NEARLY 70 PERCENT of White households in Massachusetts own a home. Only 37.4 percent of non-White households own a home. That gives Massachusetts the seventh highest racial homeownership gap in the country.
Secretary of Housing and Economic Development Mike Kennealy told legislators at a public hearing Tuesday that for Black families trying to buy their own home, “the cards are stacked against them.”
As lawmakers are determining how to spend $5.3 billion in federal money that the state will get from the American Rescue Plan Act, Baker administration officials are pushing their plan to spend $1 billion on housing programs as a way to help close that racial gap.
Kennealy and Secretary of Labor and Workforce Development Rosalin Acosta both gave extensive presentations at a hearing convened by the House and Senate ways and means committees and the House Committee on Federal Stimulus and Census Oversight focused on the use of federal money for labor and housing.
This was the second hearing on the ARPA money. The first focused on the broad contours of Baker’s $2.9 billion plan and the advice of outside economists. Four more hearings are planned for after Labor Day, with a focus on health care and human services; economic development, transportation, climate, and tourism; education and safety net services; and an open public hearing.
Kennealy’s presentation provided granular details about how Baker hopes to spend the $1 billion, which would be split evenly between programs geared at rental housing and home ownership.
On the ownership side, Baker would spend $300 million for first-time homebuyer assistance – financial assistance for buying a home, like help with down payments or subsidies to keep mortgage interest rates low. Another $200 million would go to the Commonwealth Builder Program to fund the production of homes for sale to middle-income residents. The program is now funded with $60 million in state money, or enough to subsidize 500 units. Adding another $200 million could allow the program to subsidize another 1,660 units, providing up to $150,000 per unit for construction. The housing would be built in Boston and Gateway Cities and in census tracts deemed low-income under federal guidelines.
Rep. John Barrett, a North Adams Democrat, asked why the homebuyer program would only help 31 communities – and what would be available to homebuyers in the other 320. Kennealy responded that he is still “taking a look at the options” for those communities, and said the limited focus was meant to conform with federal guidelines.
The Biden administration, in guidelines for spending the money, has stressed the importance of focusing on equity and addressing racial and socioeconomic disparities. Kennealy said there have long been structural barriers that impede home ownership in minority communities. He cited data showing that mortgages were more likely to be denied for first-time homebuyers of color than White first-time homebuyers. The most common reasons for the denials for Black and Latino homebuyers were debt-to-income ratio, collateral, and credit history. But even when other economic factors were controlled for, Whites were still least likely to have their mortgage application denied, according to data analyzed by the UMass Donahue Institute.
In 2019, Kennealy said, there were 130 Massachusetts municipalities where not a single home purchase loan was issued to a Black homebuyer.
To address the problem, Kennealy said Massachusetts is prepared to offer services like more favorable loan terms and financial assistance like down payment help. Since 2018, Massachusetts’ down payment assistance program helped more than 4,000 moderate-income borrowers, of whom 35 percent were minorities.
Kennealy also stressed the importance of building new housing, noting that housing production has slowed significantly since the 1990s – driving up rental and housing costs. Baker’s proposal would spend another $500 million to build another 2,400 units of affordable rental housing and 3,600 units reserved for seniors and veterans.
As the state is experiencing soaring home prices, Sen. John Keenan, a Quincy Democrat, asked Kennealy if there is any data on the impact of home buyer assistance programs – which are meant to increase the pool of buyers – in an environment where there is such limited inventory. Keenan questioned whether that would raise prices further, and suggested it might make sense to focus on housing production before homebuyer assistance.
Kennealy responded that the administration is mindful of that concern, but feels it is “really important to do both.” “Clearly, it’s a question of balance,” Kennealy said.
Asked by Sen. Jason Lewis how many new housing units the state needs to support the demand, Kennealy said estimates are around 200,000 units over the next half dozen years.
The hearing also featured a presentation by Acosta on Baker’s plans for job training and workforce development, and public testimony on labor and housing.
A union-led group rallied outside the State House before the hearing to urge lawmakers to prioritize workers and their families in spending the ARPA money by addressing the needs of frontline workers, working parents, and immigrant workers. Speakers at the rally called for a range of expenditures: hazard pay for frontline workers, lower MBTA fares for low-income individuals, an expanded child tax credit, the development of affordable housing, and investments in higher education.
“We’ve been talking about an equitable recovery and racial justice,” said Karen Chen, executive director of the Chinese Progressive Association. “Massachusetts needs to put their money where their mouth is.”