Why has program to help people buy homes in San Pablo gone unused?

In a recent survey , San Pablo residents and commuters made one thing abundantly clear: They want more opportunities to own a home in the city.

Dyett & Bhatia Urban and Regional Planners, consulting for the city, conducted the survey from December to late February, asking respondents to rank economic and business priorities in San Pablo. Homeownership was the second-highest priority among both residents and non-residents, just behind well-paying jobs. Among solely non-residents who work or go to school in San Pablo, homeownership was the highest priority.

San Pablo has the lowest rate of homeownership in Contra Costa County. From 2016 to 2020, the national homeownership rate was above 65%, but in San Pablo, it was less than 40%, U.S. Census data shows.

“We want to help as a city to elevate people. Homeownership does that,” councilmember Elizabeth Pabon-Alvarado said during the Sept. 19 City Council meeting, where the survey was presented. She said homeowners “have more care about the city and what goes on in the city.”

The San Pablo Economic Development Corp. and San Pablo City Council are working to expand homeownership options. A year ago, City Council finalized guidelines for the San Pablo Loan Assistance and Housing Program. SPLASH provides down-payment loans to low-income, first-time homebuyers in San Pablo. Sugey Mojica, the EDC’s senior program coordinator, said there are currently four potential applicants for the program. But to this day, the organization hasn’t handed out any loans. 

Mojica pointed to three critical issues that are potentially thwarting the loan program: housing supply, high housing costs and applicant qualifications. She noted that applicants often want to use SPLASH funds, but just can’t find a home in San Pablo that fits what they’re looking for, so they begin to look elsewhere. Mojica added that real estate agents in the area have observed a trend of homes being kept in families, potentially contributing to the low supply. 

“Families are staying and they’re not selling, so it just goes from one generation to the next generation,” Mojica said. 

As of Aug. 31, the median list price for a home in San Pablo was $612,499, in a strong seller’s market. 

Some prospective buyers can’t qualify for the program because of a high debt service coverage ratio, which measures the percentage of a household’s gross income committed to debt obligations. To qualify for SPLASH, applicants must have a DSCR below 40%. In other words, no more than 40% of an applicant’s gross income can go towards debt payments each month. 

Nikki Beasley, executive director of Richmond Neighborhood Housing Services, sees 40% as a conservative DSCR number. 

“Lenders are going up to 43, 45, some are even going up to 55 [DSCR],” said Beasley, whose organization is focused on affordable housing in the East Bay.

To reach clients in need of help, Beasley suggests that city programs increase their DSCR requirement to meet those of other lenders in the area.

Beasley suggested that cities work with agencies like hers that are certified by the U.S. Department of Housing and Urban Development to offer classes that will help people understand the process. 

Mojica noted that many applicants are confused about what the SPLASH program offers. When the program is explained and people learn that they have to pay back the loan and search for their own houses, many lose interest, she said. 

But SPLASH is making changes. It now tells lenders and real estate partners that the DSCR can be used as a guide, not as a rule, leaving room for exceptions. 

Mojica also said a $100 pre-qualification fee will be eliminated, but once clients move forward with SPLASH, they will still need to pay a $100 application fee. 

SPLASH offers free educational webinars and provides other guidance to help people become homeowners, even if they don’t qualify for the loan. 

“Have we loaned out any money? We have not,” said Leslay Choy, executive director of the San Pablo EDC. “Have we helped every single person that has come through the door, however they needed help? Yes.” 

Across the Bay Area, affordable housing is an issue. A recent survey conducted by the Bay Area News Group and Joint Venture Silicon Valley found that more than half of registered voters said they are likely to leave the area in the next few years, with housing affordability and the high cost of living among their top concerns. The survey also showed that 66% of renters worry they will never be able to afford a home. 

But hope is on the horizon for San Pablo. According to Mojica, home prices are stabilizing and the inventory of properties is on the rise, potentially signaling a buyer’s market. A forecast released by the California Association of Realtors on Oct. 12 predicts that while housing prices may drop nearly 9% in 2023, interest rates on mortgages are expected to rise, which could mean a higher monthly payment. 

Over the next eight years, San Pablo is required to build 746 units as part of the new Regional Housing Needs Allocation cycle, which is meant to increase affordable housing. Already, 213 units are in the pipeline.

Andrew Hill, principal at Dyett & Bhatia, the consulting firm working with the city, said reaching that goal will be challenging. But, he said, the firm is working with the city in “removing barriers and facilitating production of housing at all levels of affordability.”

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