The Question

Should California allow the California Housing Finance Agency (CalHFA) to issue up to $25 billion in revenue bonds to help eligible middle-income Californians buy newly built homes?

The Situation

California faces a housing shortage, and home prices have risen faster than many household incomes. For many people, saving enough money for a down payment is one of the biggest hurdles to buying a home.

The California Housing Finance Agency (CalHFA) operates programs that help some Californians purchase homes. Some of these programs provide down-payment assistance through loans that must eventually be repaid. Most existing programs focus on low- and moderate-income households.

California law also establishes construction standards for newly built homes and provides procedures that homeowners and builders must follow when construction defects are reported. Builders have argued that these rules increase the risk of developing new housing, particularly condominiums and townhomes.

The Proposal

Voters signed petitions to place Proposition 37 on the ballot. Prop 37 would allow CalHFA to issue up to $25 billion in revenue bonds to create a new homeownership assistance program. Unlike general obligation bonds, revenue bonds are intended to be repaid by program participants rather than taxpayers.

Under the program:

• Eligible buyers could receive a second mortgage worth up to 17% of the purchase price of a qualifying newly built home.
• Buyers would have to make a minimum 3% down payment from their own funds.
• Borrowers would have to meet income limits, occupy the home as their primary residence, and be California residents.
• The program would apply only to newly built homes and certain converted nonresidential properties.

The measure would also create a voluntary “Qualified Builder” program. Builders who choose to participate would meet higher labor standards (e.g., using trained workers on certain projects) in exchange for different, more flexible construction-defect rules.

Fiscal Effects

According to the Legislative Analyst’s Office, Prop 37 would likely have no direct state or local government cost. The measure is designed so that homeowners who receive loans would repay the bonds and administrative costs through their mortgage payments.

The ultimate impact of the program will depend on factors such as investor demand for the bonds, participation by homebuyers, and whether the measure increases home construction and homeownership.

Supporters Say

• Prop 37 would help middle-income Californians who can afford monthly mortgage payments but struggle to save for a large down payment.
• By targeting assistance for newly built homes, the measure could encourage additional home construction and increase housing supply.
• The program is designed to be funded by revenue bonds repaid by participating homeowners, with no cost to taxpayers.
• The measure includes consumer protections and financial safeguards while expanding access to homeownership.

Opponents Say

No argument against Prop 37 was submitted for the Official Voter Information Guide. However, critics of the measure have raised concerns that:

• The measure could encourage new housing farther from existing communities and services.
• Requiring only a 3% down payment may increase risks of default if home values decline or borrowers experience financial difficulties.
• If borrowers default on their loans, there may not be enough money to repay the bonds.
• Some changes to construction-defect rules could make it more difficult for homeowners to pursue claims against builders.