What is 40B Housing in Massachusetts? (Affordable Housing)

Heard about 40B housing – but not sure exactly what that means? Chapter 40B is a state statute in Massachusetts related to affordable housing, and is often the phrase used surrounding those programs. If your family falls into a certain moderate income range, you may qualify for programs providing you with an affordable mortgage! 

Disclaimer: This is for informational purposes only and should not be construed as financial or legal advice. All information is based on my personal interpretation and experience and does not guarantee financial or legal accuracy. Consult a lawyer, financial advisor, or local housing organization if you have questions about this program.

Let’s break it all down…

A hand holding a piggy bank and a hand holding a miniature house.

What is Chapter 40B?

Chapter 40B is the state statute which provides local town/city zoning boards with more flexible rules on approving housing developments if at least 20-25% of the units have long-term affordability restrictions.

40B can apply to both housing developments as well as rental units. They must be priced in a way that makes them affordable for moderate income families.

In Massachusetts, it’s often easy to see when these homes are advertised, as the asking price is way lower than traditional market value and there will be income (and long term deed) restrictions.

While 40B technically is the statue itself and not the actual housing units, it’s colloquially used to refer to the units, so we’ll do the same here.

How are 40B houses priced?

The prices are determined by estimating 70-80% of the median income for the area, and then determining the a sales price that would mean buyers would not spend more than 30% of their monthly income on housing costs (including principal, interest, property tax, and insurance payments, assuming a 5% down payment).

The specific price will thus vary based on the town, and may vary based on aspects of the house itself (for example, number of bedrooms, or new builds versus older homes going back on the market). 

MCO Housing is one of the organizations that helps share affordable housing listings and handles applications. In browsing their current listings, here are some of the prices I saw…

  • 3 Bedroom House in Reading – $280,300
  • 1 Bedroom Condo in Lowell – $192,600
  • 2 Bedroom House in Devens – $167,535
  • 2 Bedroom House in Bellingham – $299,990
A "sold" sign in front of a house.

How do you qualify for 40B housing?

The primary qualification factor is income. You must have an income that falls under 80% of the median income for your area. This varies based on the town/city. 

For example, for that 3 bedroom house in Reading mentioned above, the income restriction was the following based on family size…

  • 1 person: $78,300 
  • 2 person: $89,500 
  • 3 person: $100,700 
  • 4 person: $111,850 
  • 5 person: $120,800 
  • 6 person: $129,750

A lot of people are surprised at how high the income limits can be for these houses. That falls in line with the fact that many Massachusetts towns tend to attract high income families. It’s always worth checking to see if your income falls within the limits for these projects.

Note there are also typically two other qualification factors:

  • Must be a first time home buyer (there are a few exceptions to this).
  • Must have no more than $75,000 in total assets. (This includes bank accounts and retirement accounts).

How does buying a house work with this program?

The process is a little complicated. It starts with filling out an application for the home, which you’ll usually find with the listing. You’ll see these on the websites of monitoring agents; the companies that work to help review the applications and ensure you meet the guidelines.

The application is fairly in-depth; it’s similar to if you were actually applying for a mortgage. You’ll need to provide pay stub history, tax returns, bank statements, etc. You’ll also typically need a mortgage pre-approval letter. The application will detail everything you need to complete.

Sometimes, the monitoring agent will let you stop by with your application and review it with you to ensure it’s fully completed. (I’m not sure if this is always the case though).

After you apply, the vast majority of affordable housing opportunities conduct a lottery.

Just like it sounds, this means you and everyone else that filled out an application are put into a lottery, and names are drawn one by one. Those whose names were drawn first are given the opportunity to buy.

Keep in mind that just because you are not drawn first in the lottery does not mean you are definitely out of luck. If you’re within the first few spots, someone may decide to back out and they will go down the list to see if you are still interested. This isn’t super common but it does happen.

Note that the lottery is specific to the individual house you applied for. If you do not get that house and there is another unit you are interested in, you will need to go through the same application process for that other unit, and wait for the lottery again.

Can you resell an affordable home at market rate?

No. There is a deed restriction on this type of affordable housing in Massachusetts that requires it to stay affordable. (Note – other states may have varying guidelines).

When you are ready to sell, the monitoring agent or folks working in the program will determine the appropriate sales price that still maintains affordability.

As such, purchasing a house through this type of program is not meant to be a long-term investment strategy for appreciation – but rather a way to make home ownership eligible to more people.

Why consider affordable housing through 40B?

If your family has a moderate income and you qualify for this program, it may give you the opportunity to be able to afford homeownership in otherwise cost-prohibitive areas of the state. Your mortgage will be kept to a reasonable amount in line with your budget.

By keeping your housing costs low, you may be able to then funnel more money into other investment strategies like retirement accounts in forthcoming years, allowing you to better your overall financial picture over time.

The Bottom Line

40B makes affordable housing opportunities available to moderate income families. Purchasing your home through this program may give you a huge financial step up and allow you to settle into the perfect town for your family.

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