California needs serious solutions to its housing crunch. Two bonds on the Nov. 3 ballot are not among them.
Proposition 1 is the $11.25 billion Veterans and Affordable Housing Bond Act. The Legislature put it on the ballot by passing Senate Bill 417, which Gov. Gavin Newsom signed. The name is somewhat misleading because only $1.25 billion, or 11%, would go to veterans, a group most people want to help. The veterans themselves would repay the loans.
The remaining $10 billion, or 89%, would go to a grab bag of seven bureaucratic housing programs. According to the Legislative Analyst’s Office, this part would be repaid at a cost of $500 million to $600 million annually from the general fund – that is, by the taxpayers. For decades I’ve insisted: Bonds are delayed tax increases.
The largest allocation is $7.2 billion to “acquire, build, or renovate rental housing, such as apartment buildings.” Then follow $1.1 billion to promote homeownership for low- and moderate-income households, $500 million for infrastructure programs, $450 million for farmworker housing, $350 million for student housing at UC and Cal State campuses, $200 million for tribal housing and $200 million for local pilot programs.
It’s clear the money just is being divvied up to the most powerful special interests.
A big problem is the new bond spending would do nothing to alleviate the “fragmented and cumbersome” system the LAO called out in a March 2026 recommendation, “Streamlining California’s Affordable Housing Funding System.”
Proposition 37 is called the Middle-Class Homeownership Act by its sponsor, former Democratic Assembly Speaker and Senate Majority Leader Bob Hertzberg. It could issue up to $25 billion in bonds for housing. The bonds would be paid back by the homeowners.
It would give buyers a state loan covering up to 17% of a home’s purchase price. It’s a “second mortgage” because it sits behind their main mortgage, filling the down-payment gap. The homeowners would have to pay 3% of the price.
More than 900,000 signatures were gathered, almost double the 546,651 needed to put it on the ballot. The bond is “aimed specifically at brand-new construction for ownership housing for the middle class,” Hertzberg told Planning Report. He said young people, especially, “can’t come up with $150,000 or $200,000” for a down payment and have low FICO credit scores.
The LAO’s analysis of Prop. 37 found no direct state or local costs to taxpayers. The bondholders would take the hit on defaults. But the LAO cautions the actual results of the bond are “unknown,” including investor response, the cost to homebuyers versus other programs and whether it actually will increase homeownership.
For both Prop. 1 and Prop. 37, the greater problem is they could increase demand faster than supply, actually increasing the price of housing. That would put the cost of buying a home further out of reach for those not lucky enough to get these and other state programs.
Moreover, the Terner Center for Housing Innovation at UC Berkeley tallied nearly 100 new laws touching “virtually all aspects of housing” passed by the Legislature since 2017. It would make sense to wait a few years to see how all these changes actually affect real housing and real families.
The state instead should direct its attention to the other aspect of affordability: the income levels needed to pay for the housing. Just this year, the Legislature passed and Newsom signed into law what the California Taxpayers Association branded “the largest tax increase” in state history.
That included new taxes on health care providers and software downloads. Friends of mine in small business, the heart of the middle class, are wondering how they will pay the new levies.
The new taxes were on top of the old taxes. The Tax Foundation calculates the Golden State’s top income tax rate of 14.6% is the highest in the nation. The average sales tax rate is 8.99%, below Louisiana’s nation-leading 10.11%. But the gas tax is the highest, at 70.92 cents a gallon.
What good is “affordable” housing if you can’t afford it?
John Seiler is on the SCNG Editorial Board