How ROAD aims to boost housing supply and cut red tape

The 21st Century ROAD to Housing Act, which went into effect on July 11, includes a host of pro-housing provisions aimed at making housing easier to build and cutting red tape. 

The nearly 400-page bill contains provisions aimed at streamlining federal reviews, supporting factory-built housing, expanding housing supply and incentivizing local governments to streamline housing development.

The bill also includes a ban on institutional investors from buying more homes, but it provided much-needed carve-outs for build-to-rent (BTR) projects. 

The bill also views all types of housing as part of the solution — including for-sale and rental, market-rate and below-market-rate, and multifamily housing. This also encompasses traditional site-built housing and off-site construction like manufactured homes, modular housing and accessory dwelling units (ADUs).

While the bill is a good first step in driving change, most homebuilding leaders believe that there is still more work to be done, particularly at the local level, where the bulk of regulatory hurdles to new housing occur.

“Housing has become top of mind for many legislators, but just as importantly, for many states and many local governments. This bill addresses a lot of that. Overall, I think we’re thrilled,” Ed Brady, president and CEO of the Home Builders Institute, told HousingWire TBD.

“This is the first step in a longer process, and hopefully we’ll be able to have some conversations — No. 1 on implementation of this bill and No. 2 on what else do we need?”

The bill’s supply-focused provisions

The 21st Century ROAD to Housing Act includes numerous provisions aimed at making it easier to build a wide array of housing types. Together, these measures target regulatory burdens across all federal, state and local governments to make building homes easier, faster and more cost-effective. 

Streamlining federal reviews

The housing bill contains several sections aimed at streamlining reviews of federally funded residential construction projects, most often affordable, below-market housing. 

Multiple sections direct the U.S. Department of Agriculture (USDA) and the U.S. Department of Housing and Urban Development (HUD) to coordinate environmental reviews.

Section 103 exempts Rural Housing Service–funded infill housing projects from National Environmental Policy Act of 1969 (NEPA) requirements. USDA must report to the House financial services and Senate banking committees to evaluate the change within five years of enactment.

Section 802 of the bill directs federal agencies to sign a memorandum of understanding (MOU) within 180 days to establish a joint environmental review framework for jointly funded housing projects. The MOU must address categorical exclusions — a process for streamlining acceptance of each agency’s environmental impact statements and assessments — and the feasibility of joint physical inspections. 

A pair of other sections is also aimed at streamlining environmental reviews. Section 205, the BUILD Housing Act, allows HUD to simplify NEPA compliance by designating certain housing assistance as “special projects” to simplify NEPA compliance, and by delegating housing reviews to state, local and tribal governments. 

Section 206, the Unlocking Housing Supply Act, simplifies NEPA review for small-scale and infill housing projects. This covers public facility repairs, construction/rehab projects of one to four units, property acquisitions, floodplain and open space purchases, office-to-residential conversions and larger multi-unit projects. 

Section 501 of the bill, the HOME Reform Act, would exempt new categories under the HOME program from NEPA reviews — including projects of 15 units or less, infill developments and acquisitions of property for affordable housing. It would also limit duplicative environmental reviews in the HOME program, which is frequently used by nonprofit developers like Habitat for Humanity. 

“This bill reduces unnecessary red tape. It makes building homes more effective and more efficient, so organizations like Habitat and others can build more homes and bring the American dream within reach for more families,” said Chris Vincent, vice president of government relations and advocacy at Habitat for Humanity International, during a press conference in November announcing the updates to the HOME program.

Supporting manufactured and modular housing

Perhaps the most impactful provision in the bill (Section 301) is a provision that ends the permanent chassis requirement for manufactured homes. Removing this requirement could cut costs, but industry leaders say that the bigger impact is design flexibility, greater acceptance and expanded opportunities in urban and suburban markets — potentially igniting a manufactured housing blue-sky era. 

A lesser-known provision, included in Section 304, extends the $235 million PRICE (Preservation and Reinvestment Initiative for Community Enhancement) Grant Program for another seven years. The program supports the maintenance, protection and stabilization of manufactured homes and manufactured housing communities.

Section 303 updates federal rules to streamline ADU construction and manufactured home financing. This expands loan limits and introduces more flexible financing options for homeowners and buyers.

Section 302, the Modular Housing Production Act, directs HUD to pinpoint and remove barriers that make factory-built housing harder to build. These barriers can include rigid construction draw schedules, Federal Housing Administration (FHA) loan limits, and inconsistent or inefficient state and local building codes. The section instructs HUD to authorize a study on creating a standardized building code. 

The Modular Building Institute, in a statement, pointed to Sections 302 and 303 as positive steps forward for the industry. The organization also praised the potential for a uniform commercial code for modular homes. 

“This section specifically identifies construction draw schedules as a barrier to wider modular adoption. We believe this provision acknowledges the unique nature of modular construction and the need for capital at different phases of a project, as compared with traditional on-site construction,” the statement read. 

Other pro-supply provisions

There are several other provisions aimed at giving developers and builders more tools to work with as they attempt to expand overall housing supply.

Section 104, for example, requires Community Development Block Grant (CDBG) recipients to maintain a public, searchable online database that lists all undeveloped land parcels owned by their jurisdiction.

Section 201 allows HUD to favor grant applicants if the project is located in or primarily serves a designated opportunity zone, which encourage investment in economically distressed areas by allowing developers to defer or reduce their capital gains tax burden. 

Section 210 creates a housing conversion pilot program within the HOME program aimed at converting vacant buildings into housing. Unlike standard HOME adaptive reuse projects, this set-aside offers more flexible income eligibility by serving households earning up to 120% of the area median income (AMI), with the majority at or below 60% AMI.

Section 211 requires the FHA to raise statutory multifamily loan limits for the first time since 2003. It also replaces the old inflation formula with the U.S. Census Bureau‘s multifamily construction price index to keep limits aligned with building costs.

The National Association of Home Builders (NAHB) pointed to this provision as one of the bill’s most impactful for housing supply. FHA-insured multifamily loan limits have gone unchanged for more than two decades and no longer reflect the current market, which is defined by high costs for labor and materials.

Raising these limits and indexing them to inflation would better align financing with construction costs, helping support new apartment development, NAHB argued. 

Incentivizing and guiding state and local governments

The bill aims to use the power of the federal purse to incentivize state and local governments to adopt pro-supply reforms that streamline and ease regulations. 

Section 207 establishes a new competitive grant program created and administered by HUD that would help state, local and tribal governments build affordable housing. It wouldn’t directly fund the physical construction but instead focuses on the planning phase. There isn’t a specific dollar amount assigned to the program yet, but funding could potentially be allocated to municipalities that enact certain pro-housing reforms. 

Section 208 authorized $200 million per year for the Innovation Fund Grant Program, offering municipal grants of $250,000 to $10 million each for housing and community development. Eligibility relies on adopting pro-housing reforms such as eliminating off-street parking requirements and streamlining permitting. 

Section 209 directs HUD to award grants to municipalities to help them create preapproved housing plans, which allow for a quicker and smoother approval process. 

Section 213 adjusts a municipality’s federal CDBG funding, a $3.3 billion program, based on how much new housing supply a community builds. 

Two additional sections direct HUD to provide frameworks for local governments. Section 102 instructs HUD to develop national guidelines and pilot programs covering single-stair multifamily buildings up to six stories. Section 107 calls for best practices that help states and localities cut through zoning and land-use barriers to build more housing.

The limits of federal power

The legislation calls out parking requirements, minimum lot size requirements, density restrictions, inefficient permitting, policies against missing-middle housing, and many other regulations that drive up costs and timelines for housing development.

To address these regulations, the bill aims to engage with local governments by incentivizing, encouraging, coordinating, supporting and recommending. The text rarely uses stronger language like requiring, prohibiting, compelling and mandating. 

This is because local governments still control most of the regulatory hoops that developers and builders must jump through to get projects approved.

Housing is local and passionate residents who are opposed to new housing developments (colloquially known as NIMBYs) have an outsized role in shutting down new housing developments. Many of these people are older, established residents who already own a home and have an interest in keeping property values high. 

But there’s been a shift in recent years as more state and local governments are beginning to view housing affordability as a key issue. Local and state reforms to streamline permitting, expand allowable housing types, and relax minimum lot size and parking rules reflect growing legislative attention to the issue.

While using federal grant funding as leverage can certainly influence local governments, Brady argued that state and local legislators are already feeling constituent pressure to streamline housing development. 

“The local and state governments now understand the crisis of affordability and accessibility. They already have a crisis in their own markets for their own constituents, and the incentives provide them with resources and tools to satisfy that shortage of housing and that affordability,” Brady said. 

NAHB reports that federal, state and local regulations add $131,734 to the cost of a new single-family home. The bulk of these regulations are enacted and enforced on the state and local levels, placing much of the onus on governors, mayors, county executives and planning departments to carry on the momentum generated by the passage of the 21st Century ROAD to Housing Act. 

“I’m optimistic, but it’s going to take the local governments to actually use the tools and resources that this legislation provides for it to be effective,” Brady said.