City may create down payment help for buyers of affordable Capitola homes

In plain English

City staff are asking the Council for permission to build a down payment assistance program for people buying affordable homes in Capitola. The city would lend up to $25,000 per qualifying household toward the down payment on a home that carries a city-approved affordability restriction; the loan would be secured by a deed of trust and repaid when the home is sold, refinanced or transferred, so the money can be lent again. A yes vote authorizes staff to write the program rules — income limits, loan terms, resale and repayment provisions — with the City Attorney approving the final format. Market-rate homes without affordability restrictions would not qualify.

Households earning up to 120% of area median income who can handle a monthly mortgage but lack cash for a down payment could get help buying one of the roughly 21 deed-restricted affordable ownership units listed in Capitola, and the current budget only covers one household this year.

Key facts

• Loans of up to $25,000 per eligible household toward the down payment on a deed-restricted affordable ownership unit within city limits
• The FY 2026/27 budget includes $40,000 from the Housing Trust Fund to assist one household, plus up to $15,000 for legal costs to set up the program; slides cite $55,000 budgeted total
• No new General Fund money is required at this time
• Proposed income tiers: very low (under 50% of area median income), low (50–80%), and median (80–120%)
• Deed-restricted affordable ownership units listed: Heritage Lane 2, Capitola Beach Villas 8, Terra Court 1, Pearson Court 1, Wharf Road Manor 2, Turner Lane 7
• Housing Element Program 4.3 sets a goal of assisting five households during the current housing cycle