Why did they only hire straight actors?

To answer your question, to secure financing.

Owing to his gratitude to Mr. Van Sant, Matt Damon was supposedly set for the role of Dan White, though in truth I think after initial talks it was clear it probably wasn't going to happen. Nonetheless his name was widely advertised at one point, and his supposed involvement was helpful in attracting interest and financing. Other name actors came onboard, interest remained and the film got made.

Though I don't assume that all the leads are straight, I know many are and have only ever felt gratitude that due to their involvement, the film got made... on what was actually quite a small budget.

Among the extras, featured players, director, producers, writers, and crew there was a VERY pronounced gay presence... As well as a sense that we were all working to tell an important story. The only film or television set I've ever been on where I can honestly say so many people were doing this out of love, as much to earn a paycheck

It wasn't a slam to openly gay actors that two presumed straight one's got the male leads.... It was how to get the project made. Worth a mention that either Penn or Franco could have accepted higher paying work, but chose to do this instead.

Of openly gay actors who were out in 2007/08, I'm hard put to cast any of the lead roles with them. Certainly, Dennis O'Hare could well have made a fine Milk, but he'd be the first to tell you that his name attached as lead wouldn't have attracted the needed money, so it turned out he made a truly wonderful villain in the piece instead.

Many, many gay people were involved in this production on both sides of the camera, and given the quality of the finished product, I wouldn't change a thing.