The General Laws are hereby amended by inserting after chapter 40Y the following chapter:-

Chapter 40Z. Starter Home Development Fund.

Section 1. (a) As used in this section, the following words shall have the following meanings unless the context clearly requires otherwise:

“Agency”, the Massachusetts Housing Finance Agency, established under section 3 of chapter 708 of the acts of 1966.

“Committee”, the advisory committee established under section 4

“Fund”, the Starter Home Development Fund established under section 2.

“Income-eligible homebuyer”, a household within the commonwealth with annual income not less than 80 per cent that does not exceed 120 per cent of area median income.

“Starter Home”, as defined under section 1 of chapter 40Y.

Section 2. (a) There shall be established and set up on the books of the commonwealth a Starter Home Development Fund, which shall be administered by the department of housing and community development. The department shall enter into a contract with the Massachusetts Housing Finance Agency for the administration of the fund, according to guidelines promulgated by the department and in consultation with the advisory committee. The fund shall provide subsidies for new construction or acquisition and substantial rehabilitation of owner-occupied starter homes for the benefit of households whose incomes are between 80 per cent and 120 per cent of area median income as determined by the federal Department of Housing and Urban Development. The fund shall be an expendable trust fund and shall not be subject to appropriation.

(b) There shall be credited to the fund revenue from appropriations or other monies authorized by the general court and specifically designated to be credited to the fund and gifts, grants, private contributions, repayment of loans, investment income earned on the fund's assets and all other sources. Money remaining in the fund at the end of a fiscal year shall not revert to the General Fund.

(c) The agency shall maintain the fund as a separate fund and shall cause it to be audited by an independent accountant on an annual basis in accordance with accepted accounting principles.

(d) The agency shall administer assistance from the fund using only the criteria set forth under this chapter.

Section 3. (a) The fund shall finance subsidies directly to support the construction and purchase of starter homes; provided, however, that such assistance shall be the minimum amount necessary to make a project feasible.

(b) The total amount of subsidies shall not exceed 35 per cent of eligible development costs, as determined by the agency.

(1) The agency may provide a direct subsidy to a developer of a starter home, which shall not exceed the difference between the cost of development and the market value of the home as completed.

(2) Of any remaining amounts available for the project after the developer subsidy, the agency may provide a subsidy for the benefit of the homebuyer to reduce the cost of purchasing the home; provided, however, that: (i) the agency includes conditions in the subsidy or uses another legal mechanism to ensure that, to the extent the home value has risen, the amount of the subsidy remains with the home to offset the cost to future homebuyers; or (ii) the subsidy is subject to a housing subsidy covenant that preserves the affordability of the home for a period of not less than 99 years.

(c) The agency shall allocate not less than 33 per cent of the funds available through the program to projects that include a housing subsidy covenant consistent with clause (ii) of paragraph (2) of subsection (b).

(d) The agency shall adopt a program plan that establishes application and selection criteria, including: (i) project location; (ii) geographic distribution; (iii) leveraging of other programs; (iv) housing market needs; (v) project characteristics, including whether the project includes the use of existing housing as part of a community revitalization plan; (vi) construction standards, including considerations for size; (vii) priority for plans with deeper affordability and longer duration of affordability requirements; (viii) sponsor characteristics; (ix) energy efficiency of the development; (x) historic nature of the project; (xi) projects which seek to address and overcome historic, systemic inequities in the housing lending system in communities of color. Priority consideration shall be given for projects sited and developed in a starter home zoning district as defined in section 1 of Chapter 40Y.

Section 4. (a) There shall be an advisory committee to the fund, which shall make policy recommendations to the agency and to the department of housing and community development regarding the fund's program and funding activities.

(b) The committee shall be comprised of: the director of the department of housing and community development or a designee; the executive director of the Massachusetts Housing Partnership Fund or a designee; the executive director of the Community Economic Development Assistance Corporation or a designee; 2 municipal officials appointed by the Massachusetts Municipal Association, Inc., 1 of whom shall be from a city and 1 of whom shall be from a town; 1 lender experienced in the financing of starter homes and 1 for-profit developer of starter homes, each appointed by the agency; an executive director of a local housing authority appointed by the Massachusetts chapter of the National Association of Housing and Redevelopment Officials; a representative appointed by the Home Builders and Remodelers Association of Massachusetts, Inc.; a representative appointed by One Family Inc.; a representative appointed by the Massachusetts Affordable Housing Alliance, Inc.; a representative appointed by the Massachusetts Association of Community Development Corporations; and a representative appointed by the Massachusetts Nonprofit Housing Association, Inc. Committee members shall serve at the pleasure of the appointing authorities.

Section 5. The Massachusetts Housing Finance Agency shall, as part of its annual report pursuant to section 14 of chapter 708 of the acts of 1966, detail all expenditures from the fund, including, but not limited to, the recipient of the funds, the cost of administration and the number of units constructed, acquired and rehabilitated.