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California voters approved two housing bond measures, Propositions 1 and 37, according to the Associated Press.
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.
There are still many open questions about how Prop. 37 will be administered and how many Californians will benefit, said David Garcia, deputy director of policy at UC Berkeley’s Terner Center for Housing Innovation. But its blow-out margin “speaks to just how much the dream of homeownership matters to so many Californians,” he said.
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.
Though Prop. 1 appears to have passed easily, the coming influx of taxpayer dollars may put more pressure on state lawmakers to tamp down the cost of affordable housing development, which can sometimes exceed $1 million per unit in the state’s pricey coastal cities.
“I do think this raises the question of whether we can we control the cost of building these homes so that our dollars can go further and so that voters will continue to feel like they’re getting a bang for their buck,” said Garcia with the Terner Center.
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.
“There is a war against the middle class and these are like war bonds,” he said, shortly after the Prop. 37 race was called by the Associated Press. “I’ve already reached out to a number of foundations, philanthropic groups, labor unions, the ‘Giving Pledge’ people to get them to buy these bonds.”
He declined to name these groups and said none had publicly declared their intention to do so yet. But that could change soon now that the voters have backed the policy.
“It’s real now,” said Hertzberg.
This article was originally published on CalMatters and was republished under the Creative Commons Attribution-NonCommercial-NoDerivatives license.
