In an unlikely victory against government excess in the ultraliberal Bay Area, a regional housing authority has decided to remove a $20 billion housing bond from the November ballot. The measure, which proponents said would build or preserve 72,000 affordable housing units across the nine-county region surrounding San Francisco, appears to have been the largest local government bond initiative in American history.
The California state legislature created the Bay Area Housing Finance Authority (BAHFA) to help solve the region’s housing affordability problem in 2019. BAHFA, which operates in connection with two other regional agencies, then set to work developing a bond program. But although BAHFA had four and a half years to develop the bond measure, it had serious flaws.
Most egregiously, the ballot language in BAHFA’s Regional Measure 4, contained a huge mathematical error in quoting annual bond debt service at $670 million rather than the correct amount of just under $911 million. Also, BAHFA misleadingly called Regional Measure 4 (RM4) the Bay Area Affordability Plan, when, in fact, it would have made the Bay Area less affordable for the millions who pay property taxes directly, or indirectly through their rent.
These and other misleading statements in the RM4 ballot language attracted a lawsuit from several Bay Area taxpayers (including this author). Although BAHFA conceded the mathematical error, it was still fighting other wording changes demanded by the lawsuit when it finally pulled the plug on Aug. 14.
The lawsuit and attendant negative press coverage, together with audits showing government mismanagement of homeless programs and reports of affordable housing costing more than $1 million per unit were apparently souring Bay Area voters on the huge bond program.
In the spring RM4 was polling just below the anticipated 55 percent threshold for passage according to an opinion research firm BAHFA hired (at a cost of at least $133,500). But it appears that as-yet-unreleased BAHFA polling showed support had slipped a few points since spring. BAHFA commissioners decided not to risk their limited budget on RM4, choosing instead to regroup for another attempt to pass a housing bond in 2026.
BAHFA and its supporters were also surprised by the appearance of an opposition group. Falsely assuming that all Bay Area fiscal conservatives had moved, retired, or died, they incorrectly concluded that they could act with impunity. The homelessness industrial complex’s arrogance and sloppiness created a target rich environment for opponents.
For example, the bond measure had an unusual 53-year repayment period instead of the more standard period of 25–35 years we see in most school bonds. I believe this was done to reduce the annual debt service cost per $100,000 of assessed value, which most voters treat as the sticker price of a bond measure. RM4 came in at $18.98 per $100,000 but probably would have been over $20 if a more appropriate repayment period had been used.
While the long amortization period reduced the annual cost of servicing bonds, it increased the lifetime cost of the program. Total interest would have been $28.3 billion, well above the $20 billion principal value of the bonds.
There were no components of the bond program that would have constrained the cost of building the affordable housing. It was clear from BAHFA meeting proceedings that the intention was to build in densely populated areas, using unionized labor working for prevailing wages under project labor agreements. Perhaps because the housing “had to” be near transit, a disproportionate amount was to be built in San Francisco, despite it being the highest cost location in the Bay Area.
BAHFA’s approach satisfied developers, unions, transit advocates, and homelessness nonprofits at the expense of creating an even minimally cost-effective program.
A more fiscally responsible program would have focused on manufactured housing in outlying areas with lower land acquisition costs. Better yet, BAHFA could have proposed policies that would lower the cost of building market rate housing, making homes affordable to a broader range of Bay Area residents without saddling everyone with years of bond repayments.
Hopefully, BAHFA will come back with a less bad program in 2026, but somehow I doubt it. Rather than reach out to the opposition, I expect that they will fall back on their supporters to give us another misbegotten program.
