Publication Date

Fall 1995

Degree Type

Master's Project

Degree Name

Master of Urban Planning (MUP)

Department

Urban and Regional Planning

Abstract

"Affordable Housing," homeownership; does it really exist? Isn't the word "affordable" used loosely in today's real estate market? "Affordable housing," particularly in California, is out of reach for many first-time homebuyers. The issue of the lack of affordable housing became prevalent in the 1980's when the California real estate market boomed and housing prices rapidly increased from a median of $68,700 in 1980 to $194,300 in 1990. At the same time, incomes in California rose from $19,170 in 1980 to just $40,559 in 1990. Depressed incomes, coupled with high housing prices, leave many moderate-income homebuyers with a need to fill the gap between the downpayment and the mortgage loan amount needed to purchase a home. How will this gap be filled? There are many tools and techniques that can assist a moderate-income first-time homebuyer with filling this gap and obtaining financing to purchase a home.

In most states it is mandatory that cities provide a representative portion of affordable housing. The California "Fair Share" law states that each City must provide a percentage of its region's affordable housing. Within the City of San Jose, California the "Silent" Second Mortgage Program is utilized to assist in providing affordable housing to moderate-income first-time homebuyers.

By using a "Silent" Second Mortgage Program the City intends to help these moderate-income first-time homebuyers purchase a home that will go up in value and thereby build for the purchaser equity. Equity growth in a home was commonly known to those persons who sold their homes in California during the late 1980's. In California, the real estate market has experienced some difficult fluctuations, so the appreciation in the value of a home is difficult to forecast. Nevertheless, it plays a major role in California's "Silent" City Second Mortgage Programs because these programs require the borrower to share equity appreciation with the lender (in this case, the City of San Jose).

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