It’s no secret that the housing market is tough for middle and low-income residents; rental and sale prices continue to climb and inventory is limited. This issue is particularly pronounced in Los Angeles, where an ongoing housing affordability crisis has local legislators scrambling to find solutions.
A recent article by Curbed LA has revealed some exciting developments on this topic. On June 28th, City Council voted in favor of a plan to re-open and enhance the Low Income Purchase Assistance Program (LIPA) and the Moderate Income Purchase Assistance Program (MIPA). These programs assist first-time buyers with no-interest, no monthly payment loans to help cover acquisition, down payments and closing costs. In exchange, the city retains a portion of any appreciation that the home sustains. The loan requires repayment only if the home is sold, if the mortgage is paid off, or after 30 years. Below is the income criteria for both programs:
According to a recent report by Genworth Mortgage Insurance, approximately 3 million first-time homebuyers in the United States have been shut out of the market in the past decade. “Headship rates” (the number of people that are heads of their own home) have also decreased proportionately with rising unemployment rates. Below is a graph of headship rate compared to the employment-to-population rate of the largest population of homebuyers in the country, millennials:
Fortunately, the market is looking up. Unemployment rates have steadily decreased since 2010, and now Los Angeles is taking the necessary steps to bring more first-time buyers back into the fray. If the plan is passed, eligible LIPA participants can receive a loan of up to $90,000, while eligible MIPA participants can receive a loan of up to $75,000. This is great news for the real estate industry, as it will give agents access to a population of buyers that have been M.I.A. for the past ten years. Further, it reinforces the notion that the famed 20% down payment is no longer necessary to close a sale.