The California Senate is considering a proposal that would allow illegal immigrants to access state funding to assist with home down payment loans, after the measure passed the Assembly on a vote of 56–15.

Assembly Bill 1840, authored by Assemblyman Joaquin Arambula, would make illegal immigrants eligible for the California Dream for All Program, which provides up to 20 percent of down payment assistance to prospective homebuyers.

He said everyone should be eligible for the program meant to increase home ownership in California.

“The social and economic benefits of homeownership should be available to everyone,” Mr. Arambula said in legislative analyses. “As such, the California Dream for All program should be available to all.”

He said owning a home is crucial to developing financial security, thus all Californians deserve access to loan assistance.

“Homeownership is a fundamental tool for wealth building, as it fosters financial stability and provides a tangible investment in one’s future,” Mr. Arambula said. “When undocumented individuals are excluded from such programs, they miss out on a crucial method of securing financial security and personal stability for themselves and their families.”

The lawmaker said the state and the economy will benefit from expanding eligibility.

“Expanding access to homeownership is not only important to personal prosperity but also fosters economic stability and promotes a robust local economy,” Mr. Arambula said. “Ensuring universal access by all qualified borrowers to the California Dream for All Program will contribute to the overall success and vitality of California.”

Amendments added to the bill mandate applicants qualify for Fannie Mae home loans—which require a valid Social Security number or taxpayer identification number; individuals who entered the country illegally can obtain the latter.

The program was established in 2022 to provide loans to qualified first-time homebuyers with low to moderate incomes, with a subsequent change requiring recipients be the first generation of homeowners in their family.

So far, the program—overseen by the California Housing Finance Agency—has received $700 million in funding.

Capped at $150,000 per loan, the program is structured so the money, and 15 percent of any appreciation, is paid back when the home is refinanced or sold.

Costs to the state depend on the number of loans provided, according to the Assembly Appropriations Committee’s analysis, with some staffers expressing concern that the program will put pressure on lawmakers to increase funding to accommodate newly eligible applicants.

Consultants with the appropriations committee urged prudence regarding any additional funding for the program, given the state’s significant budget deficit, which they noted is expected to exceed tens of billions of dollars over the next fiscal years, according to the nonpartisan Legislative Analyst’s Office.

Supporters of the bill said immigration status shouldn’t affect families’ ability to benefit from state programs.

“The Dream for All program is a monumental program that benefits many low and middle-income families,” Cynthia Gómez, deputy director of state policy and advocacy for the Coalition of Humane Immigrant Rights—a nonprofit based in Los Angeles—said during an April hearing by the Assembly’s Housing and Community Development Committee. “However, we need to ensure that all Californians have access to the program, and this is precisely what AB 1840 seeks to achieve.”

She said the contributions of California’s illegal immigrants should make them eligible for assistance.

“In recent years, California has made great strides in ensuring that we live up to our ideals and embody the notion of being a California for all,” Ms. Gómez said. “AB 1840 continues our commitment to ensuring that all Californians, regardless of their immigration status, have access to the programs that they need to thrive.”

A fellow supporter relayed testimony for one beneficiary of the program who expressed gratitude for the help but said the program should be open to more individuals.

“If one person in the community succeeds, that pushes the community forward, and I am fortunate to be able to inspire others to be unafraid of taking risks and opportunities,” Leticia Lopez—Central Valley organizer with the humane immigrants’ rights organization—speaking for one beneficiary, said during the hearing.

“Unfortunately, for my parents and many members in my predominantly Hispanic immigrant community, this is something they can only dream of.”

Critics said the money would be better spent supporting U.S. citizens, especially given the financial difficulties the state is facing.

“I just can’t get behind using our limited dollars for people who are in this country undocumented when we have very limited funds,” Republican Assemblyman Joe Patterson, vice-chair of the housing and development committee, said during the hearing. “We have a lot of people suffering in this state, and I think we have to make decisions.”

He said he wanted to prioritize spending and ultimately voted against the measure in the hearing and again on the Assembly floor—with no Republicans voting for the bill.

“Where do we draw that line?” Mr. Patterson said. “And so, because of that, I can’t support this legislation.”

The bill is awaiting hearings by the Senate’s Housing and Judiciary committees in the coming weeks.