Short on Your Down Payment? California’s Surplus Can Help.

With rising inflation, climbing interest rates and a punishingly hot housing market, the possibility of homeownership has receded even further into the distance for many Californians.

But the state wants to help — and it has the budget surplus to do it. Under the new California Dream for All program, the state plans to allocate $1 billion a year for 10 years to provide down-payment loans to first-time buyers.

“I remember what a stretch it was to buy my first home in San Diego — it was a little 950-square-foot house, and that $135,000 price tag seemed astronomical at the time,” said Toni G. Atkins, the State Senate president pro tem, who spearheaded the program’s development. “With this program, we’ll help more individuals and families make the dream of homeownership a reality.”

While the market is showing small signs of cooling, the median home value here is still slightly more than $800,000, the highest in the United States, according to data from Zillow. That is a more than 250 percent increase from a decade ago. In roughly that same period, the median household income in the state has risen just 28 percent, from $61,400 to $78,700.

The homeownership rate in California is about 56 percent, the second-lowest in the nation (ahead of New York). That figure is even lower for Black Californians, at 37 percent, and Latinos in the state, at 44 percent.

“The No. 1 thing that California needs to do is build more homes,” Micah Weinberg, the chief executive of California Forward, the nonprofit group that coordinated the design of the program, told me. “However, that is taking some time. So in the interim, we need to focus on the fact that there are populations that have been systematically locked out of the opportunity to become homeowners and to develop the generational wealth that comes along with that.”

So how does the program work?

Concurrent with a buyer’s main mortgage, the state offers a second mortgage that covers 17 to 20 percent of the home’s price, and on which the buyers make no payments until they sell. The idea is to cover the down payment, which means buyers don’t have to save as much up front; it also means their main mortgage is lower, which reduces monthly payments over the life of the loan.

So the state of California has a stake in your home, and in the best-case scenarios, when you sell it for a profit, the state will get a percentage of that profit equal to the percentage they gave you for the down payment. If you make $100,000 on your home and the state gave you 20 percent of the original price for your down payment, the state will take $20,000 of the profit. The state’s take then goes back into the fund to be used for further loans for other buyers.

In less sunny scenarios in which the home does not increase in value, the buyers simply pay back the borrowed amount out of sale proceeds. In the unlikely event that the home decreases in value, the state will take the same percentage loss on its stake as the homeowner does on the whole sale.

Strictly speaking, the criteria for the loans are that borrowers must be first-time home buyers and make less than 150 percent of the median income in their area. But because the program is “explicitly targeted to produce racial and economic equality,” Weinberg said, the state will make an effort to help buyers in areas that have historically been targets of discriminatory practices like redlining and underappraisal.

Weinberg estimates that hundreds of thousands of Californians are potential first-time home buyers within the prescribed income bracket, but the program is designed to help about 7,700 people annually. In part, that is so the state doesn’t contribute to the problem it is trying to mitigate.

“We really wanted to make sure that we were doing two things,” he said. “One, that we were giving a whole lot of help to a good number of people, but that we aren’t injecting so much money into the California market such that we would help to inflate homes.”

But that also means the competition for the loans could be stiff when the program is up and running, which is expected to be some time in early 2023.

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If you read one story, make it this

Los Angeles County voted unanimously on Tuesday to return land to the family of a Black couple whose beachfront property, known as Bruce’s Beach, was taken away by a Southern California city nearly 100 years ago.

Where we’re traveling

Today’s tip comes from Cathy Devlin, who recommends a scenic state park along Highway 1 near Mendocino:

“My favorite place to visit in California is Van Damme State Park in Little River, which is just south of Mendocino. This state park has a wonderful combination of fern-lined forest (one hiking trail takes you through Fern Canyon) and jagged Northern California coast and beach. There are hiking trails throughout the park and guests can always cross the street and enjoy the beach and the water. Kayaking is popular at the beach, and in the “old days,” it was a premier place for abalone diving.

My husband and I have been visiting Van Damme State Park for more than 40 years. Our children grew up visiting the park, and we have wonderful memories over several decades. In fact, our son proposed to his wife at the beach. Now our grandchildren visit with us every year.

We have a family-and-friends camping trip each year, and it’s the highlight of our summer.”

Tell us about your favorite places to visit in California. Email your suggestions to CAtoday@nytimes.com. We’ll be sharing more in upcoming editions of the newsletter.

And before you go, some good news

Months before he died, Alex Trebek wrote a $500,000 check to help reduce homelessness in Los Angeles, the city he called home.

He never got to see the impact of that money. But this month, San Fernando Valley’s first homeless shelter opened in his honor, Los Angeles Magazine reported.