long-term, sustained public investment is essential to scale development.  Meaningful tenant governance requires formal structures, education, and a balance between resident power and professional management.  While modeling and policy are focused on supply, demand-side supports like rental vouchers and rent subsidies still play a critical role in sustaining social housing.
 Cost containment is a central strategy in affordable housing production.  Vienna and Denmark examples offer human-centered approaches to design and eligibility for housing at all stages of life.
 Vienna and Denmark structure social housing waitlists to support residential mobility within the system.
 Denmark’s National Building Fund and Montgomery County’s Housing Production Fund operate revolving loan funds that reinvest in housing through different mechanisms.
 Montgomery County’s Housing Production Fund demonstrates a viable model for a locally controlled social housing fund operating in the US, leveraging the current financial ecosystem (e.g., equity, bank loans).

Housing Needs Assessment
The study reaffirmed persistent housing challenges in Berkeley, including:
 High rates of rent burden, particularly among seniors;  Homelessness and housing insecurity among various populations, including students;
 Ongoing displacement, especially of long-standing Black communities;  Insufficient affordable housing supply;
 Market-driven erosion of affordable rent-controlled stock (due to vacancy decontrol); and
 Barriers to homeownership for all but high-income households.

Housing Advisory Commission Recommendations
Staff presented the study and findings to the Housing Advisory Commission on June 5, 2025. The commission elected to form a subcommittee to review the study and endorse or add to the recommendations. These recommendations are included as Attachment 1.

Social Housing Study and Recommendations WORKSESSION
September 30, 2025

BACKGROUND
On November 9, 2021, the City Council adopted Resolution No. 70,101–N.S. recognizing housing as a human right and directing the City Manager to study the feasibility of social housing models in Berkeley. This included analysis of publicly owned land and cross-subsidized housing models.

On April 4, 2023, HHCS released a Request for Proposals (RFP) for Social Housing Models and Market Analysis. The City received four responses to the RFP. The selection panel, comprised of staff from HHCS, Planning, and Berkeley Housing Authority, selected a joint proposal from The Housing Workshop, Urban Math, and PlaceWorks.

ENVIRONMENTAL SUSTAINABILITY AND CLIMATE IMPACTS
Advancing social housing in Berkeley through infill development supports the City’s environmental and climate goals. Infill housing reduces greenhouse gas emissions by promoting compact, walkable, and transit-accessible neighborhoods. Rehabilitating existing buildings or constructing new housing on underutilized sites can reduce vehicle miles traveled (VMT), support public transit usage, and limit sprawl-related environmental impacts.

POSSIBLE FUTURE ACTION
The study presents a range of strategies that Council may consider in future policy development, funding allocations, or strategic planning efforts. Council may also direct staff to explore specific recommendations in more detail or return with implementation proposals.

FISCAL IMPACTS OF POSSIBLE FUTURE ACTION
The costs associated with social housing vary depending on the model, financing structure, and policy goals (e.g., income-mix). Potential future actions may include establishing or expanding local funding programs, leveraging state and federal sources, and/or deploying innovative financing tools such as revolving loan funds or Enhanced Infrastructure Financing Districts.

The Council may consider long-term fiscal implications and funding strategies as part of a broader Affordable Housing Strategic Plan or future budget cycles.

CONTACT PERSON
Mike Uberti, Senior Community Development Project Coordinator, HHCS, (510) 981-5114
Attachments:
1: Housing Advisory Commission Social Housing Recommendations 2: Draft Social Housing Study
3: Resolution 70,101–N.S. Recognizing Housing as a Human Right (adopted November 9, 2021)

Housing Advisory Commission

MEMORANDUM
To: Honorable Mayor and Members of the City Council
From: The Housing Advisory Commission
Date: September 4, 2025
Subject: HAC Input and Recommendations on Berkeley Social Housing Study

BACKGROUND
Berkeley's social housing initiative began with Councilmember Terry Taplin's November 2021 resolution recognizing housing as a human right. The city issued an RFP in April 2023

for a consultant to study and analyze social housing models and conduct market feasibility analysis.

On June 5, 2025, the consultants presented their draft findings to the Housing Advisory Commission. The Commission subsequently developed this brief memorandum as a
companion to the study, to inform the Council’s review of the study and consideration of next steps.

KEY OBSERV ATIONS
Strategic State Alignment: Berkeley's social housing exploration strategically aligns with
unprecedented state momentum. Recent initiatives include AB 11, establishing a California Housing Authority framework (passed Assembly June 2025), AB 590 proposing a $950M bond for November 2026, and 2023’s SB 555, which required HCD to study social housing.

With Berkeley taking its own initiative, the city can position itself as an early adopter, accessing dedicated state financing and technical resources. The HCD/Terner study is expected to be available in 2026.

Montgomery County Focus: The Housing Opportunities Commission in Montgomery County, Maryland (described in the consultant’s report) provides the most relevant model for Berkeley, operating under similar financial and legal frameworks. The Berkeley Housing Authority has already taken steps down this path, with its 2020 creation of Affordable Housing Berkeley, Inc.1, “a non-profit entity which will have a goal of increasing development of low-income housing in Berkeley.”
Berkeley's Proven Track Record: The study shows Berkeley has significantly outperformed regional averages in affordable housing production. While cost-burdened renters increased 34% regionwide between 2000 and 2020, Berkeley saw only 5% growth. Berkeley also achieved 59% of its Very Low-Income housing targets over three RHNA cycles, compared to 33% county-wide. The city also enjoys a Rent Board and a long-standing collection of policies that promote safe, stable, and affordable tenancies. The city should celebrate these successes.
1 https://bha.berkeleyca.gov/bhaahb-boards/affordable-housing-berkeley-inc Attachment 1

Social Housing as Framework: Berkeley should consider adopting social housing principles as the overarching framework for all affordable housing strategies, positioning social housing not as one program among many, but as the philosophical foundation underlying the city's entire affordable housing ecosystem.

RECOMMENDED NEXT STEPS

1. Reframe Existing Programs: Find ways to apply social housing principles—permanent affordability, community control, mixed-income integration, and public/nonprofit ownership—to existing and future programs including inclusionary housing, Housing Trust Fund investments, and BMR units.

2. Develop Tenant Governance Framework: Pursue meaningful tenant representation in governance structures and transparent management practices across Berkeley's affordable housing portfolio. This approach could help address ongoing issues with property management at nonprofit buildings while aligning with social housing principles.

3. Funding Strategy: Lay groundwork for a 2028 bond measure to succeed Measure O while maximizing state and regional funding sources, including CalHFA MIP and SF HAF BAHIF programs. Explore other potential sources of financing.

4. Cost Containment Focus: Implement systematic approaches to control development and operational costs. Consider how to clear regulatory and financial hurdles to streamline timelines for mixed-income social housing projects and conduct an expansive site inventory.

5. Set Realistic Targets: Focus on practical, achievable steps that build program credibility over time. Successful demonstration projects will generate community support more effectively than overly ambitious plans. Council should establish thoughtful, achievable targets that allow the program to build momentum and community confidence.

Additional:

The City of Berkeley should consider developing an affordable homeownership pilot under
an acquisition/rehab model, and consider how applying a preference policy can advance our equity goals. With a public subsidy of $150,000 to $250,000 per unit, an ownership model through acquisition/rehab can create long-term affordable housing for less than the average local subsidy for traditional affordable housing.

The report describes Berkeley’s generational loss of Black households, and says that “for Black owner households, the loss was greatest in the 30-50% income band.” There is a potential for synergy between an ownership/acquisition/rehab model and Berkeley’s Preference Policy, which includes an affordable housing preference for individuals displaced from Berkeley due to foreclosure since 2005. Under an aligned program structure, this policy could redress some of that displacement. 2 Attachment 1

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Table of Contents

Executive Summary .................................................................................................................. i

1. Introduction .......................................................................................................................... 1 What is Social Housing? ........................................................................................................ 2 Integrating Social Housing into Berkeley’s Existing Housing Framework ............................... 3 Report Organization .............................................................................................................. 4

2. Berkeley’s Current Housing Conditions ............................................................................. 5 Demographic and Household Trends .................................................................................... 5 Critical Housing Needs .......................................................................................................... 8 Berkeley’s Current Affordable Housing Delivery System ....................................................... 11 Affordable Housing Supply ...................................................................................................16 Social Housing: A Paradigm Shift .........................................................................................20

4. Social Housing Case Studies .............................................................................................21 Vienna, Austria .....................................................................................................................21 Denmark...............................................................................................................................24 Housing Opportunities Commission (Montgomery County, MD) ...........................................28 Emerging Social Housing Initiatives in the US ......................................................................31 Summary of Case Studies and Application to Berkeley ........................................................34

5. Financial Modeling for Social Housing in Berkeley ..........................................................38 Concept 1: Acquisition/Rehabilitation of Existing Housing ....................................................40 Concept 2: New Construction ...............................................................................................48 Focus Group Feedback on Social Housing Examples ..........................................................56

6. Opportunities for Social Housing in Berkeley ..................................................................59 Recommendation 1: Short-Term Actions...............................................................................60 Recommendation 2: Affordable Housing Strategic Plan ........................................................67 Appendix A: Methodology for Report ....................................................................................74 Appendix B: Detailed Housing Data ......................................................................................77 Appendix C: Detailed Pro Forma Financial Analysis ............................................................85 Appendix D: Additional Resources ...................................................................................... 107

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Executive Summary
The Berkeley Social Housing Study explores how the City of Berkeley can begin to integrate social housing principles into its broader housing framework, advancing a vision of housing as a universal right. As the housing crisis deepens, Berkeley faces challenges, and there is growing recognition that existing programs are not sufficient to meet the scale of the housing need.

Interest in social housing is growing, drawing inspiration from international models like Vienna.

From Seattle to Rhode Island, governments are exploring public ownership, cross-subsidization strategies, and tenant governance. Yet key questions remain: how social housing differs from traditional affordable housing, what income levels it should serve, and how to pursue these goals in the context of limited funding and an underdeveloped social safety net.

This report explores the principles of social housing and how it can be implemented in Berkeley to improve the delivery of affordable housing to meet local needs. It begins by defining key principles, using case studies to illustrate how these are put into practice. A financial analysis explores trade-offs between new construction and acquisition-rehab, rental and ownership, and balancing market-rate cross-subsidies with deeper affordability. The report concludes with recommendations outlining how the City can initiate near-term actions and long-term strategies to advance social housing.

This moment offers an opportunity for reflection and strategic direction. Berkeley has long been a leader in progressive housing policy, with tools that already advance social housing principles.

This report offers a framework for the City to evaluate its current programs while charting a forward-looking agenda to deepen its commitment to housing as a public good.

What is Social Housing?
A literature review identifies several core principles that collectively define social housing as:
• Publicly or mission-driven owned and protected from transfer to for-profit entities • Permanently affordable and protected from market speculation • Inclusive of a broad range of incomes
• Centered on resident stability and self-governance

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Berkeley Housing Needs
The analysis highlights several key housing needs in Berkeley:
• Cost-Burdened Households: As of 2020, more than 10,000 renter households earning less than 50% AMI were cost-burdened. Seniors comprised about 20% of this group, a share that is expected to grow as the baby boomer generation continues to age in place. • Unhoused People. The 2024 Point-in-Time count identified 844 unhoused individuals in Berkeley. Housing insecurity also affects the student population: in 2021, 8% of UC Berkeley’s roughly 38,000 students reported spending at least one night in a temporary shelter or a place not intended for habitation due to lacking a permanent home. • Loss of Black/African American Households. Berkeley’s Black population declined by 39% from 2000 to 2023 from 13,700 to 8,415 residents. In this same period, Black homeownership also fell from 40% to 32%, with Black homeowners leaving the city at a faster rate than renters.
• Outstanding Affordable Housing Needs. While Berkeley continues to make progress in affordable housing production, it has not historically fully met its Regional Housing Needs Allocation (RHNA) goals. The City experienced slow permitting in the first two years of the current 2023–2031 RHNA cycle. However, upcoming projects, such as the affordable housing planned at the North Berkeley and Ashby BART stations, offer potential to help the city reach its RHNA goals by the end of the cycle. • Long-Term Status of Rent-Controlled Inventory. Although approximately 21,500 rental units in Berkeley are subject to limits on rent increases during a tenant’s occupancy, over time, many of these units turn over and reset to market rents, reducing the long-term affordability of the rent-controlled stock. • Limited Access to Equity Building through Homeownership. In 2000, the median- income household in Berkeley could afford the median-priced home, but that is no longer the case. Today, homeownership is increasingly out of reach for all but higher income households, limiting opportunities for equity building and long-term stability.

Case Study Findings
This report presents case studies showcasing both European models and U.S. examples of how cities are moving towards social housing. Vienna and Denmark are featured as long-standing examples, demonstrating the impact of sustained public investment in affordable housing. The report also features U.S.-based case studies, primarily Montgomery County, Maryland, along with brief overviews of efforts in California, Seattle, and San Francisco, to illustrate how American cities are adapting social housing.

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Findings include:
• Social housing can be effectively owned and managed by government entities AND nonprofit organizations. Both European examples started with municipal-built housing after World War II but have since evolved. Denmark's system is decentralized, built, and managed by a network of over 500 nonprofit housing associations. Vienna has shifted from direct public production to a model led by limited-profit housing associations (LPHAs). • Social housing plays a transformative role when it represents a substantial share of the overall housing stock. In Denmark, it accounts for approximately 21% of all homes. In Vienna, the impact is even more pronounced, with 43% of housing owned by the City or limited-profit associations, keeping it outside the speculative market. Unlike the U.S. approach, where affordable housing relies on limited public subsidies and market-rate filtering, these models show that expanding social housing directly is an effective strategy for achieving more immediate and long-term affordability.
• A long-term commitment to sustained funding is essential to scaling production. In Vienna and Denmark, a commitment to social housing is supported by dedicated public funding streams that enable local governments and nonprofits to pursue social housing.

These countries do not rely solely on private market incentives; instead, they actively shape production through coordinated policy, public investment, and strategic partnerships. • Cost containment as a central strategy for production. The European case studies use tools such as land banking, coordinated infrastructure planning, and innovative housing typologies to keep production expenses low. At the same time, they maintain a strong emphasis on design quality and sustainability, recognizing that subsidized housing must be functional, visually appealing, and well-integrated into the broader urban environment. • Vienna and Denmark offer human-centered approaches to eligibility for housing at all stages of life. In Denmark, income is not a factor defining eligibility; instead, the various housing associations operate within a flexible system, seeking to provide housing to all that request it. In Vienna, income limits exist, but are defined more broadly than in the US, with eligibility up to 180% AMI, ensuring widespread access to affordable housing. • Denmark and Vienna offer important lessons on how to structure waitlists to support residential mobility within the system. Their systems prioritize resident needs, allowing individuals to move within the housing system as their circumstances evolve, whether due to employment changes, family growth, or aging. In the U.S., there is often no clear path for a resident in LIHTC housing to transition to affordable ownership, for example. By contrast, Denmark and Vienna have built flexible waitlist structures and transfer mechanisms that make such transitions feasible and intentional.

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• An often overlooked but critical aspect of social housing systems is the role of demand-side support, particularly the broader social safety net. In housing, this means providing rental assistance or tenant vouchers to help low-income households afford their homes. For example, in Vienna, 19% of social housing funding is allocated to direct assistance to individuals or households, rather than to the housing itself. This underscores the need to address both the affordable housing shortage and the income that limits access. • Establishing meaningful tenant governance requires formal structures, education, and a balance between resident power and professional management. Tenant governance is fundamentally different from tenant input. In Denmark, governance is formalized; tenants vote on their building’s annual budget at a mandated annual meeting. In contrast, the U.S. largely lacks formal governance structures in housing; most tenant participation is voluntary and advisory. Moving toward true governance in the U.S. would require piloting new structures and investments in tenant education. • Montgomery County’s Housing Opportunity Commission (HOC) provides a U.S.- based example of how elements of a social housing model can be adapted within a conventional affordable housing finance system. Evolving from its origins as a public housing authority, HOC develops both mixed-income and 100% affordable projects. In mixed-income developments funded by the Housing Production Fund, it retains an equity stake, preserving elements of public ownership and long-term control. • Both Denmark’s National Building Fund and HOC’s Housing Production Fund operate revolving funds that reinvest in social housing, but through different models.

Denmark’s fund is sustained by surplus rent from paid-off social housing loans, creating a self-financing system rooted in tenant contributions. HOC’s Housing Production Fund uses public bond financing repaid through project-level permanent financing to recycle capital into future developments. Both approaches reduce dependence on private capital and ensure ongoing reinvestment in permanently affordable housing.

Financial Analysis of Social Housing Examples in Berkeley The financial analysis examines two scenarios: one involving the acquisition and rehabilitation of a recently sold 21-unit building on Dwight Way, and another focused on a new construction project entitled on Shattuck Avenue within the Adeline Corridor Specific Plan Area. These scenarios were designed to test two different social housing models. • Option A: Cross Subsidization / Half and Half. Inspired by Montgomery County’s HOC, this scenario uses a cross-subsidy, where revenue from market-rate units helps cover the cost of providing more affordable housing.
• Option B: Predominantly Affordable. The second scenario mirrors a Vienna-style approach by providing units affordable to households at 30%, 50%, 80% of AMI, Attachment 2

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alongside market-rate units, to foster income diversity within the building.

Each set of options was analyzed for both rental and ownership configurations, with the following findings.
• Acquisition-rehab is a cost-effective social housing strategy, offering lower per-unit costs compared to new construction. The total development cost (TDC) for acquisition- rehab is estimated at approximately $460,000 per unit, compared to $725,000 per unit for new construction. Recent market shifts have also expanded opportunities to acquire market- rate buildings, such as Bridge Housing’s acquisition of a market-rate building in Berkeley.

While acquisition-rehab has a lower all-in cost, it lacks ample dedicated state funding sources, which makes the local subsidy higher. Still, this approach offers key advantages: it enables faster delivery of permanently affordable units, mitigates displacement, and supports smaller-scale nonprofits, such as community land trusts (CLTs). Given Berkeley’s history of investing in the Small Sites Program, continuing and expanding this can advance social housing goals and support cost-effective, community-based preservation efforts. • Homeownership through acquisition-rehab provides equity-building for households priced out of the market. The public subsidy is relatively low, ranging from approximately $150,000 to $250,000 per unit. Creating a pipeline of subsidized ownership units through acquisition-rehabilitation could be a transformative step, offering residents access to a housing stock that allows them to convert their monthly rent into equity through a modest buy-in. This approach serves as a steppingstone to traditional homeownership, allowing households to build savings, while offering long-term stability for those who wish to remain. • For social housing to be truly scalable, cost containment must be a central focus of new production. Reducing development costs improves project feasibility by lowering the required public subsidy, allowing more projects to move forward. In the proforma scenarios, three cost-saving adjustments were tested: (a) eliminating land costs, (b) reducing the permanent loan interest rate from 6% to 3%, and (c) lowering construction costs by 8% to $475 per square foot. With these adjustments, a 50/50 (market-rate/affordable) project with approximately 100 units requires about $17 million in public subsidy, compared to $40 million in public subsidy needed without these cost-saving measures. • Providing low-cost debt for social housing is a strategy for closing financing gaps and increasing project feasibility. Currently, high interest rates have sidelined many market-rate developers, as the cost of debt significantly reduces cash flow available to equity investors, making new housing development financially infeasible. In the social housing sector, reducing long-term financing costs through lower-interest loans would allow projects to support more debt, thereby lowering public subsidies.

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• There are two different strategies for delivering social housing through new construction. Option A involves leveraging the market by including more market-rate units to cross-subsidize lower-income units, with public funds filling the equity gap, like the model used by HOC. Option B relies on greater public investment to serve lower-income households more deeply. While Option A reduces the overall public subsidy needed, Option B delivers a lower subsidy per affordable unit and produces more deeply affordable units to address existing gaps. These approaches are not mutually exclusive. Both can be pursued by aligning roles and directing appropriate resources to the right agencies. • To deliver social housing at scale, especially for Extremely Low- and Very Low- Income households, Berkeley needs support from outside funding sources. New construction is expensive, and the City cannot realistically cover the full cost without help as these projects usually rely on LIHTC and other public funding. To make a real impact, Berkeley should partner with state and regional agencies and community banks/lenders to help shape programs that support social housing.

Focus Group Feedback on Social Housing Examples
As part of the research for this report, a focus group of Berkeley residents from diverse income levels were convened to explore perceptions of social housing. Overall, the focus group affirmed broad support. Participants liked the idea of mixed-income housing and supported both new construction and acquisition-rehab approaches. They emphasized the need for housing that can adjust to changing life stages and household needs. There were questions about how tenant governance would work, and many emphasized the importance of professional property management and maintenance. Lower-income participants were open to ownership with limited or shared appreciation, while moderate- and higher-income participants were interested but wanted to see proven results first. Additional details on governance, community dynamics, and long-term stewardship are discussed in the full report.

RECOMMENDATIONS

Short-Term Recommendations
Thes
e recommendations will support the City of Berkeley advancing towards a social housing approac
h in the next 1-3 years:

A. Strengthen Existing Partnerships
• Convene nonprofit housing providers and community land trusts to discuss social housing and ex
plore flexible, human-centered approaches. One action is to encourage collaboration among nonprofits to support transitions across their housing portfolios.

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• Strengthen partnerships with larger nonprofit developers to support mixed-income conversions, such as BRIDGE Housing’s acquisition of the Avalon property, which will transform a market-rate project into a 50/50 mix of affordable and market-rate units. • Continue supporting Berkeley’s two active CLTs (NCLT and BACLT) by providing funding for operations and projects through the Small Sites Program, and by piloting encouraging affordable homeownership projects. Assess how CLTs can expand their role advancing social housing goals and encourage them to share best practices in tenant governance to inform City policy and program design.
• Continue to work with the Berkeley Housing Authority to align efforts and explore joint financing opportunities.

B. Pilot Closer Alignment with Social Housing Principles • Promote tenant leadership: Partner with affordable housing providers to support tenant councils and leadership opportunities, including best practices guides, training sessions, and an annual Tenants’ Governance Summit to strengthen tenant capacity and knowledge-sharing.
• Pilot annual financial transparency meetings on a voluntary basis in select City- funded projects, where residents receive a clear breakdown of the building’s finances, including rent collected, operating costs, reserves, and planned improvements. Modeled after Vienna’s approach to rent transparency, this promotes trust and accountability and lays the groundwork for greater tenant engagement.
• Pilot participatory budgeting: Test a participatory budgeting model where residents vote on their building’s operating budget, with accessible presentations, multilingual materials, and facilitated collaboration with property management to ensure informed participation.
• Integrate into City standards: Use findings from these pilots to inform future policy, potentially incorporating tenant governance, rent transparency, and participatory budgeting requirements into City funding agreements for affordable housing.

C. Improve Delivery and Financing
• Continue supporting the Small Sites Program as a social housing model: The Small Sites Program serves as a form of social housing by removing buildings from the speculative market and preserving them as permanently affordable. The City should continue funding this program, review and refine its guidelines, and identify a sustainable long-term funding source to expand its impact.

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• Encourage cost containment: to address rising development costs, the City should promote strategies such as modular construction, smaller units, and design efficiency.

The San Francisco Housing Accelerator Fund (HAF) is testing approaches to reduce per-unit costs and encourage industry innovation. The City could partner with HAF on a pilot project to demonstrate scalable, lower-cost affordable housing (see Recommendation D).
• Identify publicly owned and underutilized sites for pilot projects, especially those that can be offered at no or low cost.

D. Launch Pilot Projects
• Pilot a Mixed-Income Project using CalHFA’s Mixed-Income Program (MIP). This program is already structured to support a balanced income mix and could serve as a foundation for testing social housing in Berkeley. With a dedicated 4% LIHTC set-aside, MIP reduces reliance on local subsidies and provides long-term subordinate loans for projects serving households from 30% to 120% AMI. Berkeley should issue a Notice of Funding Availability (NOFA) to encourage the use of MIP in a new construction project. • Partner with the Housing Accelerator Fund (HAF) to pilot a cost-efficient social housing project by issuing an RFP for a specific site; qualifying projects may access innovative HAF financing, enabling faster delivery without relying on competitive tax credits, especially suited for smaller unit projects serving youth or seniors. • Pilot a social housing acquisition-rehab ownership conversion project by transforming a small multifamily property into a Limited-Equity Housing Cooperative (LEHC), providing a lower-cost path to affordable homeownership, building CLT and nonprofit capacity, and testing key social housing principles like tenant governance, participatory budgeting, and long-term affordability.
• Engage actively in statewide initiatives like the SB 555 Social Housing Study to shape policy and funding opportunities.

Mid-Term Recommendations
This set of recommendations centers on formulating an Affordable Housing Strategic Plan, building on the short-term strategies. The Strategic Plan should include the following components:
• Define social housing policy goals: Establish clear objectives for income mix, tenure types, and tenant governance; set a long-term target for social housing as a percentage of the city’s total rental stock, including goals for specific subpopulations. As part of this process, identify housing needs across life stages and conduct a University Student Attachment 2

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Housing Needs Survey.
• Determine the City's future role: Social Housing models vary in terms of government capacity and role. The City should consider how to approach social housing in the future - via a continued role as a funder/facilitator or a transition towards direct public ownership and development (e.g., Montgomery County, Seattle). This evaluation should consider governance structure, staffing capacity, legal authority, and access to financing tools.

• Conduct a sites inventory to identify no- or low-cost land suitable for social housing development, including underutilized City-owned properties, other public agency-owned sites, religious institution land eligible under SB 4, and functionally obsolete commercial properties which may require rezoning. This inventory would differ from the recent 2023- 2031 Housing Element Opportunity Sites inventory, which focused on residentially-zone land in private ownership.
• Develop a local funding strategy to support social housing, including options such as voter-approved bonds, parcel taxes, a high-earner employer or employee tax; also evaluate creating a revolving loan fund, similar to Montgomery County HOC’s Housing Production Fund to provide flexible, public-backed financing. • Formalize cost controls: Establish formal cost containment standards for social housing projects to improve efficiency and scalability, including unit size limits, per-unit cost ceilings, developer fee caps, and guidance on materials and design, building on innovations tested through partnerships with the HAF and other pilot programs. • Encourage innovative public financing tools to support social housing: The City should pursue financing mechanisms like Enhanced Infrastructure Financing Districts (EIFDs) to lower predevelopment and infrastructure costs. This approach can be replicated in Specific Plan Areas to fund utilities, streets, and public amenities. By capturing future property tax growth, EIFDs can remove costs from individual projects. •
Strengthen strategies to decommodify housing by preserving affordability in expiring properties, embedding long-term protection in new developments, and use tools like acquisition loans and COPA or TOPA to convert market-rate units into permanently affordable, community-owned housing.
• Formalize tenant governance to ensure meaningful participation in decision-making.

Build on pilot efforts by establishing a clear framework that includes participatory budgeting, cost-based rent transparency, and support for tenant councils. Invest in tenant education, union organizing support, and technical assistance to empower residents across all City-supported housing.

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• Design a human-centered, life-stage responsive social housing system that supports residents from youth to old age, framing housing as a universal public good.

This includes developing housing tailored to students, families, and seniors; improving flexibility in unit transitions; enhancing waitlist systems; and using branding and communications to shift public perception toward inclusive, dignified housing.

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1 1. Introduction
The City of Berkeley has a long history of policies and programs aimed at providing affordable housing to its residents. Embodying the view that housing is a human right, the City adopted one of the first rent stabilization programs in California to offset market rent rises. However, this policy only affects the portion of the existing multifamily housing stock built before June 1980, and vacancy controls were also prohibited by a change to state law in 1995, allowing units to be re-rented at market-rates upon vacancy for subject units (with subsequent regulated rent increases for that tenant). This means
that even for this portion of Berkeley’s
housing stock, as rental units changed
occupancy over time, rents have risen
dramatically, including among the portion
of housing stock subject to rent
stabilization.

The City has worked to facilitate
construction of new market-rate and
affordable units, leveraging its Housing
Trust Fund program and inclusionary
ordinance to support the creation of
affordable housing. Specifically, the City
of Berkeley provides development loans
for the new construction, acquisition, and
rehabilitation of affordable housing developments via its Housing Trust Fund (HTF) program.

Since 1990, Berkeley’s Housing Trust Fund program has facilitated the creation of over 1,600 affordable units and has a pipeline of over 1,400 units in development. The City’s Small Sites program, established in 2018, has supported the acquisition and rehabilitation of three rental properties, transitioning the units from the market to permanent deed-restriction units.

At the same time, over the past two decades, homeownership opportunities have slipped further from reach for many Berkeley households as sale prices have risen dramatically faster than household incomes, and Berkeley renters have become increasingly rent-burdened. These housing affordability challenges are experienced across the region, state, and country, as well as globally in regions with high housing demand. Clearly more needs to be done to address these housing crises. A new concept called social Housing has been advanced as a way to rethink affordable housing delivery. This report explores social housing and its potential implementation in Berkeley.

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2 What is Social Housing?

Globally and in the US, as housing affordability has continued to decline, interest has grown in the concept of social housing. A review of social housing literature indicates several common principles that together define social housing as:
• Owned by public agencies or other mission-driven organizations and permanently protected from transfer to for-profit entities. This principle means that social housing is owned and operated by public agencies or public authorities, or by community land trusts, limited-equity cooperatives, or other mission-driven nonprofit organizations. This principle anchors social housing as a public good, aligning it with broader societal goals such as climate resilience, racial equity, universal accessibility, and long-term affordability. • Permanently affordable and protected from market speculation. Access to housing must be a social good provided to all members of society, regardless of income. Permanent is defined as the entire life of the housing unit (and some definitions also include land).

Affordable is defined as costing occupants, whether renters or owners (or hybrid arrangements), not more than 30% of household income to live in the unit, including utilities.

Permanent decommodification goes beyond affordability by removing housing from the speculative market entirely, treating it as a public good rather than a financial asset. • Serves a range of incomes, reflecting the right to housing for all. The range of incomes of eligible households to be served by social housing varies by advocacy group; while almost all advocates aim to serve households at the lowest end of the household income range, some seek limits at 80% or 100% of Area Median Income (roughly $97,000 to $125,000 for a two-person household), while others want to include the upper end of traditional affordable housing (up to 120% of Area Median Income), while still others advocate for a mix that incorporates higher levels of income in social housing projects (e.g., “market-rate” housing) to offset the costs of constructing and operating a building. • Protects tenants’ rights, offers tenant governance, and supports long-term resident stability. Tenants should have security to remain in safe, dignified housing over time. This principle includes full protection against termination without just cause, limits on rent increases, and collaborative governance structures with meaningful tenant agency.

Additional safeguards such as the right to legal counsel in eviction proceedings, inheritance rights, and building code enforcement further strengthen tenant stability.

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3 Two additional themes are also present in some social housing literature: building sustainable housing projects (e.g., energy efficient, carbon-neutral projects), and providing housing that fully integrates social services, which can span a range of medical, mental health, job training, affordable childcare, and life skills services.

While most of these characteristics are not new concepts, together they form a vision that can guide public investment and shape partnerships with mission-driven organizations. Social housing is distinct from current housing policy approaches because it emphasizes the direct public goal of providing a necessary social good. To amplify this idea, some advocates situate social housing within a broader housing policy framework as a “public option” similar to publicly provided health insurance, meaning that social housing projects would provide a public option to select from among several options available to meet individual housing needs.

Integrating Social Housing into Berkeley’s Existing Housing Framework

As Berkeley considers social housing principles, it is important to recognize that the City already operates within a long-established housing policy framework shaped by decades of programs and funding strategies, which in turn are partially impacted by federal and state housing programs. While some of these existing policies and programs align closely with social housing ideals, others may only partially reflect those values.

This report does not assess existing programs. Instead, it takes a forward-looking approach, examining how new construction and acquisition-rehabilitation projects funded by the City could be structured to better align with social housing goals. In addition to examining social housing principles, the report includes a financial analysis of housing models that serve a range of incomes. The proforma analysis explores the trade-offs between two strategies: one that emphasizes mixed-income models to reduce reliance on public subsidies, and another that prioritizes deeper affordability to reach a broader income spectrum. Policy trade-offs are presented to help inform the City’s decisions on future housing investments.

For the other social housing principles, this report draws on case studies, particularly from European systems with more mature social housing traditions, as well as a description of the Montgomery County (Maryland) Housing Opportunities Commission, which provides a domestic example of a public agency moving in this direction.

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4 This report is intended to support ongoing discussion about Berkeley’s housing policies and how social housing principles could be integrated into future approaches. Simultaneously with this report, the State of California through the Terner Center for Housing Innovation (UC Berkeley) is studying social housing from a statewide perspective, amidst a backdrop of pending budget cuts to federal housing programs. Thus, this report can be considered as a head-start on preparing locally for potential changes to the statewide system of affordable housing unit delivery.

Report Organization

This report begins with a summary of recent Berkeley housing trends and current conditions, including an overview of Berkeley’s current affordable housing delivery system. Next, the report profiles international and US examples of social housing programs, followed by a detailed analysis of two example sites in Berkeley that could be developed according to social housing themes in the near term. This on-the-ground analysis of two sites includes financial analysis of a range of income mixes, along with the results of a Berkeley residents’ focus group with participants from across the income spectrum, The report concludes with a summary of potential strategies that the City can take to implement social housing policies.

A detailed description of the research methodology used to prepare this report can be found in Appendix A.

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5 2. Berkeley’s Current Housing Conditions
This chapter summarizes Berkeley’s demographic and household trends, along with current housing supply patterns that have resulted in high housing cost burdens, underscoring the need for more affordable units in Berkeley. Detailed data is provided in Appendix B.

Demographic and Household Trends

Population and Households
Berkeley’s population and household growth trends are complicated by the presence of numerous on- and off-campus student housing facilities. • Berkeley’s total population grew substantially between 2000 and 2023 (adding 16,219 people, a 16% increase). This growth included more than 7,500 new residents living in on- and off-campus housing classified as “group quarters.”
• When just examining the growth of people living in households (not in group quarters), Berkeley grew by 3% for the 23-year period, which was similar to Alameda County’s growth (4%).
• Between 2000 and 2023, Berkeley saw notable population shifts by age group. The number of young adults (aged 18-24) expanded by 11,285 people (a 51% increase) while the senior population (aged 65+) grew by 9,601 people, a 92% increase, as boomers aged in place.

Currently, almost one-fifth of Berkeley’s residents (20,000 people) are seniors aged 65+. • Berkeley’s current average household size (2.15 persons in 2023) is markedly smaller than for Alameda County (2.78) and the Bay Area region (2.59). • In 2023, approximately 24% of Berkeley’s households earned $35,000 or less, compared to just 16% of the County’s and 14% of the region’s households. 1 • In Berkeley, like for most California communities, there is a distinct difference between household incomes for renters and owners. In 2023, the median renter household income was $62,000, compared to the median owner household income of $170,000. • Berkeley’s homeownership rate (41% in 2023) is significantly lower than Alameda County (54%) or the region (56%). Also, even though Berkeley added homeowners since 2000, most of its growth was in renter households, causing a slight decline in overall ownership rates from 2000 to 2023.

1 Data describing household incomes in Berkeley can be difficult to fully evaluate due to the presence of university students, who are included in Berkeley Census data, but may have limited reportable income during their temporary university attendance.

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6 Housing Affordability
There are many ways to describe the affordability challenges in Berkeley. The table below provides a general indicator of housing affordability by tenure. In 2000, the median sale price of a single-family house was $437,00, requiring a household income of $105,000 to purchase. At that time, the actual median income of homeowners in Berkeley was $158,000, meaning that many owners could afford to buy the median priced house. In contrast, by 2023, the household income needed to buy the median single-family home was $314,000, well out of reach of the 2023 median homeowner income of $170,000. This reflects a broader trend: household incomes have not kept pace with the rapid appreciation of home prices.

The situation is different for renter households. In 2000, the income needed to afford the median rent was about $65,000, somewhat above the actual renter household median income at that time ($54,000). By 2023, this gap had widened further for renters: an income of $106,000 was needed to afford the median rent, while actual renter household median income was just $62,000, indicating that many renter households were likely severely cost-burdened.

Table 1: Comparison of Median Berkeley Median Household Incomes & Prices, 2000 – 2023
(Not inflation-adjusted)

Affordable Housing Income Limits
A key metric used to plan affordable supply is the distribution of household income by “income limits,” which are categories of household income defined by the Area Median Income (AMI) and the relationship above or below this number. Area Median Income is defined annually by the US Owners 2000 2023
Single Family Median Home Price (a) 437,156$ 1,452,854$ Household Income Needed to Afford Median Single Family Home (b) 104,667$ 313,932$ Actual Median Income - Owners 157,877$ 169,878$
Renters
Median Effective Market Rate Rent (c) 1,616$ 2,663$ Houosehold Income Needed to Afford Median Effective Rent (b) 64,640$ 106,520$ Actual Median Income - Renters 53,739$ 61,525$
a) Price form Zillow Home Value Index, which tracks a typical home value in the 35th to 65th percentile range. b) Ownership calculation assumes spending 35% of income on housing costs and interest rate at the time, per Federal Reserve data. Rent calculation assumes spending 30% of income on housing costs. mortgage interest rate for the relevant year, using data from the Federal Reserve. c) CoStar's effective market rent represents the average rent tenants paid, adjusted for rent concessions.

Data is for rental properties tracked by CoStar in Berkeley.

Sources: Zillow, 2025; Costar, 2025; Federal Reserve Bank of St. Louis, 2025; The Housing Workshop, 2025.

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7 Department of Housing and Urban Development (HUD) as the median household income for each county in the US for a family of four and then adjusted up or down for larger or smaller household sizes.

Alameda County’s 2024-25 Income Limits are shown below.2 California’s Department of Housing and Community Development publishes these income limits by household size, which are then used to determine maximum affordable housing costs (rent plus utilities) based on a household spending 30% of its income on housing.

Table 2: Alameda County AMI Income Limits & Maximum Housing Costs, 2024-25

2 The 2025-26 Income Limits were published by CA HCD in early May 2025, after most of this draft was completed.

The financial analysis in this report is based on the 2024-25 limits and are thus shown here.

Household
Size
Extremely Low
Income
(15-30% AMI)
Very Low
Income
(30-50% AMI)
Low Income
(50-80% AMI)
Moderate
Income
(80-120% AMI)
1 $ 32,700 $ 54,500 $ 84,600 $ 130,800 2 $ 37,400 $ 62,300 $ 96,650 $ 149,500 3 $ 42,050 $ 70,100 $ 108,750 $ 168,150 4 $ 46,700 $ 77,850 $ 120,800 $ 186,850 Unit Size
Extremely Low
Income
(15-30% AMI)
Very Low
Income
(30-50% AMI)
Low Income
(50-80% AMI)
Moderate
Income
(80-120% AMI)
Studio $ 818 $ 1,363 $ 2,115 $ 3,270 1 Bedroom $ 935 $ 1,558 $ 2,416 $ 3,738 2 Bedroom $ 1,051 $ 1,753 $ 2,719 $ 4,204 3 Bedroom $ 1,168 $ 1,946 $ 3,020 $ 4,671 Unit size based on 1 person household in studio, 2 person household in 1 bedroom, etc.

Housing cost based on 30% of income for housing (rent and utilities) Max housing cost can vary slightly, depending on each funding program's regulations.

Source: CA Department of Housing & Community Development, 2025. https://www.hcd.ca.gov/sites/default/files/docs/grants-and-funding/income-limits-2025.pdf Alameda County Household Income Limits 2024-25
Alameda County Max Monthly Housing Cost (Rent + Utilities) 2024-25 Attachment 2

8 Critical Housing Needs
Berkeley’s widening gap between incomes and the high cost of rent and homeownership has created urgent housing challenges for the unhoused, extremely low-income households, low- income seniors, and Black households. The following section describes these critical needs.

Detailed data for Berkeley, Alameda County, and the region can be found in Appendix B.

Critical Unmet Housing Need: Unhoused Residents
As a result of the high cost burdens relative to household income, many people experience being unhoused in Berkeley. The graph below shows the Point-in-Time (PIT) count, conducted every two years. Unhoused people are counted on a specific day by trained volunteers. The counting methodology includes identifying people both in sheltered situations (e.g., emergency shelters or similar), and unsheltered (e.g., sleeping in cars/RVs, on the street, etc.).

Note: Every 2 years, communities conduct counts of people experiencing both sheltered and unsheltered homelessness. The 2024 Alameda County Point-in-Time (PIT) Count was a community-wide effort conducted on January 25, 2024.

Source: Alameda County Homeless Count & Survey, 2024; THW, 2025.

The most recent PIT indicates an improvement in the number of unhoused people, declining from 1,108 people in 2019 to 844 in 2024 (a decrease of 24% for the 5-year period). The data also shows improvement in the sheltered subset, increasing from 295 people in 2019 to 399 people in 2024 (an increase of 35% provided with sheltered accommodation) and a 45% decline in unsheltered persons over the same period. Nevertheless, more work needs to be done.

Two additional findings from the Alameda County Homeless Count & Survey, 2024 for Berkeley included that 12% of people counted were aged 65 or over, which aligns with the high cost burden among seniors with low incomes outlined later in this report. In addition, almost 43% of the people counted in Berkeley identified as Black, a disproportionate share compared to the Black/African American population in Berkeley and Alameda County. 813 803
445
295 254
399
0 200
400
600
800
1000
1200
2019 2022 2024
Unsheltered Sheltered
Figure 1: Point-in-Time Unhoused Census, City of Berkeley 2019-2024 Attachment 2

9 Critical Need: Extremely Low-Income Households with Severe Cost Burdens A key metric to identify unmet affordable housing need is housing cost burden, which means the percentage of household income paid towards rent (or mortgage) plus utilities. Housing policy analysts consider paying more than 30% of household income for housing as a cost burden, indicating lack of affordability. When a household pays more than 50% of household income for housing, analysts consider this a severe cost burden, placing the household at risk of eviction and/or homelessness, particularly in the lowest levels of income.

The graph below combines 2020 renter household incomes compiled by AMI segments with reported housing costs in 2020, to derive an estimate of renter households that were cost- burdened or severely cost-burdened.
3 In 2020, of the 7,740 Extremely Low-Income (ELI) renter households in Berkeley, nearly 5,900 were severely cost-burdened, and another roughly 1,000 households were cost burdened

3 CHAS (Comprehensive Housing Affordability Strategy) data lags because it is based on the U.S. Census Bureau’s 5-year American Community Survey (ACS) estimates, which aggregate responses over multiple years to ensure statistical reliability. While this metric is somewhat dated in 2025, it is likely that the picture it provides is still valid or even more critical, given continued trends in wealth concentration, rent and sale price increases, and inflation.

Figure 2: Cost-Burdened Renter Households in Berkeley, 2020 885
960
5,895
530
1,595
1,695
2,040
1,195
445
1,220
695
15 7,650
545
35 - 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 No Cost Burden
Cost Burden (30-50%)
Severe Cost Burden (50%+)
No Cost Burden
Cost Burden (30-50%)
Severe Cost Burden (50%+)
No Cost Burden
Cost Burden (30-50%)
Severe Cost Burden (50%+)
No Cost Burden
Cost Burden (30-50%)
Severe Cost Burden (50%+)
No Cost Burden
Cost Burden (30-50%)
Severe Cost Burden (50%+)
< 30% AMI30-50% AMI50-80% AM80-100% AM
> 100%
AMI
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10 (paying 30-50% of income to rent). Altogether, about 89% of ELI households, or nearly 7,000, face a substantial risk of homelessness and are in critical need of housing assistance.

Similarly, among the 3,800 households earning between 30-50% AMI (Very Low Income), almost 1,700 households were severely cost-burdened, and another almost 1,600 households were in the less severe cost-burdened category. In total, about 86% of VLI households, or nearly 3,300 households faced critical housing needs.

In total, among the 0-50% AMI renter households, over 10,000 households were facing particularly challenging rental housing financial burdens, resulting in critical housing insecurity. It should be noted that although this data is 5 years old now, it is likely this picture has not changed substantially because rent and utility costs (along with the overall cost of living) have risen since 2020, while income increases among lower income households have stagnated for many, resulting in a likely larger critical housing need for assistance in Berkeley.

Spotlight on Seniors’ Housing Cost Burden
An important subset of Berkeley’s cost-burdened households are residents aged 65 and over.

Many senior households are on fixed incomes in retirement (e.g., Social Security) and cannot respond easily to rising housing costs. As the population continues to age, this challenge is likely to intensify.

Ber
keley saw significant growth in its senior population between 2000 and 2023, with residents aged 65 and older increasing from 10,484 to 20,085, a 92% rise. Similar trends occurred in Alameda County and the broader region, reflecting national patterns as the large “boomer” generation ages into senior cohorts.

In 2020, ov
er 1,045 senior ELI renter households in Berkeley were severely cost-burdened, and another 535 ELI households were classified as cost-burdened. Senior households represented a disproportionate 23% of all cost-burdened renter households in this income group. Many senior renters in Berkeley need additional housing assistance to reduce their cost burdens and risk of homelessness. A social housing delivery system should account for the needs of this age group, including specialized unit designs that support aging in place and a range of supportive services for older adults.

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11 Critical Unmet Housing Need: Black/African American Population and Household Loss Another important aspect of unmet housing needs is tied to the marked decline of Berkeley’s Black/African American population. Between 2000 and 2023, the number of Black/African American residents fell from 13,700 to 8,415, a 39% decrease. In contrast, the Hispanic/Latino population grew by 30%, adding over 13,000 residents. The White population remained relatively stable, while the Asian population increased by more than 12,600, a 75% rise.

Berkeley’s racial/ethnic population changes were echoed in Alameda County and the region.

For Black/African American residents, Alameda County also saw an absolute decline from 2000- 2023 (dropping by 31%). The Bay Area region also experienced a similar decline, although to a lesser extent, dropping almost 20% in the same period.

The decreases in Berkeley’s Black population translated into shifts in housing patterns for households with a Black head of household. Although the overall loss of households totaled 40%, the patterns varied by tenure. For Black renter households, the greatest rate of decline was in the 80%+ AMI income level. For Black owner households, the loss was greatest in the 30-50% income band, but also substantial across all income segments. In summary, Berkeley lost Black homeowners at a faster rate than Black renters between 2020 and 2023, resulting in a decrease in Black homeownership rates from 40% to 32% (see Appendix B for detail).

These shifting housing patterns and impacts on the Black/African American community in Berkeley are important because they relate directly to a history of displacement and discrimination in mortgage lending dating back decades. One step toward reparations has been to adjust the City’s affordable housing preference system, to prioritize households affected by displacement. If Berkeley shifted to a social housing framework, and enhanced its affordable homeownership offerings, this could expand approaches to reparations.

Berkeley’s Current Affordable Housing Delivery System

The City of Berkeley operates a number of affordable housing programs devoted to the preservation of existing housing stock, the production of new affordable housing stock, and the protection of tenants. The following summarizes key existing programs.

Rent Stabilization
Berkeley voters passed the Rent Stabilization and Good Cause for Eviction Ordinance in 1980, and voters passed a Charter Amendment to establish the Rent Stabilization Board in 1982.

From 1980 to 1998, rents in units built prior to 1980 were permanently controlled so that the Attachment 2