California voters approve $11.25B housing bond, saddling state with decades of new debt

California voters greenlit Proposition 1 on Tuesday, authorizing the state to sell $11.25 billion in bonds to fund affordable housing projects.

As of Wednesday morning with 58% of the vote counted, about 1.4 million more voters checked “yes” over “no” on the ballot measure for it to lead with 4.46 million votes. The Associated Press projected it to win late Tuesday night.

Put on the ballot by state lawmakers, Prop 1 aims to fund up to 40,000 multifamily rental units and assist another 40,000 households in buying a home, targeting veterans, seniors, teachers and essential workers.

Of the money, $1.25 billion will go towards veteran housing, $7.2 billion to buy, build or renovate apartment buildings, and another $1.1 billion will help low and moderate-income households buy homes.

The rest would fund various things like farmworker housing or affordable student housing.

Bonds are a way that governments borrow money and pay it back with interest. The California Constitution requires that most new bonds be approved by voters.

The passage of Prop 1 indicates that voters really want to do something about the state’s affordable housing crisis, experts told the California Post.

“Voters know that housing affordability in the Golden State is a challenge, and the passage of Prop 1 shows that they are interested in public help to boost housing supply,” said Danielle Hale, chief economist at Realtor.com.

“Higher mortgage rates have squeezed homebuyers and the for-sale market for four years, and they have hurt builders too, especially in multifamily. Apartment projects depend on layers of financing, and assembling it has gotten much harder at today’s borrowing costs, particularly in a state as expensive and complicated to build in as California,” Hale added.

The money from Prop 1 can help plug that gap, said Joel Berner, a senior economist at Realtor.com, but he warned it from being a fix for the housing crisis.

“Bond money does not shorten approval times or reduce land acquisition costs, so it’s only one piece of the puzzle,” he said.

While Prop 1 had the back of Gov. Gavin Newsom and the California Democratic Party, opponents argued the money really is only a drop in the bucket. The measure can also pose a risk to the state’s finances; it would cost the state between $500 million and $600 million each year for about 25 years to repay the cost of the general housing bond, according to a legislative analysis.

The state is currently repaying about $80 billion in bonds from the state General Fund, according to the Legislative Analyst’s Office.

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