California housing bonds: Voters pass Prop. 37, Prop. 1 still pending

California voters approved Proposition 37, an unprecedented revenue bond that supporters say will make homeownership more accessible for hundreds of thousands of aspiring homebuyers, according to the Associated Press. Proposition 1, a more traditional affordable housing bond, has yet to be called, although it has 58% voting "yes" with an estimated 42% of ballots counted.

The two bonds take aim at the state’s affordable housing crisis in very different ways.

Prop. 1 would give the state permission to borrow a record-breaking $11.25 billion, with the lion’s share going toward the construction of affordable housing for low-income renters and homeless Californians.

Prop. 37 is a first-of-its-kind revenue bond that would have the state borrow as much as $25 billion from private investors and lend that money to qualifying homebuyers to help cover the bulk of their down payments. Plenty of experts have questioned how this untested program would work, but most agree that it would not come at the expense of state taxpayers.

A familiar borrowing proposal

Prop. 1 carries a historically large price tag, but is otherwise a conventional policy approach. California regularly puts affordable housing spending on the state credit card, especially after the Legislature and former Gov. Jerry Brown axed the state’s main funding source in the wake of the Great Recession.

The most recent major bond in 2018 saw the state borrow $4 billion. Developers and affordable housing advocates have been lobbying the Legislature for a successor since then.

The tone of the “Yes” campaign took on a heightened degree of urgency this year. The money from that most recent bond is now all but depleted. A recent redesign of the state’s carbon emission market, one of California’s signature climate change programs, is also likely to nix one of California’s few other sources of money for affordable housing.

If Prop. 1 passes, nearly two-thirds would be used to fund apartment buildings dedicated to cash-strapped Californians including those facing homelessness. The remaining haul would be split among different programs: Low-cost home loans for low-income and veteran buyers; support for farmworker, student and tribal housing; technical innovation grants and grants for cities planning new dense housing development.

Supporters say the new spigot of cash could unlock nearly 40,000 affordable units that are ready to break ground but lack state funding. That isn’t anything close to the 312,500 units that state regulators say the state needs to build every year to meet its housing goals. But affordable housing advocates say it would be a welcome boost for a state that has especially struggled to build for its neediest renters.

Something completely different

Prop. 37 is meant to help Californians a bit higher up the income spectrum, but who still can’t quite crack homeownership. The proposed borrowing program is principally backed by the California Association of Realtors and former Democratic Assembly Speaker Bob Hertzberg.

Critics of the measure have questioned whether privately financed downpayment loans will be affordable for Californians who most need the help. Hertzberg has countered that wealthy philanthropists, foundations and other charitable spenders could be convinced to provide the funding to the state at below-market interest rates.

This article was originally published on CalMatters and was republished under the Creative Commons Attribution-NonCommercial-NoDerivatives license.