Wells, Central California Lending Run Dry

October 1, 2018

Child Adjusts Faucet

Thousands of residential wells ran dry in California’s Central Valley region during the state’s years-long drought.

The cost to dig a new well with a new pump and equipment can be $19,000—$30,000 or more. It’s an expense out-of-range for most working-class families. Affected homeowners often live in fear that they’ll lose their homes.

“If you don’t have potable water at your house, your house can be condemned. A condemnation proceeding is grounds for defaulting on your mortgage, which is grounds for a foreclosure,” explains Jesse M. Keenan, a visiting scholar with the San Francisco Fed’s Community Development department.

Compounding the problem, banks and brokers won’t lend on an existing house that doesn’t have public water or a functional well.

One solution is bridge financing.

Bridge financing allows homeowners to take out a short-term loan to reconstruct wells, making homes habitable and also eligible for traditional financing again. Such a program was put in place as a partnership between Northern California Community Loan Fund, a local Community Development Financial Institution (CDFI), and Self-Help Housing. The state made grant dollars available to help homeowners construct new wells. While the program’s funds are almost tapped out, it serves as a promising model for other CDFIs.

For more details from a Community Development perspective, read our full Q&A with Jesse Keenan.

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