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The state’s housing crisis isn’t just a problem for low-income Californians. It drives homelessness, yes, but it also sends middle-class families fleeing in search of housing they can afford.
On Nov. 3, Californians will consider two bond measures, Proposition 1 and Proposition 37, that tackle affordability in different ways to help both low- and middle-income Californians. We need both of them to deal with the grim reality that the state’s housing market isn’t working for anyone but the rich.
Proposition 1 is a $11.25-billion bond measure placed on the ballot by the Legislature that would expand and continue funding for several existing programs that serve Californians who need help, such as low-income renters, first-time home buyers, farmworkers and veterans, to name a few. By funding new construction, Proposition 1 could “unlock” more than 40,000 units already in the pipeline across the state. Most of the money, about $10 billion, would come from general obligation bonds paid back by taxpayers over 25 years.
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This might sound familiar. That’s because in 2018, voters passed a $4-billion bond measure with the same name, the Veterans and Affordable Housing Bond Act, and number. Both versions of Proposition 1 overemphasize help for veterans: A downpayment assistance program for them would get just $1.25 billion of the current bond total. The biggest chunk, $7.2 billion, would go toward subsidizing the preservation and construction of affordable rental housing for low-income Californians.
That’s one of the reasons Assemblymember Carl DeMaio (R-San Diego) opposed putting it on the ballot. “Let's get the vets, and let's put them front and center and say it's all about the vets. Everyone loves veterans,” he said in an Assembly floor speech in June.
DeMaio also fumed that spending more taxpayer money on building affordable housing does nothing to address the regulations that make construction so difficult and expensive in California – and he’s not wrong.
But those regulations are a separate matter, and Californians who cannot afford market-rate housing shouldn’t pay for legislative inaction. In fact, according to an analysis by the nonpartisan California Budget and Policy Center, Proposition 1 would replenish funds for many existing affordable housing programs that are running out of money. The center noted that funding from Proposition 1 in 2018 was completely exhausted within five years because of overwhelming demand.
Proposition 37 is also a housing bond, but it goes much further – and doesn’t leave taxpayers on the hook. The citizen’s initiative was backed by former state lawmaker Robert Hertzberg and would extend housing help to people who often get left out of government programs: middle-class Californians.
Mariel Garza
It would establish a loan program overseen by the California Housing Finance Agency for newly built homes priced up to $1.5 million (or lower in some parts of the state). The idea is to spur new homebuilding while giving Californians of modest means a fighting chance to own one. To qualify, buyers would have to make no more than twice the local median income (in Los Angeles County, that’d put the cap at about $200,000), and provide a cash downpayment of at least 3%. With a primary mortgage for 80% of the total purchase price, the new loan program would cover up to the remaining 17%.
“This whole rich-poor divide that's going on is really horrible. All we do is pass stuff for rich people and poor people,” Hertzberg told me. “The middle class says you're never helping me.”
Paul Thornton
But will it actually work? According to an analysis for the campaign by a UCLA housing expert, under ideal conditions Proposition 37 could spur the construction of 190,000 new homes. But that is by no means guaranteed.
That’s because the bonds are repaid over the life of the loan by the borrowers rather than being backed by the full faith and credit of California taxpayers. This has the benefit of shielding taxpayers from risk but it also could make potential bond buyers less willing to buy them at low interest rates, increasing the cost to borrowers.
Concerns over affordability are among the reasons the League of Women Voters of California came out against Proposition 37. The group is worried that making program participants pay back two loans simultaneously could “help a family buy a home without making it affordable to keep.” The group also objected that eligible homes don’t have to be built near transit, jobs or services, which could promote suburban sprawl.
Mariel Garza
Hertzberg said that new state laws easing the approval process for denser housing and a provision in the initiative incentivizing condo construction help address concerns about sprawl. Furthermore, Proposition 37 would allow only fixed-rate loans, not the kind of variable-interest schemes that ballooned mortgage payments and tanked the housing market in 2008.
Proposition 37 does put some risk on borrowers – as any loan does – but that seems a fair tradeoff for a program aimed at helping the middle class. It’s a creative solution worth trying.
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