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November, 2006

Proposition 1C

Housing and Emergency Shelter Trust Fund Act of 2006. 


About 200,000 houses and apartments are built in California each year. Most of these housing units are built entirely with private dollars. Some units, however, receive subsidies from federal, state, and local governments. For instance, the state provides low-interest loans or grants to developers (private, nonprofit, and governmental) to subsidize housing construction costs. Typically, the housing must be sold or rented to Californians with low incomes. Other state programs provide homebuyers with direct financial assistance to help with the costs of a downpayment.

While the state provides financial assistance through these programs, cities and counties are responsible for the zoning and approval of new housing. In addition, cities, counties, and other local governments are responsible for providing infrastructure-related services to new housing—such as water, sewer, roads, and parks.

In 2002, voters approved Proposition 46, which provided a total of $2.1 billion of general obligation bonds to fund state housing programs. We estimate that about $350 million of the Proposition 46 funds will be unspent as of November 1, 2006.


This measure authorizes the state to sell $2.85 billion of general obligation bonds to fund 13 new and existing housing and development programs. (See “An Overview of State Bond Debt” for basic information on state general obligation bonds.) Figure 1 describes the programs and the amount of funding that each would receive under the measure. About one-half of the funds would go to existing state housing programs. The development programs, however, are new—with details to be established by the Legislature. The major allocations of the bond proceeds are as follows:


Figure 1

Proposition 1C
Uses of Bond Funds



(In Millions)

Development Programs


Development in
urban areasa

Grants for various projects—including parks, water, sewer, transportation, and environmental cleanup—to facilitate urban “infill”


Development near public transportationa

Grants and loans to local governments and developers to encourage more dense
development near public transportation.



Grant funding for parks throughout the state.





Homeownership Programs


Low-income households

Variety of homeownership programs for low-income households.



Deferred low-interest loans up to 6 percent of home purchase price for first-time low- or
moderate-income homebuyers.


Local governments

Grants to local governments which reduce
barriers to affordable housing. Funds would be used for homebuyer assistance.



Grants to organizations which assist low- or
moderate-income households in building or renovating their own homes.





Multifamily Housing Programs


Multifamily housing

Low-interest loans for housing developments for low-income renters.


Supportive housing

Low-interest loans for housing projects which also provide health and social services to low-income renters.


Homeless youth

Low-interest loans for housing projects which provide housing for homeless young people.





Other Housing Programs



Low-interest loans and grants for developing housing for farmworkers.


Pilot programsa

Grants and loans for pilot projects to develop housing at reduced costs.


Homeless shelters

Grants for developing homeless shelters.









a  New program.



The funds would be allocated over a number of years. The measure provides the Legislature broad authority to make future changes to these programs to ensure their effectiveness.

Fiscal Effect

Bond Costs. The cost to pay off these bonds would depend primarily on the following two factors.

If the federally taxable bonds were sold at an average rate of 6.5 percent and the remaining bonds at an average rate of 5 percent, the cost to the state would be about $6.1 billion to pay off both the principal ($2.85 billion) and the interest ($3.3 billion). The average payment would be about $204 million each year.

Administrative Costs. The Department of Housing and Community Development and the California Housing Finance Agency would experience increased costs to administer the various housing and urban development programs. A portion of the programs’ allocations—probably between $100 million and $150 million of the total bond funds—would be used to pay these administrative costs over time.

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