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November 6, 2018 — California General Election

— Affordable Housing Bonds — Authorizes Bonds to Fund Specified Housing Assistance ProgramsLegislatively Referred Statute —

November 6, 2018 —California General Election

State of California
Proposition 1 — Affordable Housing Bonds Legislatively Referred Statute - Majority Approval Required

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Election Results

Passed

4,401,119 votes yes (54.6%)

3,663,559 votes no (45.4%)

  • 100% of precincts reporting (24,312/24,312).

Authorizes $4 billion in general obligation bonds for existing affordable housing programs for low-income residents, veterans, farmworkers, manufactured and mobile homes, infill, and transit-oriented housing. Fiscal Impact: Increased state costs to repay bonds averaging about $170 million annually over the next 35 years.

Information provided by The League of Women Voters of California Education Fund

The way it is now

Across the state, people are struggling to afford housing. The cost to rent or own a home in California is more expensive than in most of the country. To help provide housing to low-income and homeless residents, the state provides affordable loans to some home builders. These builders include local governments, nonprofits and some private companies. California also has a program that provides affordable home loans to military veterans. 

What if it passes?

Prop 1 would allow the state to sell $4 billion in new bonds to pay for existing affordable housing programs. Money would go toward programs for:

  • Low-income residents
  • Veterans
  • Housing near public transportation
  • Farmworkers

Prop 1 bonds would provide housing for up to 30,000 low-income households and 7,500 farmworker households each year. Money from Prop 1 would also help 15,000 homebuyers with down payments and provide home loans to about 3,000 veterans every year.

Budget effect

Repaying the bonds plus interest would cost the state about $170 million each year for the next 35 years. This amount is about one-tenth of one percent of the state’s current budget. The veterans’ program will be no cost to the state.

People FOR say

  • California needs housing for hardworking families, seniors and people with disabilities.
  • Prop 1 honors veterans by helping them buy a home when they return from service.

People AGAINST say

  • Prop 1 would only provide housing for a small number of people.
  • If California keeps borrowing money, all residents will end up paying higher taxes.

 

Information provided by League of Women Voters of California Education Fund

The Question

Should the state issue $4 billion in bonds for housing programs for low-income residents, veterans, farmworkers, plus for mobile homes and transit-oriented housing?

The Situation

An average house in California cost 2.5 times the national average and average rent in California is about 50% higher than the national average. About 100,000 houses and apartments are constructed each year in California, most by private interests, and not by the government.  In some instances, the state provides assistance with grants or low-cost loans for construction of housing to be sold or rented to low income individuals.  California also receives about $2 billion each year from the federal government to support housing projects.

General obligation bonds are sold to investors and repaid from the State’s General Fund.  The State repays the principal and interest over time, approximately thirty-five years for these bonds.  A general rule is that principal and interest payments usually are about twice the principal amount of the bonds.  Bonds used to fund home loans for veterans are repaid by the veterans through their mortgage payments.

The Proposal

Proposition 1 permits the state to issue $4 billion in new general obligation bonds for the following housing programs:

  • $1.8 billion for building or renovating affordable multifamily housing (apartments)
  • $450 million for infrastructure (parks, water, sewage and transportation) to support housing construction
  • $450 million for down payment assistance to low and moderate-income home ownership
  • $300 million for farmworker housing (rental and owner-occupied)
  • $1 billion for home loans to eligible veterans.

This proposal would provide assistance to 30,000 multifamily and 7,500 farmworker households as well as home loans to about 3,000 veterans.

Fiscal effect

The cost to taxpayers for $3 billion in bonds would about $5.9 billion over a 35 year period or approximately $170 million a year in order to pay back both the principal and the interest on the general obligation bonds.  The $1 billion set aside for veterans’ assistance is repaid as the veterans pay off their loans.  

Supporters say

  • Proposition 1 provides relief from the housing crisis by building some housing and helping those who struggle to buy housing.  
  • The measure honors veterans by helping them to buy a home.  

 

Opponents say

  • Proposition 1 will help a very limited number of persons.
  • Californians are being asked to borrow more money through these bonds which will end up costing everyone.

 

Summary

  • Authorizes $4 billion of state general obligation bonds to fund existing housing programs. 
  • Includes $1.5 billion for Multifamily Housing Program for low-income residents, $1 billion for loans to help veterans purchase farms and homes, $450 million for infill and transit-oriented housing projects, $300 million for farmworker housing program, and $300 million for manufactured and mobile homes.
  • Provides housing assistance for buyers, infrastructure financing, and matching grants to expand affordable housing stock.
  • Appropriates General Fund revenues to pay off bonds for existing programs that have no revenues or insufficient revenues. 

SUMMARY OF LEGISLATIVE ANALYST’S ESTIMATE OF NET STATE AND LOCAL GOVERNMENT FISCAL IMPACT:

  • Increased state costs to repay bonds averaging about $170 million annually over the next 35 years. These bond funds would be used to provide affordable housing.

State Bond Cost Estimate.

Authorized new borrowing $4 billion
Average annual cost to pay off bond $170 million
Likely repayment period 35 years
Source of repayment General tax revenue
— Office of the Attorney General

Background

Housing Is Expensive in California. Housing in California has long been more expensive than most of the rest of the country. While many factors have a role in driving California’s high housing costs, the most important is the significant shortage of housing, particularly within coastal communities. A shortage of housing means households wishing to live in the state compete for limited housing. This competition increases home prices and rents. Today, an average California home costs 2.5 times the national average. California’s average monthly rent is about 50 percent higher than the rest of the country.

State Housing Programs Fund Some Home Building. In most years, about 100,000 houses and apartments are built in California. Most of these housing units are built entirely with private dollars. Some, however, receive financial help from federal, state, or local governments. In these cases, the state provides local governments, nonprofits, and private developers with grants or low-cost loans to fund a portion of the housing units’ construction costs. Typically, housing built with these funds must be sold or rented to Californians with low incomes. A portion of housing units built with state funds is set aside for homeless Californians. While the state historically has not provided ongoing funding for these housing programs, California receives approximately $2 billion annually from the federal government to support these projects.

Home Loan Program for Veterans. The state’s veteran home loan program provides home loans to eligible veterans, including veterans who may not otherwise qualify for a home loan. Under the program, the state sells general obligation bonds to investors and uses the funds to provide loans to eligible veterans to purchase homes. Participating veterans repay the state for these home loans. These funds are then used to repay the bonds. 

— Legislative Analyst's Office

Impartial analysis / Proposal

New General Obligation Bonds for Housing. This measure allows the state to sell $4 billion in new general obligation bonds for various housing programs. (For more information on the state’s use of bonds, see “Overview of State Bond Debt” later in this guide.)

USE OF FUNDS 

As shown in Figure 1, the measure provides bond funding for various housing programs, which are described below in more detail.

Proposed Use of Bond Funds (In Millions)

Category Amount
State Housing Programs  
Affordablemultifamily housing programs $1,800
Infrastructure programs $450
Homeownership programs $450
Farmworker housing program $350
   Subtotal $3,000
Veterans Housing Program  
Veteran Home Loans $1,000
TOTAL $4,000


State Housing Programs.
The measure provides $3 billion for various state housing programs. Proceeds from the bond sale would be awarded to program applicants—local governments, nonprofit organizations, and private developers—through a competitive process administered by the state. 

  • Affordable Multifamily Housing Programs. The measure provides $1.8 billion to build or renovate rental housing projects, such as apartment buildings. These programs generally provide local governments, nonprofit organizations, and private developers with low-interest loans to fund part of the construction cost. In exchange, projects must reserve units for low-income households for a period of 55 years.
  • Infrastructure Programs. The measure provides $450 million to programs that build housing in existing urban areas and near public transportation. The funds also would provide loans and grants for a wide variety of projects that support this housing—such as parks and water, sewage, and transportation infrastructure.
  • Homeownership Programs. The measure provides $450 million to encourage homeownership for low- and moderate-income homebuyers. Most of the funds would be used to provide down payment assistance to first-time homebuyers through low-interest loans or grants. Additionally, the measure provides funds to assist low- and moderate-income families to build their own homes.
  • Farmworker Housing Program. This measure provides $300 million in loans and grants to build housing for farmworkers. Program funds would be used for both rental and owner-occupied housing.

Veterans Housing Program. This measure also provides $1 billion for home loan assistance to veterans. Veterans generally use these loans to purchase single-family residences, condominiums, farms, and mobile homes. 

— Legislative Analyst's Office

Financial effect

Bond Cost for State Housing Programs. This measure would allow the state to borrow up to $3 billion by selling general obligation bonds to investors, who would be repaid with interest from the state’s General Fund. The cost of these bonds would depend on various factors—such as the interest rates in effect at the time they are sold, the timing of the bond sales, and the time period over which they are repaid. We estimate that the cost to taxpayers to repay the bonds would average about $170 million annually for 35 years—totaling $5.9 billion to pay off both the principal ($3 billion) and interest ($2.9 billion). This amount is about one-tenth of 1 percent of the state’s current General Fund budget. 

Bond Cost for Veterans Housing Program. This measure would allow the state to borrow up to $1 billion by selling general obligation bonds to investors. Veterans participating in the home loan program would make monthly payments to the state, allowing the state to repay the bonds. These payments have always covered the amount owed on the bonds, meaning the program has always operated at no direct cost to the state.

How Many People Could the Measure Help? The funds from this measure typically would be used together with other government monies to provide housing assistance. In many cases, the measure would allow the state to receive additional federal funding for affordable housing. In total, the bond funds would provide annual subsidies for up to 30,000 multifamily and 7,500 farmworker households. The funds also would provide down payment assistance to about 15,000 homebuyers and home loans to about 3,000 veterans. In some cases, such as for the down payment assistance programs, Californians could quickly begin to benefit from the bond funding. In other cases, such as for the construction of new affordable multifamily housing, it could take several years for Californians to benefit from the measure.

— Legislative Analyst's Office

YES vote means

A YES vote on this measure means: Allows the state to sell $4 billion in general obligation bonds to fund veterans and affordable housing.

NO vote means

A NO vote on this measure means: The state could not sell $4 billion in general obligation bonds to fund veterans and affordable housing.

Arguments FOR

YES on Prop. 1 means affordable housing for veterans, working families, seniors, people with disabilities and Californians experiencing homelessness from California’s severe housing crisis. Prop. 1 doesn't raise taxes! Veterans, Habitat for Humanity, Congress of CA Seniors, Coalition to End Domestic Violence and more all agree: Yes on Prop. 1.

— Official Voter Information Guide

Arguments FOR

YES on Prop. 1 means relief from the crushing housing crisis that is devastating Californians and taking its harshest toll on veterans, hardworking families, seniors, and people with disabilities. Prop. 1 is the ONLY proposition that directly addresses the shortage of housing by building more affordable homes— WITHOUT RAISING TAXES. YES on 1 means housing for veterans, and delivering help to those who are struggling most by:

  • Investing $1 billion to help veterans afford homes
  • Building new, emergency housing for homeless children and families
  • Building multi-family housing for working families and creating homeownership opportunities
  • Creating new supportive housing for people with disabilities and domestic violence victims

“Together, we can create affordable housing to help those in need, including former foster youth and low-income senior citizens.”—Sen. Jim Beall, Prop. 1 Author, Senate Transportation and Housing Committee Chairman.

HONORING VETERANS WITH HOUSING
YES on Prop. 1 means dedicating $1 billion SOLELY to veterans’ housing by providing new housing and homeownership opportunities for veterans under the CalVet Home Loan Program that has helped 423,000 veterans and their families. Prop. 1 honors veterans by helping them have a home after they return from service.

California has the largest population of homeless veterans in the nation, and homelessness is expected to increase over the next decade among veterans who served in Iraq and Afghanistan. Veterans suffering from medical and mental health conditions sustained from their service are at high risk for long-term homelessness.

“A safe, stable, affordable home is how we can provide a lifetime of support for veterans of all generations and their families. Affordable housing for veterans opens up opportunities to participate in the American Dream their sacrifices have made possible.”—Gerald G. Wilson, Past State Commander, Disabled American Veterans, Department of California.

HARDWORKING FAMILIES LIVE WHERE THEY WORK
Prop. 1 will build affordable homes for hardworking people like nursing aides, grocery clerks, and teaching assistants, so they can live in the communities where they work while still having money for groceries and childcare.

EASING HOMELESSNESS CRISIS
Prop. 1 will address rising homelessness in our neighborhoods. Families pushed to the financial brink are living in cars, doubled and even tripled up in overcrowded housing. Families with no other options turn to overwhelmed shelters.

SAFE, AFFORDABLE HOUSING FOR VICTIMS OF DOMESTIC VIOLENCE
“Domestic violence exists in the shadows, often unseen, forcing many victims and their children to live in unsafe conditions. Emergency shelters can’t meet the demand and housing crises exacerbate trauma. The ability to live in a stable, affordable home brings safety and healing for survivors and their families.”—Kathy Moore, California Partnership to End Domestic Violence.

ECONOMIC BOOST
Prop. 1 is expected to create tens of thousands of jobs and boost California’s economy. Business leaders say YES on 1 because California must start building more affordable places for our workforce and keep the state economically competitive.

BROAD SUPPORT
Veterans, Habitat for Humanity, domestic violence survivors, seniors, business and health care leaders agree: Prop. 1 helps build the affordable housing our communities need.

www.vetsandaffordablehousingact.org

GERALD G. WILSON, Past State Commander Disabled American Veterans,
Department of California

SHARON ELLIS, Chair
Habitat for Humanity California

GARY PASSMORE, President
Congress of California Seniors 

— Official Voter Information Guide

Arguments AGAINST

Proposition 1 would authorize the State to borrow $4 billion (by selling bonds) for housing programs. The housing shortage stemming from the influx of millions to California requires far bigger solutions. A bad solution proposed earlier this year (Senate Bill 827) would have destroyed existing neighborhoods. There are BETTER APPROACHES.

— Official Voter Information Guide

Arguments AGAINST

This is another general obligation bond measure. It asks voters permission for the State of California to borrow more money by selling “bonds” that would need to be repaid with interest (potentially through higher property taxes) usually over many decades. I say “potentially” because sometimes bond proceeds are used for financing but repaid by program recipients—such as homeowners under the former Cal-Vet home-farm loan program. Bond measures present several questions:

1. How far in debt is the government already?
2. What is the expected total cost of the measure to the public?
3. Are the proposed uses for the money specified?
4. Are the proposed uses justified—given other things that may be needed or desired?
5. Should voters continue to finance projects through higher property taxes when California’s property tax system is so unfair?

CALIFORNIA’S PROPERTY TAX SYSTEM IS UNFAIR
In 1978, California voters approved a voter initiative then-known as Proposition 13. The initiative added provisions to the California Constitution that prevented the “re-assessment” of real property unless and until the property changes hands or is substantially rebuilt.

Proposition 13 has protected real property owners from steep tax increases based on higher property values; however, it has also created a system in which new homeowners pay 10–20 times more than their neighbors whose property has like value but was obtained long ago.

In addition, because business property can be and is often leased (instead of sold), Proposition 13 has led to a massive shift of the overall property tax burden from businesses to homeowners.

The proponents of a ballot measure should bear the burden of explaining why it is worthy of support—given the full cost, available alternatives and other needs and wants.

In this case, the proponents should use their REBUTTAL to answer questions 1–5 above.

GARY WESLEY

— Official Voter Information Guide

Replies to Arguments FOR

Under Proposition 1, the $4 billion to be borrowed by selling bonds would go to a variety of programs that may or may not repay money for revolving use.

The programs are aimed at lessening the housing shortage in California for a very limited number of persons. Far bigger solutions are needed. Let’s ask candidates for state offices what they propose.

A VERY BAD PROPOSAL
Earlier this year, corporate executives in California pushed state legislation (Senate Bill 827) to strip cities and counties of the authority to stop big developers from building highrise apartments and condos in every neighborhood within a half mile of a transit hub or quarter-mile of an existing or later-added frequent bus stop.

Under the bill, even onsite parking spots could not be required!

Over 90% of San Francisco, for example, would have been subject to such imposing highrises.

BE WARNED: Although Senate Bill 827 was not approved in April, SB 827 (or a similar bill) could well be passed and signed into law after the November 2018 election and before you know it.

The proposed law could then only be stopped by a statewide referendum (petition and later vote).

Here is one BETTER APPROACH: In-fill housing where appropriate but otherwise restrict new business centers to areas that have room for nearby new housing.

Many employees could then walk, skip, skate or bike to work.

GARY WESLEY 

— Official Voter Information Guide

Replies to Arguments AGAINST

Prop. 1 is absolutely essential to address California’s severe housing crisis.

Veterans, working families, people experiencing homelessness, seniors, people with disabilities, women escaping domestic violence and many others are struggling to afford the cost of housing.

Veterans who return home after serving our country can’t find a place they can afford to live.

Hardworking people like nursing aides and grocery clerks, and older retirees on fixed incomes, struggle each month to stay in their homes.

We simply must add more safe, affordable housing for these Californians—and that’s what Prop. 1 will do.

Yes on Prop. 1 will Add Safe, Affordable Housing— Without Raising Taxes
Don’t be misled. Prop. 1 is not a property tax. $1 billion of Prop. 1 is dedicated to affordable home loans for veterans and their families, which they will repay over time. The remainder of Prop. 1 will be covered by existing state funds.

Prop. 1 will allow California to leverage federal housing funds: nearly $3 to match every dollar we invest from Prop. 1.

Prop. 1 Will Build Homes and Save Lives
California is home to nearly a quarter of the nation’s total homeless population, and the highest numbers of veterans and youth facing homelessness alone. We can do better.

Prop. 1 will help alleviate the crisis of homelessness and will honor our veterans with access to safe, affordable homes.

Vote Yes on Prop. 1 to address California’s extreme housing crisis, and help ensure a safe, affordable home is within reach for all Californians.

KATHY MOORE, Executive Director
California Partnership to End Domestic Violence

DEBORAH JOHNSON, President
California Veterans Assistance Foundation

JENNIFER HARK DIETZ, LCSW, Executive Director
People Assisting The Homeless (PATH)

— Official Voter Information Guide
Yes on Proposition 1

Yes on Proposition 1

Total money raised: $7,291,049
Bar graph showing total amount relative to total amount for this entire campaign.

No on Proposition 1

No data currently available.
Bar graph showing total amount relative to total amount for this entire campaign.

Below are the top 10 contributors that gave money to committees supporting or opposing the ballot measures.

Yes on Proposition 1

1
Chan Zuckerberg Advocacy - The Chan Zuckerberg Initiative
$300,000
2
No on Prop 10; Californians for Responsible Housing
$283,113
3
Pacific Gas and Electric (PG&E)
$270,000
4
Chevron
$250,000
4
KP Financial SVCS OPS
$250,000
5
Salesforce.com
$225,000
6
Housing California
$185,613
7
California Apartment Association
$180,000
8
Dignity Health
$150,000
8
Edison International
$150,000
8
Essex Property Trust
$150,000
8
Roope, Caleb J.
$150,000
8
State Building & Construction Trades Council of California
$150,000

No on Proposition 1

Yes on Proposition 1

By State:

California 90.78%
Idaho 2.06%
Colorado 1.37%
Illinois 1.03%
Other 4.76%
90.78%

By Size:

Large contributions (99.99%)
Small contributions (0.01%)
99.99%

By Type:

From organizations (93.37%)
From individuals (6.63%)
93.37%

No on Proposition 1

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— October 19, 2018 Cal Channel and the League of Women Voters of California Education Fund
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