For those of us lucky enough to live in the Santa Barbara area, this is so true. Beaches, the ocean, mountains and nice weather year-round make it paradise.

But housing prices make this dream out-of-reach for many. The median home price in Santa Barbara County is currently $1,784,000, with a median market list price of almost $2.5 million.

Prices were high even 50 years ago when a new single-family house went for around $40,000, way beyond my reach as a young man so I left Santa Barbara.

Lucky for me, I was able to buy a home back here in 2012, very near the market low after the 2007-2008 housing bust.

But now I’d be hard-pressed to buy the same home, given the tremendous rise in housing values.  

Let’s take a look at Santa Barbara housing math. Assume someone can find a home here for the “bargain price” of $1.2 million. It will likely be very small and probably need a lot of work.

After making a 20% down payment of $240,000, monthly payments on a 30-year fixed rate mortgage at 6.3% would be about $6,000. Add property taxes of about $700 per month, and house payments would total about $6,700 per month.

According to the “28/36 Rule,” you’d need gross monthly income of about $18,000 to $24,000 depending on other debts.

WOW! Doable for some, but not most working families. So, I was thinking about ways for families to make a home purchase — “the American Dream” — come true. Sometimes, you’ve got to think outside the box when solving problems.

One fact that seems essential is to accept the reality that you might have to commute — or even live in a less desirable location — to find a more affordable house.

I couldn’t afford to live here as a young man, so I moved to Seattle. Even there, it quickly became clear that home prices dropped the farther away from downtown you went.

So, as a young, newly married college graduate, I wound up buying a brand-new house in a cute suburb called Bothell for about half the price of a home much closer in. That required a 30- to 45-minute commute each way, but we got a nice home and entry into the housing market.

That house rose from $42,500 to more than $60,000 in two years — and up to more than $80,000 in four years. My income sure didn’t double, so we were glad we took the leap early.

A quick look at prices in Santa Barbara County shows that those willing to commute find lower housing prices. The median selling price in Carpinteria is $990,000 and Ventura is even less at $863,000.

Yes, you may have a commute, but selling prices that are almost half of Santa Barbara’s can make it a very worthwhile tradeoff.

And I was thinking about how families can help make home ownership a reality.

Parents and grandparents often help their grown kids get a first home. First, you can offer them advice with your years of experience — and that’s free. And if you have the wherewithal, some financial help can really make a difference.

Down Payment

Minimum down payments can be as low as 3% depending on the loan program. FHA (Federal Housing Administration) loans require 3.5%, and some VA (Veterans Affairs) loans may allow for no down payment at all.

But a gift from parents/grandparents to help with a down payment may be the difference between getting into a home now or having to continue renting.

And the bigger the down payment, the better the loan terms and lower the monthly payment.

Note that lenders require proof that the money coming from family is truly a gift, and not a loan.

Private Family Mortgage

Mortgage rates have been hovering between 6% and 7% over the past year.

While seemingly high given the bargain rates over the past decade, they are actually about average for the past 30 years.

But what if parents or grandparents had the money to “be the bank” for their kids’ mortgage? Not a gift, but a real loan, with the house as collateral.

The federal government sets minimum interest rates for intra-family loans; they are called applicable federal rates (AFR) and are set monthly.

The current minimum AFR for a long-term loan made in March 2025 is just 3.64%. So, families with sizable savings/investments could really help make a home more affordable by “being the bank.”

A $1 million 30-year fixed rate mortgage at 6.3% would have monthly payments of $6,190, but at 3.64% the monthly payments would only be $4,570.

That’s a huge savings for a young family, while the senior generation gets monthly payments for retirement income or to reinvest.

The loan should be fully documented, and the kids should make regular payments just like with a traditional mortgage.

Note that the senior generation could forgive payments from time to time if they wish — and can afford to forgo the payments — with some tax consequences to deal with.

And one big caveat: What if the kids default? Would you actually foreclose on the house?

Gifting

If you don’t need the house — or money from its sale — you could give it to your kids/grandkids. Or you could create a family partnership/LLC and make partial gifts of the home over time.

Keep in mind that income, gift and estate taxes should be considered, so you’d want to get help from qualified legal/tax advisers.

There are even ways to reduce the gift/estate tax consequences, like a qualified personal residence trust.

In simplest terms, this would allow the senior generation to stay in the house for a period of time with the home then transferring to the kids at a lower gift tax cost.

This definitely requires skilled tax advice.

Inheritance

Leaving houses to family has been quite common in Europe for centuries, and one way for kids to afford living here is to inherit the family home.

Obviously, the senior generation doesn’t need it when they’re gone (unless you want to haunt the place), and the property gets a stepped-up basis in case it’s sold.

In California, there’s even a property tax benefit if the heir makes the house their primary residence within a year and qualifies for a $1 million exclusion from the newly assessed value.

Note that there may be federal estate taxes involved, so again seek legal/tax help.

Accessory Dwelling Units

An accessory dwelling unit (ADU ), also known as a granny-flat or in-law suite, is a secondary residential unit on the same lot as the primary home.

Santa Barbara County actually encourages this kind of addition to help reduce the housing shortage.

The ADU provides independent living space and can be attached, detached or converted from existing space.

Sometimes, parents may even move to the smaller ADU and let the next generation with children live in the larger primary home.

Sharing a Home

Families may find multigenerational house sharing makes sense. Years ago, our elderly neighbors in the Seattle area remodeled the daylight basement of their home to include a very livable space with its own kitchenette and bathroom, with their son and his family taking over the full upstairs.

This provided some nice safety/care benefits for the seniors and a beautiful home for the kids that they would otherwise not be able to afford. The arrangement provided privacy but also the joy of three generations being so close.

Many past generations lived this way. Creativity and respect for each other are important.

So, while buying a house here in paradise is pricey, there may be ways for families to work together to help make it a reality.

This could be a great conversation for you and your family to have. Just make sure you are all on the same page and get skilled financial, legal and tax advice.