Susan Gittelman
We have an affordable housing supply problem. It is a partly a function of the fact that incomes have not kept pace with the cost of housing in our area.
Homes for sale are scarce, and house prices in Greater Boston are rising at unprecedented rates. But building new homes is so expensive that not enough are built, leaving many families priced out.
In communities of color, there are very limited opportunities for moderately priced home ownership. Almost all new housing built in recent years is rental housing – not for purchase. Boston and Cambridge have developed some home ownership housing for low- and moderate-income families, but in Massachusetts’ 26 Gateway Cities and other specific neighborhoods, opportunities to buy are almost nonexistent.
Lack of this supply limits the opportunity for families to enjoy the benefits that come with homeownership. The most immediate one is taking advantage of the mortgage interest deduction, the largest federal housing subsidy. In addition, over time families can tap the equity built up into their homes to start new businesses or send kids to college. Equity built in a home can allow them to share these benefits with the next generation.
A New Model for Today’s Concerns
Housing agencies and advocacy groups like MassHousing, which provides bond financing for new housing, and Citizen’s Housing and Planning Association (CHAPA), which encourages production and preservation of low-income housing, are increasingly focused on home ownership.
In response to this situation two years ago, the Baker administration created the CommonWealth Builder program, a $60 million initiative intended to seed homeownership opportunities and help build generational wealth in communities of color. The main principle of CommonWealth Builder is that, supplementing programs that focus on assisting buyers themselves, it helps developers by paying a portion of the cost to build these units. It effectively lowers the necessary price point of a new unit, making it attainable to more families.
A unique feature of the CommonWealth Builder program is that it allows homeowners to realize the full market appreciation of their unit upon sale so long as they occupy the unit for at least 15 years. The benefit of this aspect for homeowners and their families cannot be overstated.
Historically, public programs that subsidize home ownership limit the appreciation that the owner can realize upon sale, for two main reasons. The first is to preserve the unit as permanent affordable housing stock. The second is the idea that public resources should not be used for individual private gain.
But these views are being thoughtfully reconsidered in the context of achieving a larger societal goal of closing the racial wealth gap. This includes using available tools to make sustainable home ownership opportunities available to all, and to truly deliver the benefits of home ownership to more families In disadvantaged neighborhoods, which are typically communities of color.
Limited Impact Without More Funding
The administration was able to pilot this approach when General Electric gave up its plan to build a new headquarters in Boston and returned $60 million to the state.
“As the largest program of its kind in the nation, the CommonWealth Builder program is a first step in addressing homeownership and wealth disparities across Massachusetts,” Chrystal Kornegay, the executive director of MassHousing, said at a June announcement.
From the outset it became clear that the program has tremendous potential. Just recently, the first successful project opened in Haverhill at modest-sized Mount Washington Homes. The initial round of financing will also support new developments in Roxbury, Everett and Jamaica Plain.
But because of its funding limitations, its impact is limited. While the initial $60 million sounds like a lot, the program contributes a maximum of $150,000 to each unit planned. As a result, the opportunity is limited to about 400 families.
That may be about to change, with an exciting new development that could greatly expand this innovative program. Massachusetts will be receiving $5.3 billion from the federal American Rescue Plan Act in response to the effects of the pandemic crisis. Although details must be worked out with the legislature, the administration has proposed using a significant portion of these funds for major sustainable investments in housing and home ownership. And among these investments, the governor wants to earmark $200 million of these funds to expand the CommonWealth Builder program.
“It really is a perfect fit between legislation that came from Congress and what we were already doing, to scale up those efforts,” said Kornegay.
Commonwealth Builder is a good program designed to stimulate new housing creation particularly in communities of color and to truly maximize the benefits that home ownership brings to those qualified and lucky enough to purchase these homes. Now is the time to take this program to scale.
Susan Gittelman is the executive director of B’nai B’rith Housing, a nonprofit affordable housing developer currently working in Boston, Sudbury and Swampscott.
