Prop 37: Creates Middle-Income Homebuying Program

Olivia Allen-Price: For would-be homebuyers in California, there are a seemingly endless number of hurdles to jump over. But perhaps the biggest one for most people is saving for the down payment. When homes cost as much as they do in California, coming up with that initial chunk of cash hurts.

Ericka Cruz Guevarra: It’s pretty standard to put down 20% of the cost of a home for a down payment. And if you can’t, you may be required to get mortgage insurance, which is just one more extra fee. The median cost of a single-family home in California is $980,000. That means you’ll need $200,000 for a down payment.

Olivia Allen-Price: And of course most homes here in the Bay Area where we’re recording cost way, way more.

Ericka Cruz Guevarra: It’s this issue that the proponents of Proposition 37 set out to tackle. Here’s how the measure reads on your ballot. 

Voice Over: Proposition37 creates a loan program for middle-income buyers of qualified new homes. 

Ericka Cruz Guevarra: I’m Ericka Cruz Guevarra, host of The Bay.

Olivia Allen-Price: And I’m Olivia Allen-Price, host of Bay Curious. Today, we continue on with PropFest, breaking down each of the 14 initiatives on the statewide ballot.

Ericka Cruz Guevarra: You heard that right, 14. 

Olivia Allen-Price: Direct democracy, baby. Here we go. 

Today, we’re going through Proposition 37, a $25 billion bond to fund a program to help moderate income Californians buy homes. Here to walk us through it is KQED’s housing reporter, Adhiti Bandlamudi. Welcome, Adhiti. 

Adhiti Bandlamudi: Hey Olivia, I’m ready to talk bonds. 

Olivia Allen-Price: Let’s do it.  Let’s start big picture on this one. What’s the context for Prop 37 and why is it on our ballot?

Adhiti Bandlamudi: Yeah, California has one of the lowest rates of homeownership compared to other states. The national average is 66 percent, but California’s is 10 percent lower. It’s like 56 percent. That’s largely because the homes here are so expensive. More than half of Californians don’t own a home until they’re in their late 40s. And for a lot of people, the down payment is the sticking point. They could make a mortgage, but they don’t have enough savings to get into the game. And what could Prop 37 do to help that situation? So it directs the California Housing Finance Agency, also called Cal HFA, to create a middle-class home buyer down payment assistance program funded with up to $25 billion in revenue bonds, which means the bond would be paid back by mortgage payments home buyers make, not by taxpayers who aren’t buying homes. There’s an interesting catch here though. This program only applies to newly constructed homes. So on the whole, this bond is trying to do two things, help middle-class home buyers buy homes and also jumpstart the housing construction industry. 

Olivia Allen-Price: Okay, so unlike Prop 1, the other housing bond on this year’s ballot, which we talked about the other day. 

Adhiti Bandlamudi: I’m familiar with it, yes. Yes, 

Olivia Allen-Price: Which funds all sorts of programs. This one is specifically targeting that middle income group of people who often don’t qualify for other programs from the state.

Adhiti Bandlamudi: Correct, and we should be clear, the way that this bond defines middle class is a bit tricky. So it’s defined as making 200% of area median income. Another way of thinking about that is that it’s roughly double of what a typical family in the area makes. Now, because it’s tied to what local incomes are in a particular place, qualifying for this program is going to vary greatly depending on where you are living in California. The California Budget Center has a really nice breakdown of what this would mean on a county level for a family of one, two, three, four. So let’s take a family four. This would mean that in San Francisco, for example, the family could make up to $342,000 and still qualify. If the family lived in San Mateo, that number would be a little bit higher. In Solano County, on the other hand, that number would be about $100,000 lower. So again, qualifying for this program really depends on where you live in the state. And this proposition really focuses on connecting new homeowners to new housing by helping people come up with the money for a down payment, which is really interesting to watch if this passes because it can only be used for newly constructed homes, which also means that it’s gonna take time for people to use this program to buy a home because the homes have to be built.

Olivia Allen-Price: And really it will be more useful for potential home buyers in certain places where new homes can be built.

Adhiti Bandlamudi: Exactly. It’s really going to depend on the cities and the counties that are willing to build more homes, that have space to build, more homes that have public political pressure to build more homes. So it’ll be interesting to watch. Walk me through how this would actually work from the homebuyers’ perspective. Okay, so here are the mechanics of it. So buyers would have to put down at least 3% of the down payment themselves. The bond would basically allow the state to cover 17% of home price. So 17 plus three, we got 20% down, which is the standard amount needed to avoid paying mortgage insurance. Now, the bond would require that home buyers pay back that 17% down payment assistance with interest, which means they’d be paying that back along with their monthly mortgage payments. What’s required of homebuyers who want to take part in this program? Unlike other down payment assistance programs, it doesn’t require the applicant to be a first-time or first-generation homebuyer. And it also doesn’t have any rules that would mean the homebuyer owes the state any equity gained on the house. Homebuyers have to qualify for a mortgage, meet the income requirements, occupy the home as their primary residence, make monthly payments, and they would have to fully repay their loans. What’s all this going to cost taxpayers? This would not cost taxpayers anything because the interest payments homebuyers would make to the state would cover the interest on the bond.

Olivia Allen-Price: We’ve got to hit pause for a minute, but when we return, more on Prop 37, including who’s behind it and what supporters and opponents say. Stay with us. 

Sponsor messages

Olivia Allen-Price: Welcome back to PropFest. We’re talking about Proposition 37. Arati, this measure was placed on the ballot by a group, not the state legislature. Who’s behind it?

Adhiti Bandlamudi: Bob Hertzberg, he is the former state Senate majority leader. He’s now retired from the legislature, but he still gets involved with causes he cares about. He started thinking about this bill back in 2008, right after the financial crash. He saw that we immediately stopped building homes, and there weren’t a lot of incentives for developers to build middle class housing.

Bob Hertzberg: You know, so many things we do in government either help the super wealthy and powerful or the people that are otherwise in trouble in so many ways, and it’s the right thing to do, but the middle class feels like they’re out of the loop.

Olivia Allen-Price: In addition to Hertzberg, who else is supporting this measure? 

Adhiti Bandlamudi: There’s a lot of broad support for this proposition. The Democratic Party, various construction and realtor groups have also shown support, as well as Javier Becerra, who’s running for governor. 

Olivia Allen-Price: Hmm. And what about opponents? What do they have to say, and who are they? 

Adhiti Bandlamudi: So there are no official opponents to this bill, but there are some arguments for why it may not have its intended effect. So first off, there’s a real question right now as to whether home ownership in a state like California is still the most advantageous path. The premium to buy a house, like all those extra fees and things like insurance and interest, they can outweigh the historical benefit of buying a home and owning one. Second, while this proposition states an intent to keep the interest rate on the down payment loans low, it doesn’t guarantee it. Critics argue that because home buyers would be paying their mortgage and paying back the down payment assistance loan, it’s a second mortgage. And investors could see that as more risky and in turn that could lead to higher interest rates. 

Also, some people say that this could actually exacerbate racial disparities in home ownership because there are barriers to participating. According to the Public Policy Institute of California, the median amount in Californians’ checking and savings accounts was just over $18,000 in 2025. This means that a 3% down payment could still almost or entirely wipe out the savings of what an average family has. 

Third, California already has several down payment assistance programs. There are estate ones, there are ones run by counties, by local banks. Does it really need another one, especially one that’s so focused on newly built homes? And also, while we’re on the topic of newly built homes, right now, home building is pretty slow going with borrowing costs, labor costs, materials, all being really expensive. So while this bond is trying to provide incentives, there’s no guarantee that developers will bite and actually build the homes. Reform California has come out against it. Carl DeMaio is a Republican assembly member from San Diego, and he says it’s a lot of money to be borrowing right now. And he’s also worried that this bond isn’t really for home buyers, but for developers.

Carl DeMaio: This bond program basically becomes a subsidy for rich developers who give campaign contributions back to politicians. It really only helps a few people when it comes to housing, the lucky few that might win the lottery. This is not the approach for affordable housing.

Olivia Allen-Price: What does spending look like for Prop 37?

Adhiti Bandlamudi: Supporters of the proposition have raised $12.7 million as of this taping. The opposition hasn’t spent any money on this measure. All right.

Olivia Allen-Price: Aditi Bandlamudi, thank you for breaking Prop 37 down for us. 

Adhiti Bandlamudi:  Yeah, thanks for having me. 

Olivia Allen-Price: In a nutshell, a vote yes on Prop 37 gives the state permission to borrow up to $25 billion to create a down-payment assistance program for middle-income people. It would be repaid by people who receive those loans. A vote no means you do not want the state to borrow up to 25 billion dollars to create this program.

Ericka Cruz Guevarra: That’s it for PropFest today. We’ll be back tomorrow with an explainer on Proposition 38, another bond, this time for immunology and immunotherapy research, and Proposition 39 about voter ID.

Olivia Allen-Price: We’re dropping episodes every weekday from now until October 9th on the Bay and Bay Curious podcast feeds. Make sure you’re subscribed so you don’t miss out.

Ericka Cruz Guevarra: PropFest is a collaboration between the Bay and Bay Curious podcasts. It’s produced by Alan Montecillo, Gabriella Glueck, Pauline Bartolone, Olivia Allen-Price, Katrina Schwartz, Christopher Beale, Anna Casalme, and me.

Olivia Allen-Price: We get extra support from Ethan Tovan Lindsey, Maha Sanad, and the whole KQED family. 

You can find audio and transcripts for this series at kqed.org slash prop fest. Some members of the KQEd podcast team are represented by the Screen Actors Guild, American Federation of Television and Radio Artists, San Francisco, Northern California local.

Ericka Cruz Guevarra: Support for The Bay is provided in part by the Osher Production Fund. 

Olivia Allen-Price: Our show is made in San Francisco at member-supported KQED. If you value podcasts like this one, please consider becoming a sustaining KQed member. Learn more at donate.kqed.org. I’m Olivia Ellen Price. 

Ericka Cruz Guevarra: And I’m Erika Cruz-Gavarra. We’ll see you tomorrow. Bye!