California’s State Senate and Legislative Assembly passed a bill that would provide home down payment subsidies under the state’s “Dream for All” plan to some undocumented migrants (those with a social security or taxpayer identification number). The bill passed both legislative bodies along party lines—no Republicans voted for it—with a combined vote tally of 68 for versus 26 against. The lopsided vote reflects the fact that Democrats have supermajorities in both chambers of about 78 percent.
The “Dream for All” program is a costly and poorly designed plan that awards a maximum of $150,000 (up to 20 percent of the home’s purchase price) to Californians to put toward a down payment on a home. When the home is sold, the down payment award is repaid, along with 20 percent of the home’s appreciation in value. The awardee is required to pay no interest.
The structure of the program incentivizes borrowers to apply for the maximum possible award. And while the program is intended to support low-income households, the fact that the program does not have an asset limit means that high-net-worth borrowers can receive the subsidy. There is an earned income limit, but it ranges up to nearly $300,000. And for high-income, two-earner households, this income limit could be gamed by having just one borrower within the household apply based on their sole income.
In 2023, the program received $300 million in funding, which was exhausted in 11 days. Some realtors and lenders involved in the program reported that those receiving the funds were far along in the process of applying for their mortgage, which suggests that the $300 million funding was largely a gift to those who could purchase a home without assistance.
Somehow, legislators were surprised that the 2023 funding was oversubscribed after 11 days. What did they expect, when they were giving away cash to an eligible pool of possibly several million households (renters making up 44 percent of California’s 13.5 million households)? Assuming that the average down payment award was $100,000 (the data for this statistic is not available), then the state made 3,000 awards, which represents about 0.5 percent of the state’s renters. There will never be a shortage of applicants for this plan.
Extending this benefit to undocumented migrants makes no sense from the perspective of old-school, Tip O’Neill (“All politics is local”)–style politics. No self-interested politician—certainly not one who faced electoral competition—would vote for this bill, because it is a political nonstarter. California voters have significant concerns about border security and illegal immigration. Sixty-two percent of Californians view the border as not secure, and 70 percent see undocumented migrants as a “burden” within the state. These views are not in any way surprising, given that California was averaging 240,000 California-Mexico border encounters per month at the end of 2023. And the views among Hispanic voters—the state’s largest immigrant demographic category—are not all that different from those of other voters. Given the limited funds available under “Dream for All,” expanding the pool of eligible borrowers to include illegal migrants is not in the best interest of state voters. So why did most of the state legislators vote for it?
Back in the day, if a representative’s constituents weren’t in favor of a policy, their representative wouldn’t support it; politicians get voted out if they don’t represent what their constituents want. But California politics doesn’t work that way anymore, at least not in the many districts where there is no longer meaningful political competition.
The state’s Republican Party—and political competition within the state—began to decline significantly about 30 years ago, following a voter-approved ballot initiative (Proposition 187) that placed restrictions on nonemergency public services to illegal immigrants. Those limitations were similar to those in place in liberal European countries at the time. Opponents of the initiative viewed these restrictions as racially discriminatory, though the initiative’s motivation was purely economic. California was suffering considerably at that time from the decline of its large aerospace and defense industry following the end of the Cold War. Tax revenues had fallen so much that the state budget declined 9 percent between fiscal years 1991–92 and 1995–96 (after adjusting for inflation). Voters weren’t xenophobic; they were trying to preserve public services at a time of unprecedented fiscal exigency.
Prop 187 was temporarily blocked by injunction and in 1997 was declared by a federal district court to be unconstitutional. Newly elected California governor Gray Davis chose not to appeal the ruling, and Republicans paid a substantial political price for Prop 187—even though it attracted considerable support from Democratic Party voters when it passed in 1994. The Republican Party has waned ever since in California, particularly since Trump was elected in 2016. Political competition within the state is now very limited. In addition to roughly 78 percent of seats in the State Senate and Legislative Assembly, Democrats hold every statewide elected office: governor, lieutenant governor, attorney general, secretary of state, treasurer, controller, insurance commissioner, and school superintendent.
Some California politicians have personal views that don’t align with those of their constituents, but they are able to push those agendas through legislation because there are effectively no checks or balances on their choices. One view among these legislators is that some issues outside the traditional purview of politics should become rights, as in “healthcare is a right,” “housing is a right,” “stores with gender-neutral displays are a right,” and “women’s athletics for males identifying as females is a right.” And now, it is “housing subsidies are a right and should be accessible to all.”
The “Dream for All” down payment subsidy wasn’t even funded this past year because of the budget deficit, and it is unclear when it will be funded in the future, as California will likely continue to face fiscal challenges. The bill is now with Governor Gavin Newsom. Given Newsom’s national political aspirations, I expect he will veto the bill, because the political headlines would otherwise be devastating for him. If he does veto it, his wisest explanation would be to state, “The program has turned out to be too expensive for what it accomplishes and shouldn’t be expanded.” This would be the economic truth, something that is rarely seen today in Sacramento.
Whether one is left, middle, or right on the political spectrum, political competition is valuable because it provides an opportunity for reasonable ideas to get off the ground and prevents the worst ideas from getting very far. Just imagine how much better off California might be today if alternative perspectives and policy ideas advanced by Republicans over the years could have received a fair hearing—particularly their views about accountability in state and local governance and efficiency in state and local spending. These views include Republicans’ proposals regarding the state’s extremely delayed, way-over-budget high-speed rail; their calls to improve the state’s antiquated unemployment office IT infrastructure, the failure of which led to over $30 billion in fraudulent payments during the height of the COVID pandemic; and their long-standing recommendations to track the effectiveness of state spending on housing and homelessness.
Ironically, there is nothing partisan about demanding accountability and efficiency within state and local government. But blocking those efforts has become a routine practice today in California’s one-party state.
