California has long been the land of dreams, luring people from across the country and increasingly from throughout the world. A good job, an education, and, most of all, possession of one's own piece of this vast and varied state was part and parcel of what drove people here.
Yet today that very dream is threatened by what, for millions of Californians, is a closed door. Much of the blame lies, ironically, with the success of the state, a booming economy that created billions in new wealth and opportunities, turning California into the world's fifth largest economy. California's growth engendered a massive increase in the cost of housing, with prices, particularly on the coast, reaching levels well beyond the reach of most state residents. As a result, despite the good economic times, homeownership in some areas, such as Los Angeles, actually declined in the 1990s.1
Not all the problems, however, can be blamed on markets. Changes in the state's tax structure have provided little incentive for communities to build more housing; indeed, the current tax system, dependent largely on retail sales, encourages the development not of homes for families, but malls for shoppers. At the same time, tough environmental laws and often a powerful anti-growth lobby make the construction of new housing, particularly in the low- and moderate-level varieties, almost impossible. As a result, California home construction in the past decade lags far behind that of other periods of demographic and economic growth.
Almost all potential middle- and working-class home buyers have been affected by the soaring prices. Yet arguably the group most impacted — and almost certain to feel the sting most acutely — is Latinos, who represent a plurality of California new households.2 Strongly work-oriented and family-centric, Latinos are natural home buyers, with a strong, demonstrated cultural affinity for investing their earnings into residential real estate. Yet increasingly they face growing obstacles to purchasing homes, often being forced to crowd several families into one residence or to move to the extreme periphery of our major urban centers.
If not addressed forcefully, this gap in affordability could create a potentially dangerous break with our state's tradition. Earlier waves of migrants to California — from the homesteaders, to the Depression-era "dust bowl" refugees, to the post-World War II generation — all found a California that could reward their hard work with the prospect of owning a home. Latinos, the predominant new wave of the late twentieth and early twenty-first centuries, would become the first major group to find themselves, through no fault of their own, excluded from owning their piece of the California dream.
The implications of this failure could be severe. A largely new population, eager to share the California dream, may become discouraged, alienated, and politically detached. Possible conflicts between a class of permanent renters and homeowners, particularly with racial overtones, would not bode well for the state or its future. Worst of all, the inability to own homes would force many of the most industrious immigrants and second-generation Latinos out of the state, leaving behind vastly weakened communities.
What is urgently needed, then, is a strong commitment, both by the private and public sectors, to address this potentially dangerous situation. Although discrimination is still a factor inhibiting homeownership among Latinos,3 many of the barriers are more aptly described as economic or cultural and ultimately best addressed through policies that increase the supply and access to housing to moderate-income people.
The economic issues are perhaps the most paramount. Effort should be made by private, nonprofit, and public agencies to extend credit to working- and middle-class Californians who include many of those in the roughly two-thirds of households statewide that cannot afford a median-price home.4 This would by definition aid Latinos who represent the largest proportion of moderate-income residents and potential home buyers.
Cultural issues need to be addressed largely by the private sector. Our survey results show a powerful proclivity on the part of Latinos to purchase homes through Spanish-speaking or Latino-oriented agencies. Developers also need to be more sensitive to the kinds of housing products that work for Latino families.
But, ultimately, much of the solution lies in Sacramento and in the varied communities of this state. Until tax and fiscal policies are enacted that encourage localities to build housing — as opposed to retail developments — there will be little incentive for them to do so. Only further out peripheral areas would be developed except for the highest cost housing, something that would not address the most critical need and would accelerate sprawl. And in the end, the state and its communities must recognize that housing is a critical part of the state's infrastructure — just like roads, transit, water, or power systems. Housing is the fundamental thing that roots Californians to the state and allows companies to tap labor markets critical to their growth. Housing for Latinos is not about one sector or one ethnic group; it is about the very essence, the future of California for us all.
Report Findings Include:
- Latino home buyers purchase more than one in five homes sold in California.
- More than one-half of all homes purchased in California by Latinos are in the five-county Southern California region, predominantly in Los Angeles County.
- Nearly two-thirds of U.S.-born Latinos in California are homeowners, whereas less than one-third of Latinos born outside the U.S. own their own homes. - Most of California's Latino homeowners
are recent owners — 44 percent have owned their homes for fewer than five years, and more than 70 percent of their current residences are a first-time home purchase.
- Family considerations are the strongest motivation behind purchasing a home, followed by owning the home as a financial investment.
- In purchasing their homes, the top challenges among California's homeowners were "finding the right home" and "understanding the home-buying process." Across the board, foreign-born Latinos faced the greatest challenges in purchasing their homes.
- Foreign-born Latino homeowners in California devote a considerably greater amount of their income to mortgage payments than U.S.- born homeowners. An average of 43 percent of their household income is spent on the monthly mortgage, compared to 32 percent among U.S.-born.
- The vast majority of the Latino renting population are immigrants; 80 percent were born outside the U.S. — 66 percent in Mexico.
- Nearly one-half of all Latino renters pay more than 30 percent of their monthly income in rent; more than one-third pay more than 40 percent.
- Among renters who previously attempted to purchase a home, the top two reasons for being declined are: "bad credit/no credit" and "insufficient income for down payment/no money."
- Overall, Latino renters are very optimistic about their likelihood of purchasing a home at some point in the near future — nearly 70 percent are confident they can purchase a home within five years.
- Most prospective Latino home buyers hope to purchase a singlefamily home — more than half of them are looking for a home of $150,000 or less with a down payment of $10,000 or less.
- More than 65 percent of potential home buyers prefer to conduct the home-buying process in Spanish — 78 percent prefer to work with a Latino real estate agent and 63 percent prefer to deal with a Latino lender representative.
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Karin Lane (MPP '05) is director of the Prevention of Mother-to-Child Transmission Program of AMPATH, which runs 23 HIV/AIDS clinics in Kenya.
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