California voters have approved Proposition 37, the Middle-Class Homeownership Bond, according to the Associated Press. Official certification is still pending. The measure allows the California Housing Finance Agency (CalHFA) to issue up to $25 billion in revenue bonds. That money will fund a new second-mortgage program for moderate-income buyers of newly built homes.
Most coverage so far is statewide. Below are the numbers that apply specifically to Santa Clara and Santa Cruz counties, along with our view on where the program will and won’t matter locally.
Prop 37 at a Glance: Local Numbers
*Based on HCD’s 2026 state income limits. Limits vary by household size, and CalHFA’s final program rules will confirm the exact figures.
How the Program Works
The buyer puts down at least 3%. CalHFA provides a fixed-rate second mortgage for up to 17% of the purchase price. Together that makes a 20% down payment, so buyers can use a conventional first mortgage without private mortgage insurance (PMI).
It’s a loan, not a grant. Buyers make monthly payments on the second mortgage, and those payments repay the bond investors. The interest rate hasn’t been set yet.
The numbers line up at the cap. On a home at the roughly $1.56M cap, the 80% first mortgage comes to about $1,249,000. That is right at the conforming loan limit for both counties, so the first mortgage can be a conforming loan rather than a jumbo.
Example: a $1,200,000 new townhome
- Buyer’s 3% down payment: $36,000
- CalHFA second mortgage (17%): $204,000
- First mortgage (80%): $960,000
Who Qualifies
- Income: No more than 200% of the area median income for the county where you buy.
- Residency: You must have lived in California for at least one year.
- Occupancy: The home must be your primary residence, and you must move in within 60 days of closing.
- The home: It must be newly built with you as the first buyer, or a former nonresidential building converted to housing.
- It must be priced at or under the county cap
- Not just for first-time buyers: Current and past homeowners aren’t excluded, which is a meaningful difference from many assistance programs.
Resale homes do not qualify. This applies to new construction only.
Where It Will Matter Locally, and Where It Won’t
Likely to matter:
- New condos and townhomes in San Jose, Campbell, Santa Clara and Sunnyvale
- New single-family and townhome communities in Morgan Hill and Gilroy
- New construction in Watsonville, Scotts Valley, Capitola and the City of Santa Cruz
Unlikely to matter much:
Los Gatos, Saratoga, Monte Sereno and up further up the peninsula. Very little new construction in these areas sells under the roughly $1.56M cap.
Worth watching:
The measure includes an optional “qualified builder” path that changes construction-defect rules for participating developers. Defect liability is a major reason so few for-sale condos get built in California. If builders use the option, Prop 37 could have a bigger effect on new condo supply than on single-family homes.
What This Means If You’re Selling
Sellers of existing homes can’t offer Prop 37 financing to their buyers. Once the program launches, some buyers in the roughly $900,000 to $1.5M range may lean toward new construction, because they would need about $36,000 down instead of $240,000. Sellers of resale condos and townhomes near new developments should keep this in mind when pricing and timing a sale.
Owners of land or older commercial buildings may see the opposite effect. The program could make their property more attractive to developers.
Timeline
When Can Buyers Use It? Not yet. CalHFA has up to one year to launch the program. Lenders, interest rates and application details are still to come. Until then, buyers can still use CalHFA’s existing assistance programs.
Planning a Move in 2027?
Whether you’re weighing new construction or deciding when to sell, we can walk through how Prop 37 may affect your plans. Contact The Pulpan Brothers Group
By Ej Pulpan of the Pulpan Brothers Group | Christie’s International Real Estate Sereno | Updated November 2026
Sources: CA Legislative Analyst’s Office, CA Secretary of State Voter Guide, CalMatters, HCD 2026 State Income Limits, FHFA 2026 conforming loan limits.
