California Proposition 37 Passes: Will It Really Make Homeownership More Affordable?

California voters have approved a new homebuyer assistance program that could make purchasing a home easier. But there are some important limitations buyers should understand. California voters approved Proposition 37 in the November 2026 election, authorizing up to $25 billion in revenue bonds to help qualifying buyers purchase homes with substantially less money down.

Having been involved in California real estate sales and mortgage lending for over 40 years, I’ve seen numerous programs introduced to improve housing affordability. Some have been beneficial, while others have had so many restrictions that relatively few buyers could take advantage of them. There are numerous First Time Buyer Programs, grants, Down Payment Assistance from the state, county, city and various lenders already offered. You can already do a 3% down purchase with PMI. Proposition 37 has potential to be another tool for a knowledgeable professional to use, but there’s more to the story.

How Will Proposition 37 Work?

The program will be administered by the California Housing Finance Agency (CalHFA), providing qualifying buyers with a second mortgage of up to 17% of the purchase price.

For example, on a $900,000 home:

Instead of needing $180,000 for a traditional 20% down payment, a buyer could potentially purchase with just $27,000 down, plus closing costs. That’s a substantial advantage.

But here’s the catch: The second mortgage isn’t free money. It must be repaid with interest.

While the structure could eliminate private mortgage insurance (PMI), the buyer will have two mortgage payments. Depending on the interest rates and repayment terms, the combined monthly expense could still be substantial. In other words, the program may help with the down payment problem, but not necessarily the affordability problem.

Who Qualifies?

The basic requirements include:

• California residency for at least one year.
• Household income not exceeding 200% of area median income.
• Minimum 3% down payment from the buyer’s own funds.
• Property must be occupied as a primary residence.
• Purchase price limitations based on county conforming loan limits.

Interestingly, buyers aren’t necessarily required to be first time homeowners, like many of the assistance programs. Final underwriting and lending guidelines still need to be established by CalHFA.

The Biggest Limitation: Existing Homes Don’t Qualify

This is where I have some reservations, and I have been luke warm on this program. Proposition 37 is primarily restricted to newly constructed homes and certain qualifying residential conversions.

A buyer purchasing an existing home in West Hills, Woodland Hills, Chatsworth, Simi Valley, or most other established communities generally won’t qualify. The program is designed partly to encourage new housing construction, which California certainly needs.

However, presently there’s not a lot of new housing tracts in the region, most residential real estate transactions involve existing homes. Restricting assistance to new construction excludes a substantial portion of the market while potentially providing developers with a competitive advantage. There’s also the possibility that increasing buyers’ purchasing power without a corresponding increase in housing supply could contribute to higher new home prices.

When Will the Program Be Available?

Although Proposition 37 has passed, the program isn’t operational yet. CalHFA must establish the lending guidelines, arrange bond financing, determine interest rates, and approve participating lenders. As of this writing, there’s no confirmed date when buyers can begin applying. I’m tied into CalHFA, so will stay apprised.

My Take

I support programs that responsibly help qualified buyers achieve homeownership. Many potential buyers have sufficient income to make mortgage payments but struggle to accumulate a substantial down payment. Proposition 37 could help those buyers, particularly, or specifically, when purchasing new construction. However, I see two major shortcomings: It doesn’t necessarily reduce the monthly cost of homeownership, and it excludes the existing home market. California’s housing affordability problems involve much more than down payments. Construction costs, insurance, regulations, interest rates, and limited housing inventory all contribute.

There are other existing strategies and programs to accomplish what Prop 37 aims to do. Proposition 37 may become another useful financing tool, but its real value won’t be clear until the interest rates, repayment terms, and lending guidelines are established. Helping someone come up with the down payment is one thing. Making sure they can afford the home for years to come is another.

If you’d like to discuss what these programs, changing market conditions mean for your home, your buying plans, or your financing options, feel free to reach out. In today’s market, having current information and a sound strategy can make all the difference.

Ron Henderson GRI, SRES, SFR, RECS, CIAS, CREN, GREEN
President/Broker
Multi Real Estate Services, Inc.
DRE #00905793 NMLS #310358
www.mres.com
ronh@mres.com
Specialist in the Art of Real Estate Sales and Finance
Real Estate market, mortgage rates, Los Angeles, San Fernando Valley, Conejo Valley, Simi Valley, Woodland Hills, West Hills, Calabasas, Chatsworth