$11.25 Billion in Bonds, $25 Billion in Second Mortgages, and a CEQA Fast Track: California’s Ballot Offers Housing Three Ways

Props 1, 37 and 45 show a state that would rather subsidise scarcity than remove the rules that create it

Anyone trying to rent or buy near the California coast knows the price of a place to live. The November ballot offers three answers to the problem, each with a different theory of what is broken. GrowSF’s guide to the 14 statewide measures lists them: Proposition 1 authorises $11.25 billion in bonds, mainly for affordable housing and veteran home loans; Proposition 37 authorises $25 billion in bonds for fixed-rate second mortgages on newly built homes for qualifying buyers; and Proposition 45 fast-tracks essential projects through environmental review with shorter agency deadlines and narrower judicial review. Two spend money and one removes friction.

Proposition 1: The Traditional Bond

Proposition 1 follows a familiar template. The state borrows, repays with interest from the General Fund and funds subsidised units and loan programmes. Bonds have built housing, and they have a place in a state that needs a lot of it. But they share a weakness: they raise the budget for building without lowering the cost of building. When a subsidised unit costs far more than a market unit would cost in a less regulated place, the bond buys fewer homes than it should.

The question for voters is how many homes $11.25 billion will produce, at what cost per unit, and compared with what alternative. Past housing bonds have faced criticism for slow delivery. Without an estimate of units and a record of past performance, it is hard to judge. The ballot summary does not provide those figures, and voters should look for them in the official analysis.

Proposition 37: Second Mortgages for New Homes

Proposition 37 is the most unusual. It authorises $25 billion in bonds to provide fixed-rate second mortgages on newly built homes to qualifying buyers. In plain terms, the state would lend part of the purchase price at a fixed rate, helping buyers with the down payment and monthly cost. The idea is to support demand for new construction.

The economics are contested. Subsidising demand in a market where supply is restricted tends to raise prices, since more buyers with more money chase the same number of homes. That is the standard objection to demand-side housing aid. Supporters answer that tying the aid to new construction sends the money to the supply side too, since builders have more certain buyers. Whether the net effect lowers or raises prices depends on whether construction can respond, which depends on regulation.

Proposition 45: Taking Friction Out

Proposition 45 addresses the supply side directly. It fast-tracks essential projects through the California Environmental Quality Act review, with shorter agency deadlines and narrower judicial review. The California Environmental Quality Act has been used for decades to delay or block projects, sometimes for legitimate environmental reasons and sometimes as a tool of neighbours, competitors or unions seeking leverage. Housing advocates have long argued that it adds years and cost to projects that cause little harm.

A 2006 commentary from the Reason Foundation, Regulating California’s Housing, argued that the state’s high home prices stem from regulation and not from greedy developers. It cited estimates that regulation added more than $850,000 to a median San Francisco home and about $316,000 to a Los Angeles home, at 2005 prices. The numbers are old and the methodology was contested, but the direction of the argument has been echoed by many economists since: when supply is restricted, prices rise.

The Missing Question: What Counts as Essential?

The details matter. A fast track for essential projects is only as good as its definition of essential. A broad definition could cover most development and deliver real change. A narrow one could cover a few public projects and leave housing out. Voters should read the text to see whether housing is included, how the judicial review limits work and what protections for habitat and communities remain.

How the Three Fit Together

Seen together, the measures reflect a state that wants more housing and disagrees about the method. One approach is to put more public money into subsidising units and buyers. The other is to reduce the rules that raise costs. They are not mutually exclusive. A state can fund affordable housing and also cut permitting time. The most effective policy mix is likely to include both.

The risk is that subsidies are adopted and reforms are not. Subsidies are popular, visible and easy to announce. Reforms require confronting entrenched interests and are harder to explain. If voters approve the bonds and reject the fast track, the state will spend $36 billion in borrowed money into a market where building remains slow and expensive.

What Surfers and Renters Share

Young people who surf, work and rent near the coast are the ones most squeezed by the housing market. Many share rooms, commute long distances or leave. Housing policy is therefore not an abstraction but the reason a generation of Californians can or cannot stay near the water. They have a stake in the question of whether the state removes barriers or merely adds subsidies.

Further Reading

The cost of housing is a shared concern across the Atlantic. Our London pages have tackled the price of access in a city of expensive housing, the cost of living crisis and California’s new protections for workers from AI. See also our guide to American comedy for context, and Bohiney Magazine for more American coverage.

For lighter reading, Newsthump has the day’s other stories.

SOURCE: bohiney.com