Where is the housing help for the middle class?

A former state legislative leader says fellow Democrats in Sacramento have long ignored the housing needs of middle-class Californians. And he has a plan to help them buy a new home. To their credit, Gov. Gavin Newsom and Democratic lawmakers have been chipping away at regulatory obstacles to home building in recent years, particularly in the just-concluded legislative session. But the building pace is still far behind what’s sorely needed — and what Newsom promised when he first ran for governor seven years ago. Supply doesn’t come close to meeting demand and that pushes home prices much higher than millions of middle-class families can afford.

One of the biggest raps on California is that housing costs have skyrocketed out of reach for many. That’s a big reason why lots of middle-class folks have fled the so-called Golden State for less expensive regions. “Much of the work by the governor and the Legislature in recent years has focused on homelessness and affordable housing, both of which require taxpayer subsidies and leave the middle class behind,” says former Van Nuys lawmaker Bob Hertzberg, who was an Assembly speaker and Senate majority leader.

“Middle-class Californians just can’t save up enough for a down payment. And the few government programs to assist middle-class buyers are complex, underfunded and are restricted to first-time homebuyers.” He notes the political consequences: “We [Democrats] haven’t done enough for them. And they’re punishing us in their voting patterns.”

Yes, the middle class has been turning right all across the country. Housing affordability is a problem in many states, but is particularly acute in California.

In July, the median price for an existing single-family home in California was $884,050, according to the California Association of Realtors. The normal 20% down payment would require a buyer to lay out $176,810 in cash. Not many young couples — or middle-aged either — have that much spare money on them. The median home price varies greatly throughout the state. In San Mateo County, it’s $2.1 million; in San Francisco, $1.6 million. Other counties: Orange, $1.4 million; Riverside, $630,000; Ventura, $949,500; Kern, $390,000; Sacramento, $559,000.

Hertzberg has submitted a proposed ballot initiative for the 2026 election that would allow middle-class buyers of brand-new homes to borrow most of their down payment.

Rather than putting up 20% of the selling price in cash, the buyer would fork over just 3% — $26,522 based on the July statewide median price — and borrow the remaining 17%, or $150,289. So, there’d be the regular first mortgage on 80% of the selling price, plus a second mortgage on the down-payment loan.

Based on Hertzberg’s calculations, for example, a three-bedroom, three-bath Santa Clarita home selling for $700,000 would require monthly payments of $4,253 on the two mortgages. That assumes a combined interest rate of 7%.

New townhouses and condos also would qualify under the program. The statewide median price for those in July was $647,000. Why only new homes? Hertzberg says it’s “critically important” to increase the housing supply and the only way to do that is to build more. At the same time, it creates construction jobs.

Also, politically, it draws the support of developers, carpenters unions and Realtors. And for local governments, it generates more property and sales taxes. Who’s defined as middle class? Buyers whose household income is less than 200% of the median for their local area. Statewide, that’s $193,000. But it varies: $213,200 in Palmdale, $262,600 in Camarillo, $207,800 in San Bernardino, $177,000 in Fresno, $311,720 in San Francisco.

Unlike other government housing programs, this one isn’t limited to just first-time homebuyers. It only requires buyers to be Californians and to live in the home as their primary residence. No renting out.

The program would be administered and implemented by the California Housing Finance Agency. “Most importantly — no cost to taxpayers,” Hertzberg says. The “Middle Class Homeownership” act would be financed by the sale of $25 billion in revenue bonds that would create the down-payment loan pot. Borrowers must repay their second mortgage if the home is sold or refinanced within 15 years.

Regular lending institutions would arrange the loans and charge minimum fees. “It’s very difficult to work with a government bureaucracy, so we’ll have banks handle all the paperwork,” Hertzberg says. He says the program would be self-financed. Loan repayments would resupply the pot for additional homebuyers. He figures the $25-billion kitty would generate up to 150,000 new homes — helpful, but still well below the millions more that California needs.