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Tim Coyle

Lawmaker Steps Out on Housing

California legislators rarely meet the test of being “profiles in courage” – at least not formally. Just the opposite is more typical. Voting behavior of state lawmakers isn’t at all courageous. Data shows that votes are cast only after they are okayed by a preferred special interest or the particular House leadership.

That changed with the arrival of Bob Hertzberg in the state Senate. In time he took on the state’s really big issues. Right or wrong, he seized on California’s major problems, focusing on winning bi-partisan solutions.

Hertzberg, a Democrat, didn’t immediately fit the profile-in-courage standard, though. He was not a purposeful contrarian or a Party maverick – nearly all of his votes went the direction his leadership set for their caucuses. And, his first effort to push major legislation was a flop.

Consider that a few years back, Hertzberg dared take on the entire business community in California by issuing a report on the state sales tax. In the report, the junior member of the Senate advocated that private businesses and real estate enterprises pay a new tax, based on sales.

With the introduction of legislation, Hertzberg’s goal was to create a more reliable revenue stream than that which was collected each year as California taxes. By most accounts, the combination of income, sales and property taxes did not produce a steady, predictable flow to annually pay down budget debts.

He was hammered. His legislation failed in its first policy committee. He had expected opposition but it was substantial and swift. Everyone from the CA Taxpayers Association to the Pacific Egg and Poultry Association were viscerally and vocally opposed to the measure.

But, Senator Hertzberg was unfazed. Now he’s at it again. This time his target is housing – how to make more lower-income families become homeowners.

Whether he began his latest quest as a way to reduce poverty or to attack California’s stubborn housing supply shortage his actions are bold and brave. Further, he’s recognized that for most homeowners their greatest source of wealth is the equity in their homes.

Hertzberg complains that current lower-income housing programs concentrate too heavily on rental housing overlooking the benefits of homeownership. Here’s
Hertzberg in his own words:

“[T]he centerpiece of current housing assistance is subsidized rental housing either through a voucher system, or more typically, through projects where below-market rent levels are achieved through a complex array of government entitlement bonuses, grants, tax-credits and low-cost financing.

Calling homeownership a great source of wealth formation and one of poverty’s more reliable antagonists, Hertzberg says: “It is time to flip the script. Government ought to focus on turning renters into homeowners, who can build their own wealth over the long term.”

Further, he says:

“The (existing housing) programs are important and there is a need for temporary rental shelter – and such programs deserve more resources – but an exclusive reliance on rental assistance is not a long-term fix to wealth inequality.”

What Hertzberg proposes – in addition to existing programs – is patterned after the GI Bill. In short, he proposes a $25 billion state bond to “provide long-term financing to . . . assist families to buy newly built homes, live in them and share in the profits with the bond holders over time. Families would build wealth and our state’s building industry would create steady, better-paying jobs . . .”

To increase its capital, the state program would probably partner with a federal agency – like the Federal Housing Administration (FHA). (FHA offers a lender-insured mortgage with a down-payment requirement as low as three and one-half percent.) The state would then use FHA lending authority – creating a “soft second mortgage” – and the proceeds of the bond to assist as many as one and one-half million low-income, California households.

Hertzberg explains:

“A silent second mortgage is one where the bond fund loans all or most of the down payment to the borrower and records a second deed of trust to secure repayment, with no monthly payment on the loan.”

The only problem with Hertzberg’s plan is how the author suggests that users of the homeownership programs conform to “environmentally sensitive” standards – like making them all infill – and help curb sprawl.

It’s these kinds of limitations, however, that have helped create the state’s housing crunch to begin with. Hertzberg should know better.

But, this slip up shouldn’t bring down the whole ambition of Hertzberg’s. After all, when was the last time you heard a California lawmaker praising homeownership?

Instead, Hertzberg should be applauded for his courage, his enthusiasm and his consideration. And, we should heed his urgency: “The time to act is now,” he intones. “The sooner we refocus on homeownership, the better.”