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........

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