Buying a home in Southern California remains a formidable challenge, with median home prices demanding substantial cash upfront. In Los Angeles County, the median price for a single-family home currently stands at $935,000, while Orange County reaches $1.5 million. For a statewide median price of $900,000, a typical 20% down payment means shelling out $180,000, a significant hurdle for many.
Proposition 37, on the November 3 ballot, aims to address this by establishing a $25 billion down payment assistance program for middle-class households across California. To put its scale into perspective, one of the state’s existing programs, California Dream For All, launched with $500 million—a mere 2% of the funding proposed by Proposition 37.
Under Proposition 37, qualified homebuyers could borrow up to 17% of the sales price of a home, while contributing 3% of the down payment from their own funds. The program is designed to be self-sustaining, funded by interest charged to borrowers on these down payment loans, which are structured as second mortgages, rather than drawing from taxpayer dollars. The measure has garnered broad support, including from Gov. Gavin Newsom, who stated it's a "historic opportunity to expand homeownership opportunities for generations of working families — at zero cost or risk to taxpayers." Statewide unions and mayors from Santa Monica to San José have also voiced their backing.
However, the proposition comes with a significant caveat: any home purchased through the program must be new construction. This could limit the program’s reach, as some critics point out, given the inherently high cost of new builds. The measure would restrict qualifying homes to an estimated price range of $1 million to $1.5 million, depending on the county.
Eligibility for borrowers requires at least one year of California residency and an income no more than 200% of the local median. For a family of four in Los Angeles County, this translates to an annual income cap of $216,200. The program does not restrict assistance to first-time homebuyers, but participants would be required to live in the home purchased. The specifics of loan terms and interest rates are not outlined in the proposition itself; these details would be determined by the California Housing Finance Agency (CalHFA) should the measure pass.
Bob Hertzberg, a former Senate Majority Leader and the proposal’s architect, indicated the focus on new construction is intended to spur building, addressing the state's estimated shortage of 840,000 to 3 million homes. He expressed hope that increased demand would encourage builders to construct more units.
Despite this intention, some groups remain skeptical. An analysis funded by the Proposition 37 campaign estimated the program could lead to 190,000 new homes, though the report’s author acknowledged it's "impossible to know" the true number. Matthew Lewis, director of communications for California YIMBY, noted that high prices already demonstrate existing demand for homes, and he questioned whether the measure truly addresses the underlying cost of building. He warned that the program risks intensifying bidding wars, potentially creating "12 people bidding on the same house" instead of 10.
Concerns also extend to developers. Paul Schon, an apartment developer in Los Angeles County, described the proposition as "minor," suggesting that tackling permitting times and regulatory hurdles would have a more significant impact on boosting supply. Builders, even with incentives like a "qualified builder" option that offers protection from defect lawsuits for 10 years, are not convinced the measure would push construction into overdrive.
The funding mechanism, which relies on state-issued revenue bonds sold to investors and repaid through borrower interest, also raises questions. While many existing down payment assistance programs, including some run by CalHFA, offer interest-free loans, Proposition 37's fixed-rate loans would carry interest to be self-funding. The Legislative Analyst’s Office points out that revenue bonds are generally viewed as riskier than other government bonds, potentially leading to higher interest rates for borrowers. Hertzberg stated he has spoken with investors who might be willing to purchase these bonds at more favorable rates given the housing crisis the funding aims to solve. The League of Women Voters opposes the measure, citing concerns about residents taking on too much debt and the lack of transparent loan terms prior to the vote.
As the ballot measure approaches, Southern Californians will weigh the promise of widespread homeownership assistance against the specific limitations and yet-to-be-determined details of this ambitious proposal.
