As Boston’s housing prices continue to soar, Black home buyers are being pushed out of the city and into the suburbs. And new research shows that as a result, a concerning wave of racial segregation is taking place in Massachusetts.
While statewide Black and Hispanic homeownership increased 4.9% to 6.2% between 2018 and 2021, this growth often took place in concentrated towns and cities outside Boston, despite residents’ desires to stay. Due to rising costs — the average price of a single-family home grew 23% in Boston and 32% in Dorchester alone between 2018 and 2022 — and apprehension in competitive housing markets to accept government-insured loans, Black residents are moving out of Boston and into a select few areas.
“If white home buyers avoid buying in these segregating cities, future home-price appreciation may lag, which would limit wealth-building for Black homeowners,” Cornelissen said.
In Massachusetts cities like Brockton, a community of roughly 100,000 residents south of Boston, Black homeownership grew nearly 17% between 2018 and 2021. But due to the city’s ailing infrastructure and funding, experts like Cornelissen are worried that these flaws will remain untouched and concentrated in Black communities.
“Segregating cities like Brockton also face the costs of an aging infrastructure, the burdens of abandoned industrial and commercial sites, problems with urban violence, and school systems stretched by the needs of first-generation immigrant and lower-income students,” Cornelissen wrote. “Segregation concentrates these issues and their costs in communities of color, which in turn perpetuates racial inequalities in local resources and opportunities.”
Along with skyrocketing prices, Black residents’ exodus from Boston is also tied to concerns surrounding government-backed Federal Housing Administration (FHA) loans. These loans, overwhelming used by Black and Brown homeowners, do not have risk-based pricing and require a 3.5% down payment, an affordable option for people with low credit scores. However, they also require a mortgage insurance premium for the length of the loan, ultimately make them cost more than conventional ones.
Forty percent of Black homeowners who took out a mortgage used an FHA loan between 2018 and 2021, a mark significantly higher than the 9% of white homeowners who did.
Cornelissen said that because Black home buyers face higher denial rates, they may be pushed into taking out an FHA loan. Additionally, these loans are often rejected in competitive housing markets.
“My research has unearthed concerns around how welcomed FHA mortgages are in competitive housing markets around Boston,” Cornelissen wrote. “Especially in tight housing markets, FHA buyers struggle to compete with buyers making cash offers or waiving contingencies. I have also found that some sellers and their realtors stigmatize FHA buyers, perceiving them as less reliable, fearing that the transaction may fall through or wanting to avoid the bureaucracy of an FHA inspection and appraisal. This stigma of FHA in competitive markets may introduce additional challenges for Black home buyers, who disproportionately rely on FHA loans.”
While Brockton has seen a near 50% price increase for single-family homes since 2018, its greater acceptance of FHA loans has provided Black home buyers a more welcoming, though concentrated place to purchase houses.
“Rising prices have not only limited buyers’ options, but those using FHA loans are sometimes locked out from houses that they can afford,” Cornelissen said in a similar study last September. “This stigma against FHA buyers may be geographically distributed, as realtors in this lower- to moderate-income market displayed higher willingness to work with FHA borrowers, while realtors in higher-income markets may lack familiarity.”