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CA
Prop 37
Homeowner Loans

Bond

Creates Loan Program for Middle-Income Buyers of Qualified New Homes

Authorizes $25 billion in state revenue bonds to encourage the construction of new homes and increase middle-class homeownership through second mortgages.

SPUR's Recommendation

SPUR supports the creation of new tools and financing to promote homeownership, and these revenue bonds would have no impact on the state’s General Fund. The focus on new construction will increase the supply of for-sale homes in the state and allow homebuyers to build generational wealth through home equity. While Prop. 37 could have focused more specifically on supporting populations that face barriers to homeownership, we believe its contribution to overall homeownership rates makes it worthy of support.

Vote YES

What Prop. 37 Would Do

Proposition 37 would authorize revenue bonds for fixed-rate second mortgages for buyers of newly built homes, helping them afford a 20% down payment. Home loan borrowers would have to repay the bonds and administrative costs. The California Housing Finance Agency would offer eligible buyers fixed-rate mortgages for up to 17% of the purchase price of a newly constructed home. The bonds could not be used for existing homes.1 Other requirements:

  • Homebuyers would have to make a minimum 3% down payment.
  • Second-mortgage loans would be limited to 17% of a home’s purchase price.
  • Homebuyers would put down 20% equity at purchase to eliminate the need for private mortgage insurance.
  • The maximum sales price for a qualified new home could not exceed 125% of the Federal Housing Finance Agency conforming loan limit for that county. (For example, the 2026 limit for San Francisco is $1,249,125; 125% of that limit would be $1,561,406).
  • Homebuyers would have to be California residents for at least one year and would agree to occupy the home as a primary residence.
  • Family income could not exceed 200% of the area median income (AMI) in the county or metropolitan statistical area where the new home is located.

The Backstory

The cost of housing in California has made homeownership increasingly challenging for many households, especially for Black and Latinx families who have experienced housing discrimination and have less inherited wealth, according to the Public Policy Institute of California.2

This second-mortgage program would be available to households earning up to 200% of AMI, or $401,600 for a family of four in San Francisco.

Homeownership assistance has been a priority for former State Senator Bob Hertzberg. In 2022, he attempted to get a measure similar to Prop. 37 on the ballot through the state Legislature, but it failed. Former State Senator Anthony Portantino picked up the effort after Hertzberg was termed out of office, but he couldn't move legislation either. Hertzberg, now a private citizen, pivoted to a signature-gathering campaign and submitted more than 900,000 signatures this year to qualify Prop. 37 for the ballot. It requires a simple majority (50% plus one vote) to pass.

Equity Impacts

The racial equity impacts of Prop. 37 are unclear. While the Bay Area Equity Atlas found that the overall homeownership rate in the Bay Area is lower for Black (37%), Latinx (42%), and Native American (42%) households, this measure’s high cap of households earning up to 200% of AMI may disproportionately benefit Asian and white households, who have higher incomes and can more easily afford homeownership. In the Bay Area, the median income of Black and Latinx households is below 80% of AMI, according to U.S. Census data.

Pros

  • Prop. 37 would potentially create more homeownership opportunities in a state that, at 55.8%, has one of the lowest homeownership rates in the nation.
  • The measure focuses on new construction to increase housing supply rather than increasing demand for existing housing stock.
  • It would require the California Housing Finance Agency to conduct an independent annual audit of the program to ensure that bond proceeds are used in a manner consistent with the requirements.

Cons

  • Prop. 37 is not limited to first-time homebuyers and may therefore benefit Californians who could enter the market without its support.
  • The program is not targeted to low- or moderate-income households, allowing households with earnings of up to 200% of AMI to qualify. The maximum sales price may go up to 125% of the Federal Housing Finance Agency conforming loan limit.
Vote YES on Prop 37 - Homeowner Loans
Footnotes

1 Qualified homes include a newly constructed single-family home, townhome, row house, condominium, or manufactured home intended for occupancy by one household.

2 Public Policy Institute of California, “California’s Housing Divide,” October 21, 2024.