Is the answer to California’s housing crisis more bonds and more debt? Of course not.
Yet that’s what’s being pitched with Proposition 1.
Placed on the ballot by the California Legislature via Senate Bill 417, Prop. 1 asks voters to approve $11.25 billion in bonds to help finance various programs, including a $500 million down payment assistance program.
One bond – $1.25 billion – will go toward the Department of Veteran Affairs (CalVet) Home Loan Program. Participants in the program will repay this portion of Prop. 1.
The other $10 billion bond will be paid out of the state’s General Fund, and will go toward various programs. Most of it will go toward subsidized housing for low-income residents, while other funds will go toward programs aimed at student housing, tribes and farmworkers.
According to the Legislative Analyst’s Office, Prop. 1 “would provide subsidies for up to 40,000 multifamily rental units, as well as about 2,500 units for farmworkers and about 1,200 beds for university students.”
Proponents say Prop. 1 is worth the cost given the state’s high rate of homelessness and the high proportion of renters who struggle with high housing costs. In backing the measure, California YIMBY argues that, “Publicly-funded housing subsidies for low-income Californians who cannot afford market-rate rents are a good thing, and they should be more widely available.”
Yeah, no.
Taxpayer-subsidized housing in California is incredibly expensive to build. As a RAND Corp. report from last year points out, publicly-subsidized “affordable” housing in California costs 1.5 times that of market rate housing “and more than four times the cost of market-rate housing in Texas.”
There are myriad reasons for this, of course. As much progress as California has made in loosening zoning laws, the state’s land-use policies remain restrictive. Permitting processes in major cities are often incredibly slow. Reprieves from the California Environmental Quality Act always come with costly strings attached, including labor mandates.
Throwing more money into housing that’s slow and expensive to build simply won’t accomplish very much, because it can’t.
California YIMBY, to its credit, also points out some of the less desirable features of the measure. The down payment assistance program, for example, might be nice for those who benefit from it, but given the low supply of housing, it could end up contributing to higher home prices.
Then there’s the total bill for all of this. The $10 billion general obligation bond will, after interest, cost far more than that and further crowd-out other spending in the state budget. According to the LAO, the state will be spending $500 million to $600 million a year for 25 years to pay off the bond.
This, in turn, will only put further pressure on the perpetually precarious state budget and increase the risk of the Legislature approving or seeking new and higher taxes. This is no idle threat considering state lawmakers contemplated hundreds of billions of dollars in new taxes this legislative session.
Eight years ago, in opposing the very similar Proposition 1 in 2018, we wrote, “If California’s leaders are serious about making California a more affordable place to live, they should concentrate their efforts on curtailing onerous regulations and restrictive land-use policies and making it easier for homebuilders to build. And if they insist on subsidizing housing, they should do so directly, rather than wasting taxpayer money on interest payments.”
We stand by that, though we’d emphasize the need for California to stop fiddling and burdening reforms with mandates. There are those who argue California can both subsidize housing and loosen regulations, but the reality that we’re still having this discussion underscores that state and local leaders are dragging their feet and not deregulating fast enough.
California needs more housing, yes, but it doesn’t need Prop. 1.
Prop. 1 squanders billions into expensive housing and other gimmicks to buy political support.
Vote no and demand better housing policies.