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Proposition 1: California’s proposal for affordable and veterans housing, explained

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Who’s behind it, who’s against it, and why it’s on the ballot

Under Proposition 1, the state would borrow money to pay for various housing programs, including the construction of denser housing near transit.
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Proposition 1 would authorize the state to borrow up to $4 billion for affordable housing and home loans for veterans.

The state would borrow the money in the form of bonds, which it would repay with interest from the state’s general fund, its main checking account.

As the Los Angeles Times editorial board has pointed out, the name of the measure—the Veterans and Affordable Housing Bond Act of 2018—is a bit misleading because only one-quarter of the money would go to help veterans.

The vast majority of the bonds, about $3 billion, would be set aside for various types of housing programs.

The biggest share, or $1.5 billion, would go toward the construction and rehabilitation of permanent and transitional rental housing and apartments for California households who earn of up to 60 percent of the area median income (about $41,000 in the Los Angeles metro area).

The second biggest portion of the $3 billion, about $150 million, would be earmarked for cities, counties, transit agencies, and developers to build higher density housing near transit stations.

The remaining $1 billion would be earmarked for veterans participating in a home loan program. (That portion of the bond money would be repaid by program participants who make monthly payments to the state.)

Who’s behind it?

The measure began as a state bill introduced by Sen. Jim Beall of San Jose nearly two years ago. Gov. Jerry Brown signed the final bill in September 2017, after it passed 56-21 in the assembly and 30-8 in the senate. But the California Constitution demands that general obligation bonds greater than $300,000 get voter approval, and Senate Bill 3 became Proposition 1.

What impact will it have on Los Angeles?

Cities, counties, nonprofits, and private developers would have to submit applications to access the money, according to the nonpartisan Legislative Analyst’s Office.

Statewide, the LAO estimates that the bond funds, in total, could provide subsidies for up to 30,000 households each year, as well as downpayment assistance to 15,000 homebuyers and home loans for 3,000 veterans.

“In some cases, such as for the down payment assistant 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,” the LAO says.

Arguments for

Almost all Californians agree that the state needs more housing to address the current shortage, and affordable housing specifically caters to those people least likely to be able to maneuver the current market.

Developers who build affordable housing often weave together financing from a variety of sources, including government subsidies, and they could use the bond money as leverage for other funding.

“Developers argue, persuasively, that without such subsidies, it’s just not economic to build housing units that lower-income Californians can afford, given that affordable housing costs about as much to build as market-rate housing,” says the Los Angeles Times editorial board.

Beall, the bill’s original author, also points out that many of the state’s previous housing development efforts have finished out their funding and that more money is needed if we expect the work to continue.

Arguments against

Critics such as the Howard Jarvis Taxpayers Association argue that the high cost of building in California makes Proposition 1 an untenable solution. They also say it will add more debt to the state’s balance sheet.

The LAO estimates that it would cost taxpayers about $170 million annually for 35 years—or $5.9 billion—to pay off the bonds with interest.

That would be a hit to the state’s general fund, a catchall account that pays for education, transportation (high speed rail, CHP), parks, and environmental protection, among other things.

“The General Fund dollars used to repay the principal and interest on the Prop. 1 bonds would not be available to support other public systems and supports, including those that directly support low- and moderate-income Californians—a tradeoff that should be considered when evaluating the potential impact of Prop. 1,” says the California Budget and Policy Center.

Who supports it?

Proposition 1 has won endorsements from major California newspapers, including the San Francisco Chronicle, Los Angeles Times, and Sacramento Bee. It also has the support of the League of Women Voters, California Association of Realtors, and Democratic state lawmakers.

Who opposes it?

Howard Jarvis Taxpayers Association

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