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Chrystal Kornegay
Homeownership is a marker of a middle-class lifestyle, and a vehicle that creates family wealth over generations. But in Massachusetts, and across the US, the prosperity that homeownership unlocks is not enjoyed equally.
Our state and our country face a racialized wealth gap that was created, in part, by historically unequal access to homeownership opportunities and mortgage credit, through redlining, racially restrictive deed covenants, and discrimination in lending and mortgage banking. The legacy of historical housing discrimination manifests itself today when the median net family wealth of white Bostonians exceeds $250,000, versus $8 for black Bostonians. It shows itself in homeownership rates, where people of color make up 27 percent of the state’s population but represent just 13 percent of the state’s homeowners. Last year, according to data compiled by the Massachusetts Community & Banking Council, only 15 percent of home-purchase mortgage lending went to black and Latino homebuyers.
Homeownership and family wealth are intertwined and today, the racial gap in homeownership runs on its own inertia. Recent research by the Urban Institute shows that the gap in homeownership rates between young white and black adults is mostly driven by parental tenure and parental wealth. Homeownership is often passed from parents to children, since parents who own homes have the financial means to help their children assemble their first down payment. At the same time, the racial gap in homeownership means the ability to pass down homeownership is unequal.
If homeownership is largely inherited, and homeownership is a key driver of generational wealth, then inherited homeownership locks in economic inequality, across generations. A change in course requires a deliberate strategy to connect more first-time homebuyers to homeownership opportunities, in a way that benefits those who have been historically locked out of the market.
MassHousing launched our down payment assistance program in 2018, because we saw that in an environment defined by high rents, high home prices, and increased student debt, even a 3 percent down payment represents a significant barrier to working households who wish to become first-time homebuyers. At the same time, we know from experience that once that barrier is overcome, creditworthy buyers – even those with modest incomes – will succeed in the long term.
MassHousing’s down payment assistance program eliminates down payment savings as a barrier to sustainable homeownership, by offering income-eligible first-time homebuyers the ability to finance their down payments over fifteen years, at a low, fixed interest rate. It is the only statewide down payment assistance of its kind, and it does not require any public subsidy.
In the nine months since MassHousing launched down payment assistance, the program has already helped nearly 900 low-, moderate- and middle-income households buy their first home. Down payment assistance has been an especially powerful tool in building social equity, by helping to expand homeownership opportunities beyond inherited homeownership.
Roughly three of every 10 MassHousing down payment assistance loans so far have gone to buyers of color. That’s a significant data point, in a state where just 15 percent of last year’s home-purchase mortgages were issued to black and Latino borrowers. Our success is proof of the policy concept behind down payment assistance: By eliminating down payments as a barrier to homeownership, we have connected a broader universe of creditworthy borrowers to homeownership opportunities, and to long-term wealth creation. We are fueling mortgage lending that reflects the diversity of the state we live in and demonstrating a path to closing the racial homeownership gap.
Chrystal Kornegay is executive director of MassHousing.
