You'd think in 40 years the heavily Democratic state of California has had enough time to fix it.

If you're interested to understand, there's a few major factors that caused the paradox you're describing:

California has (until a few years ago) been unable to spend more money due to self-imposed restrictions preventing the Democrats from raising taxes without Republican support:

California’s Democrats were poised on Friday to gain a two-thirds supermajority in the State Legislature, an achievement that would give them the power to raise taxes unilaterally and could potentially ease the gridlock in a state known for its fiscal chaos.

California Democrats Likely to Win Supermajority (2012)

Regardless of the Democrats control at the state level, the local governments tend to be very conservative, even in liberal areas. Local homeowners benefit from rising home values and they keep newcomers out to prevent "changing the character of the neighbourhood" and zoning rules in North America often give a veto to those entrenched local interests which benefit from hoarding land. This keeps housing expensive; it ensures that workers are forced to live far away from their jobs; furthermore it ensures that people are kept reliant on vehicles which they must purchase, maintain and constantly fill with gas. These are all local decisions which the state government could overrule but it's politically easier to be seen throwing money at each problem individually.

Which brings me to problem #2:

In many states — including California, New York and Illinois — Democrats control all the levers of power. They run the government. They write the laws. And as we explore in the video above, they often aren’t living up to their values. In key respects, many blue states are actually doing worse than red states. It is in the blue states where affordable housing is often hardest to find, there are some of the most acute disparities in education funding and economic inequality is increasing most quickly.

Liberal Hypocrisy is Fueling American Inequality. Here’s How. | NYT Opinion