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A $1.5 million cut to a state grant program for first-time homebuyer counseling might seem small, but the nonprofit community developers who use the funds say it could gut their work trying to give aspiring homebuyers of color a shot in the ever-more-expensive Massachusetts housing market.

Gov. Maura Healey pared back the Chapter 206 program, administered by the state Division of Banks, from $3.05 million to $1.55 million as part of a $272.4 million package of cuts meant to bring spending on programs in line with “ongoing resources,” the governor said in a signing letter she sent to legislators.

“For all the talk of closing the racial wealth gap, the racial homeownership gap, this [Chapter 206 funding] is a crucial piece of the puzzle,” said Angie Liou, executive director of Asian Community Development Corp., which serves Boston’s Chinatown and the region’s larger Chinese-American community. “Homebuyer education counseling is really critical. If you’ve never bought a home before and you’re the first person in your extended family to do so, it’s a really daunting prospect.”

And most practically, Liou said, these federally-certified first-time buyer classes are required if a buyer wants to access mortgage and down payment assistance programs like those offered by MassHousing, the Massachusetts Housing Partnership and the Federal Housing Administration, some of which can also help lower high interest rates that have pushed up the median monthly payment on a Greater Boston starter home to $3,048, according to Redfin.

And with English-language proficiency uneven among Massachusetts’ immigrant communities, Liou said, the complicated details of mortgage products can quickly get confusing without classes and personal counseling available in an immigrant’s native language – in the case of Chinese, a language that has several dialects with vast differences among them.

“This [cut] means fewer people coming through our program, which means fewer people of color able to buy homes,” said Codman Square Neighborhood Development Corp. Executive Director Gail Latimore.

She estimated that home sales to graduates of Codman Square NDC’s first-time homebuyer classes alone had bought homes in its Dorchester service area or in Boston’s suburbs that represented $50 million worth of assets now in the hands of families of color. A recent analysis by the Federal Reserve Bank of Boston calculated the median white family in America has a net worth 6.8 times greater than the median Black family when pension assets are excluded, in part down to a large gap in home ownership rates.

Looking at condominiums sold in Somerville in recent years – July 2023 median sale price $850,000 according to The Warren Group, publisher of Banker & Tradesman – Somerville Community Corp. CEO Gonzalo Puigbo noted that many of the city’s buyers were able to snag these high-priced units “because of intergenerational wealth through a parent or inherited money” that unlocks the critical down payment, something the city’s dwindling numbers of blue-collar renter families don’t have access to.

“There aren’t a lot of options for a [local, working-class] family except continuing to rent and suffer increases that top the annual rate of inflation,” he said.

Until the pandemic, the Chapter 206 program had been funded at around $1.5 million per year, derived from loan originator fees collected by the Division of Banks. For the last two years, the program had received a 50 percent increase in funding as part of a larger push to improve access to homebuying for lower- and moderate-income Bay Staters as a homebuying frenzy and ultra-low interest rates sent condo prices surging by 37 percent and single-family prices by 41 percent between 2019 and 2023. Many of those less-well-off aspiring homebuyers were people of color, federal mortgage application data shows. In a statement to Banker & Tradesman Monday, an administration spokesperson said Healey’s cut to the program “will not impact [the Division of Banks’] ability to operate the program.”

But the foreclosure prevention counseling, first-time buyer classes and one-on-one homebuyer counseling funded by Chapter 206 are run on a relative shoestring, Latimore said, meaning that a cut can quickly translate into a huge reduction in a nonprofit’s ability to offer homebuyer education classes, let alone the counseling that some first-time buyers need to understand the process they’re trying to go through and the products they’re buying.

“Codman gets about $200,000 a year from this grant. If these cuts stay in effect that’s going to go down to, who knows, $50,000? That’s not enough to keep someone on staff,” she said

The nonprofit developer’s two housing counselors also support renters in its affordable housing buildings, she said, by helping figure out fair payment plans to make up for rent payments skipped in the early days of the pandemic when huge swaths of the Boston service sector shut down, laying off tens of thousands.

“When you fall behind and you’re only earning, say, $35,000, $40,000 – even though our rents are affordable – when you lose income and you fall behind for three or four months, it takes you a long time to catch up,” she said. “People are still getting back on their feet.”

Puigbo also confirmed that his organization would have to make tough choices if the statewide community development corporation trade group, MACDC, isn’t able to convince legislators to override Healey’s veto this fall.

“The only two sources of funding we have [for homeownership classes and counseling] are Chapter 206 and [the federal Department of Housing and Urban Development] – and HUD’s challenging. Some years you get it and some years you don’t. When you add the $50,000 we get from the Division of Banks each year, we’re talking about maybe $70,000 for a budget of $200,000. Sometimes a bank will donate money or individual donors will contribute but I’m always having to look for other sources of funding,” he said. “If this goes away I’m going to have to make a decision about maybe retracting some of the classes, or maybe send a person from full-time to part-time…The one-on-one coaching may have to go away.”