California’s housing overhaul has been so extensive — 45 bills signed last October alone by Gov. Gavin Newsom — the results won’t be clear for years. Even so, voters this November 3 may get to decide on another $10 billion in housing bonds. That’s from the Affordable Housing Bond Act of 2026, Assembly Bill 736, by Assembly member Buffy Wicks, D-Oakland, and its companion bill, Senate Bill 417, by state Sen. Christopher Cabaldon, D-Yolo County.
To get on the ballot, the bond will require two-thirds votes in each house of the Legislature and Gov. Gavin Newsom’s signature. The California Council for Affordable Housing reported on April 3, the bond “appears to be on track” to be put before voters.
How would the bond, if passed, affect California cities? The aim is to build, preserve and support about 135,000 dwelling units. The first effect could be the hit to the state’s general fund to pay back the bonds. Although cities could see building from the programs the bonds fund, nothing is free, and the payback could squeeze out other programs going to cities.
AB 736 says this would be a general obligation bond, meaning paid from the state’s general fund. And it would “finance programs to fund affordable rental housing and home ownership programs, including, among others, the Multifamily Housing Program, the CalHome Program, and the Joe Serna, Jr. Farmworker Housing Grant Program.”
The January 10 analysis by the Senate Rules Committee calculated the total cost to pay off the bond over 30 years, including principal and interest, would be approximately $17.39 billion. The cost from the general fund would be $580 million a year. However, it noted that calculation was based on the 4.02% interest rate paid in 2025 by the California State Treasurer for state obligation bonds. The analysis also pointed out a higher interest rate at 5% would raise the yearly payback to $651 million.
Earlier this year the Legislative Analyst’s Office already warned, in its January 12 review of Newsom’s budget proposal for fiscal year 2025-26, the state faces “multiyear deficits, with estimates ranging from $20 billion to $35 billion annually.” In a month we’ll receive the governor’s May Revision of his budget, followed by the LAO’s updated analysis. The $580 million or $651 million a year only would add to those deficits.
Except, as I have argued for decades, “Bonds are delayed tax increases.” In either case, spending cuts overall or higher state taxes to pay for the bonds would hit cities. Existing programs benefitting cities could be cut. Or the tax increases could slow overall state economic activity, reducing city tax bases.
Even as the many bills recently passed are being implemented, and their impact is unknown, the $10 billion in funds almost entirely would fund existing programs. Here are the two biggest:
- $5.25 billion for the Multifamily Housing Program. According to the website of the California Department of Housing and Community Development, the application window currently is “CLOSED.” But when operating, it provides, “Low-interest, long-term deferred-payment loans for new construction, rehabilitation, and preservation of permanent and transitional rental housing for lower-income households.”
However, a series of studies released February 10 by the Terner Center for Housing Innovation at UC Berkeley found developers in America commonly assemble multiple funding sources. The problem:
Public funding sources can be administered by separate agencies or departments, each with its own requirements and timelines. This fragmentation can result in increased development costs, project delays, and added uncertainty for projects—all critical barriers to building affordable housing in high-cost, high-demand housing environments.
Layering $5.25 billion in new bureaucracy onto that existing tangle only will worsen that problem. For cities, although the money might pour in, it would mean just more state interference in their own efforts to promote housing. A specific Terner case study, “California’s Housing Finance System,” was especially revealing:
Fragmentation has led to many inefficiencies. A 2020 State Auditor’s report found that each housing agency had different applications, requirements, and deadlines, producing redundant processes and burdensome compliance.
The case study also makes this recommendation, which perhaps ought to be implemented before the state embarks on an expensive housing bond:
Other high-capacity states offer models California could learn from. Massachusetts, Minnesota, North Carolina and Oregon have all implemented “one-stop shop” systems for allocating housing finance.
- $1.75 billion for Multifamily Housing Program Supportive Housing. The Senate Floor Analysis opaquely explains, the bond would require the Department of Housing and Community Development “to offer capitalized operating subsidy reserves for supportive housing developments receiving funding.”
In English: The state would be required to offer upfront funding to cover long-term operating losses so supportive housing projects can actually survive financially.
According to the Assembly Committee on Appropriations’ analysis of Senate Bill 482 from 2023, “Supportive housing developments tend to have higher operating costs due to the associated supportive services offered in conjunction with a unit and lower rents charged on those units. Capitalized operating reserve funding allocations are held in an account administered by HCD and the department reviews and approves disbursements as needed.”
The problem for cities, though, is the general one of subsidized housing: it distorts the housing market. “Affordable Housing Does More Harm Than Good,” housing scholar Randall O’Toole titled a critique in May 2025 for the Cascade Policy Institute. He wrote: “Studies have found that five new units of subsidized housing crowd out the construction of four units of market-rate housing. This drives up the price of the single-family homes that most people want.”
Finally, California is such a vast and various state of 39 million people, a massive subsidy of $10 billion, gamed by savvy developers, will not fit all local housing circumstances. Instead, the bond, should it pass, will prompt unknown negative consequences for cities and their residents.
John Seiler is on the Editorial Board of the Southern California News Group.