California’s November ballot includes Proposition 37, proposing a down payment assistance program to help low- to middle-income Californians purchase newly constructed homes. 

Proposition 37 would allow California’s Housing Finance Agency to borrow upwards of $25 billion to provide low-interest loans at 17% of a home’s value to potential homebuyers. By covering a majority of the down payment, the loan leaves buyers paying only 3% of a downpayment upfront.

The home must be newly built, and eligible buyers can earn a maximum of twice their area’s median income. For example, in the city of San Luis Obispo, buyers could not earn more than $147,000 annually to remain eligible, according to the Census Data.

The proposition would not increase taxes for Californians and funding would come from selling state revenue bonds to private investors, according to the voter guide. State revenue bonds are used to finance state projects by asking investors to purchase a bond, according to the California State Treasure’s Office. For Proposition 37, these bonds would be paid back by the assisted homebuyers paying off their down payment loan. 

Supporters, including the California Democratic Party and the California Association of Realtors, believe this proposition will open the door to homebuyers who would otherwise be unable to afford a down payment. 

A typical down payment in San Luis Obispo is around $191,000, but with Proposition 37, that number would drop to $28,650, according to Vote Yes on 37. 

“I’m a senior this year, thinking about what that process will look like for me once I graduate,” said Julia Ruiz, a psychology senior. “Especially depending on the community I would live in, in California, housing prices are already extremely expensive, and the cost of living has been raised significantly.”

Opponents, including the League of Women Voters, are concerned the measure will only worsen debt for low-income communities. Proposition 37 does not prioritize first-time buyers and its eligibility could include incomes of around $300,000 a year, according to the League of Women Voters ballot recommendations. 

“Generally speaking, low-income households are going to be less likely to be able to pay off debt, so you could have an exacerbation of inequality,” said Michael Latner, a political science professor. 

If passed, Proposition 37 could alleviate financial concerns students have when entering the housing market. Eleanor Olsen, a psychology junior, resonated with this concern impacting first-time homebuyers. 

“It’s really hard to buy your first home and a lot of people just don’t end up buying a home at all,” Olsen said. 

For Proposition 37 to operate, new homes must be constructed for the eligible buyers. Supporters believe housing affordability will improve because the program stimulates construction, according to Vote Yes on Prop 37. 

Latner raised concerns about how the housing market will react. 

“If the state is going to create a program that puts more money in the pockets of home buyers, well the market, then, that’s just going to increase housing prices because developers are going to know that there’s more money available,” Latner said. 

Supporters claim the down payment assistance could grant more people the affordability to close on a home, according to Vote Yes on Prop 37. Proposition 37’s down payment program would function on top of an existing mortgage payment. 

“It could help San Luis Obispo attract and retain some essential workers who earn enough to carry a mortgage but struggle to save the down payment,” Hamed Ghoddusi, a finance professor and director of the Cal Poly Real Estate Initiative, wrote in an email to Mustang News. 

However, Ghoddusi said the program would not solve the overall affordability of a home. 

“Down payment loans solve a cash problem at closing. They do not make homes cheaper relative to what people earn. Buyers still need to afford the monthly payments on both mortgages,” Ghoddusi wrote.