LA Increases Loans for First-Time Homebuyers in One of Hottest Markets in US

Ngai Yeung
·3 min read
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(Bloomberg) -- A Los Angeles city-run program for lower-income first-time homebuyers is increasing its maximum down-payment assistance by as much as $50,000, as residents struggle with rising prices in one of the US’s least affordable housing markets.

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The city council voted unanimously Wednesday to raise the assistance limit for lower-income buyers to $140,000, up from $90,000, while the cap for middle-class households was increased by $40,000 to between $90,000 and $115,000, depending on the family’s earnings.

House prices are so high in the city that they’re pushing more and more people out of the market. The Los Angeles area has the lowest homeownership rate of any major US city, at 45.2% of residents, falling from around half in 2015, according to first-quarter data from the US Census Bureau. At the same time, housing prices have been rising faster than incomes, leaving residents with less money to put down a deposit and get a mortgage.

“Over the last five years, we have seen an increase of over 50% of home value in Los Angeles,” said Nury Martinez, president of the Los Angeles City Council and author of the motion during Wednesday’s meeting.

“Buying a home should not be an unattainable goal, and as young people are forced out of the neighborhoods they grew up in, this city can no longer ignore the problem.”

The city’s rising costs and growing homeless problem have emerged as key issues in the mayoral race at the end of the year.

The assistance programs offer loans with a zero percent interest rate -- though there is a shared appreciation provision -- to help buyers cover the down payment, closing and acquisition costs. The new limits will start July 1.

The median home price in the Los Angeles metropolitan area is $792,470, according to the California Association of Realtors. That’s more than twice the US median of $368,200. Adding rising mortgage rates into the mix, and housing prices across the country are suddenly getting even more expensive.

Homebuyers need a 20% down payment for a conventional mortgage, which would be $158,500 for a median-priced home.

The lack of affordable housing in Los Angeles has also been driving more people onto the streets. The county has around 66,500 people experiencing homelessness, second only to New York City, according to 2020 data, the latest available.

Homeownership rates are also unequal across demographics.

According to a 2021 report, while 34% of White households and 31% of Asian households in Los Angeles could afford a median-priced home in the area, only 15% of Hispanic or Latino and 14% of Black households could do the same.

“It’s also about gender equity and racial justice in the city,” Martinez said on the importance of first-time home loan assistance for lower income households.

(Adds issues in the mayoral race in sixth paragraph. An earlier version was corrected to change the date reference.)

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