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Council cuts city's historic equity share in first-time homebuyer loans from 30% to 15%
Summary
Facing a decades-old portfolio of 438 equity-share loans, the council voted to reduce the city's share of earned equity on resale from 30% to 15% to increase sellers' net proceeds while retaining affordability restrictions until 30 years elapse.
The San Jose City Council on April 8 approved a staff proposal to reduce the city's equity-share portion in the long-standing First Time Homebuyer Loan program from 30 percent to 15 percent for loans that trigger a resale, staff said.
Housing Director Eric Sullivan and Deputy Director Banu San presented the analysis. Sullivan summarized the policy trade-offs and historical context, saying the program started more than 30 years ago and that the city's original documents intended these units to remain affordable over time. "What is proposed here is to reduce that equity share by 50% going from a 30% take of their equity down to 15%," Sullivan said.
Nut graf: The program affects a relatively small but legacy portfolio of loans. Staff said there are roughly 438 loans in the portfolio and that the city originally lent a little over $30 million across those loans. Staff modeled the immediate pool of loans that have reached their 30-year term and estimated how much equity would accrue to the city under the two equity-share formulas.
Deputy Director Banu San presented figures for loans reaching their 30-year mark today and through 2029. San said 13 loans are due today; if sold at current modeled values the city's 30% share on those 13 would total about $1.2 million (average approximately $97,000 per loan), while a 15% share would total about $631,000 (average about $49,000 per loan). The analysis used assumed average market values of about $650,000 based on 2024 comparable sales and applied a modeled annual rate for future-value calculations.
Council members discussed trade-offs between preserving permanently deed-restricted affordable housing stock and boosting homeowners' equity. Several members noted most of the homes in the portfolio are small condominiums and that many owners are likely to remain in their homes rather than trigger a resale. Vice Mayor Foley moved support for the reduction; the council approved the change unanimously.
Ending: Staff will update program procedures to reflect the new 15 percent equity-share formula and continue outreach to loan holders; because the city does not record revenue from these loans until a sale occurs, implementation will proceed as borrowers trigger resale or other transfer events.
