Salinas committee forwards first-time homebuyer down-payment assistance program and $1.03 million in PLHA funds to City Council

The Housing and Land Use Committee on an affirmative vote forwarded a proposal to establish a first-time homebuyer mortgage down-payment assistance program and to appropriate $1,034,137 in Permanent Local Housing Allocation (PLHA) funds from allocation years 2021 and 2022.

Vincent Montgomery, planning manager for the Housing and Community Development Department, told the committee the program is designed "to expand access to home ownership for moderate, income households and to complement the city's existing rental assistance and housing stabilization initiatives." He said staff prepared preliminary draft guidelines and coordinated with internal and external partners and regulatory reviewers.

The program would offer eligible first-time buyers a low-interest, deferred-payment loan to assist with down payment and nonrecurring closing costs. Assistance would be capped at $125,000 or 17% of the purchase price, whichever is less; the loan is structured as a 30-year deferred-payment instrument. Montgomery said only accrued interest would be forgiven if the borrower remains in the property for the 30-year restricted period.

Eligibility in the draft guidelines targets households earning up to 150% of area median income who either reside in the City of Salinas or have been employed within the city for at least two years. Eligible property types listed include single-family homes, condominiums and manufactured homes in owner-occupied parks; mobile homes could qualify only if the buyer owns the lot. Borrowers must complete a HUD-approved eight-hour homebuyer education course before applying.

Staff identified $1,034,137 in PLHA funds as the initial funding source, noting the total reflects combined allocations from 2021 and 2022 that were not fully expended in their original allocation years. Montgomery said, based on current funding levels, the city expects to assist at least 10 households and that loan repayments would be recycled into a revolving fund to support future assistance.

Montgomery described the implementation timeline: the committee presentation occurred today, City Council consideration is scheduled for Jan. 27, and draft guidelines are to be submitted to the California Department of Housing and Community Development (HCD) by Jan. 31. He cautioned that HCD review can take several weeks to a few months; staff estimated public-facing application intake could begin roughly three to four months after HCD approval.

During public comment, a real estate appraiser who identified himself as such urged the committee to emphasize inclusionary housing details and questioned whether the program’s limited initial scale would be sufficient. "Only benefiting 10 families? That's kinda like the rent stabilization, which only really impacts 8% of the renters," the commenter said, adding concerns about competing city infrastructure needs.

Committee members asked for clarifications on eligibility for ITIN holders, the choice of first-come, first-served selection, eligibility where ADUs are present, and residency verification. Staff said an applicant must be able to obtain a mortgage from a lender (noting many banks do not currently make loans to ITIN holders), explained that first-come, first-served inflates the chance that funds reach buyers who already have an accepted offer, and said properties with ADUs are excluded to avoid applicants having a higher debt-to-income or income-producing unit that complicates underwriting. Staff also said residency language can be clarified to require residence within Salinas jurisdiction.

The committee voted to forward the proposed program and funding to the City Council for formal consideration and to authorize the city manager or designee to finalize program guidelines and execute documents necessary for implementation.

The item will next appear before the City Council on Jan. 27; staff plans to submit the draft guidelines to HCD by Jan. 31 and expects HCD review to determine the public rollout schedule.