California Legislature Extends Exhausted Homebuyer Subsidies to Illegal Immigrants

The California Legislature passed a bill Wednesday that will make illegal immigrants eligible for a state program that subsidizes down payments for first-time, first-generation homebuyers.

Assembly Bill 1840 would allow undocumented immigrants to receive up to $150,000 in down-payment assistance from the California Housing Finance Agency’s (CalHFA) Dream For All program, provided they meet all the program’s existing eligibility criteria and have a Social Security number or an individual taxpayer identification number.

Proponents argue that the bill will make the program fairer: People who otherwise qualify for the program shouldn’t be excluded just because of their immigration status.

“Limiting access to homeownership assistance programs perpetuates inequality and excludes residents of California from obtaining a significant wealth building opportunity,” said Assembly Member Joaquin Arambula (D–Fresno), the bill’s author.

Critics—including Republican lawmakers, a few Democrats, and Elon Musk—countered that the bill would only encourage more illegal immigration into California.

Neither position makes a lot of sense, given that the Dream For All program is effectively exhausted.

The California Legislature appropriated $520 million for the Dream For All program in the last two state budgets.

The first $300 million was claimed within two weeks of it becoming available by 2,200 beneficiaries. The application window for the next tranche of money is closed, and the Legislature did not provide any additional funding for the program this year.

Dream For All beneficiaries have to pay back a portion of the down-payment subsidy when they sell their home, meaning more money will trickle into the program over time, even without additional taxpayer funds. But for the moment, it’s tapped out.

There thus seems to be little added fairness in expanding on-paper eligibility to a wider range of people who won’t be able to claim the new benefits in practice.

On the flip side, letting immigrants claim a benefit that’s already exhausted would seem to provide a weak incentive to cross the border illegally.

The arguments for and against A.B. 1840 are thus much ado about nothing. It doesn’t seem to be all that practically relevant to discuss who should be allowed to draw from a well that’s already run dry.

Where the debate over A.B. 1840 is helpful is in highlighting the futility of California’s attempts to subsidize its way out of its high housing costs.

Home prices in the state are just too high, and the pool of people eligible for the subsidy (whether that includes undocumented immigrants or not) is just too large for public funding to make a dent. And because state and local regulations put so many limits on the construction of new homes, the primary effect of downpayment subsidies is likely an increase in home prices.

Absent California’s regulatory limits on new home construction, which include everything from zoning laws and environmental review laws to growth boundaries, California’s housing stock would be more elastic and prices would be lower. The need for public subsidies, particularly ones targeted at middle-income homebuyers, would lessen, and so would the fights about who exactly should qualify for those subsidies.

As it stands now, the Golden State’s self-imposed housing shortage kicks off fights about who really deserves to occupy that scarce stock of housing and receive the public dollars needed to afford it.

Having passed both chambers of the Legislature, A.B. 1840 goes to Gov. Gavin Newsom’s desk for a signature.

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Source: https://reason.com/2024/08/29/california-legislature-extends-exhausted-homebuyer-subsidies-to-illegal-immigrants/