California Passed Prop 37: Buyers of New Homes Could Put Just 3% Down

California voters approved Proposition 37 on Tuesday. The Associated Press called the race, and with about two thirds of the vote counted, the measure was passing with about 61% of the vote. It creates a state loan program to help middle-income families buy newly built homes.

The program lets the California Housing Finance Agency (CalHFA) sell up to $25 billion in revenue bonds. That money funds a "middle-class homeownership loan," a second loan that covers up to 17% of the home's price. The buyer puts down at least 3%, and a regular first mortgage covers the rest. On an $800,000 home, that means $24,000 in cash instead of the $160,000 a 20% down payment would take.

Buyers repay the loan in monthly payments, and those payments repay the bonds. The state's Legislative Analyst says the measure has no direct cost to the state or to local governments. If a buyer defaults, the bond investors take the loss, not taxpayers. CalHFA must also keep the interest cost to buyers as low as possible.

To qualify, a buyer must live in California, live in the home they buy, and earn no more than twice the typical household income in their area. The home must be new: the buyer has to be its first owner, and the price must be under a limit set for the area. Newly built houses and condos both count. Any builder can sell homes under the program.

Supporters included the California Association of REALTORS®, the California Conference of Carpenters, SEIU and State Treasurer Fiona Ma. Critics, including the League of Women Voters, said the state should not be in the mortgage business and that the loans do not fix the shortage of homes behind high prices.

The program is not open yet. CalHFA still has to sell the bonds and write the rules, and no start date or exact income and price limits have been published. How much it helps will depend on how many investors buy the bonds and how the loan costs compare with other down payment programs.

It also lands while builders are struggling to sell. New home sales fell to their slowest pace since 2020 this fall, so builders have a reason to price new homes under the program's limits.

For agents, now is the time to get ready. Find out which new communities near you are likely to be priced under the limit, and talk to those builders' sales teams. Start a list of buyers who have a steady income but not a big down payment, and ask your lender partners to tell you the day CalHFA posts the rules. Buyers who are ready on day one will get the first homes.

Sources: ABC10, CalMatters and the California Legislative Analyst's Office.