Landmark federal housing bill becomes law

The federal 21st Century ROAD to Housing Act became law at midnight on July 11, after the presidential window to veto or sign the bill closed.

The law provides a host of tools to boost housing supply, codify essential federal resources, and modernize federal regulations. The law’s incentives and resources focus on building federal-local partnerships, while not preempting state or local government authority.

The bipartisan law was spearheaded by the U.S. Senate’s Committee on Banking, Housing, and Urban Affairs, particularly Chair Tim Scott of South Carolina and ranking member Elizabeth Warren of Massachusetts. The MMA worked closely with Sen. Warren, the Massachusetts Congressional Delegation, and the National League of Cities to move the bill toward passage.

“We at the MMA are really proud to see this landmark legislation become law,” said MMA Executive Director Adam Chapdelaine. “The ROAD to Housing Act proves that there is overwhelming bipartisan support for a menu of solutions to build more housing supply across the country, while supporting a partnership with municipalities, instead of preempting their authority and voice.

“We’re grateful for the work of our friends at the National League of Cities and the strong leadership of Sen. Warren and the entire delegation to make this bill a reality for our cities and towns.”

The law provides new flexibilities for the use of Community Development Block Grant funds by allowing them to be used directly in new housing construction. The law also creates a three-year authorization for the CDBG-Diaster Recovery program, helping to improve the efficiency of housing-related recovery aid following a disaster.

The law also slightly revises CDBG allotments, designed to tie a small percentage to housing production measured over five years. Communities that exceed the median Housing Growth Improvement Rate would receive bonus funding of up to 10% of their allocation, while those that fall significantly below the median will see their allocation reduced by 10%, with exceptions for municipalities with low-cost and high-vacancy areas.

The ROAD to Housing Act includes funding for new grants and pilot programs aimed at boosting local and regional housing plans. These include $200 million in grants to local governments to implement planning and community development initiatives, and $200 million for a competitive Innovation Fund for local governments that have demonstrated measurable increases in housing supply.

There is additional funding for a new Whole-Homes Repair program to support local homeowner and landlord repair programs, and additional investments and updates to the HOME Investment Partnerships Program. Additionally, new flexibilities in both the Innovation Fund and the HOME program will allow for spending toward infrastructure investments and supplementing water and sewer needs.

The law streamlines National Environmental Policy Act reviews by aligning standards across agencies and allowing for exemptions for certain development projects. This includes exempting most Rural Housing Service-funded projects from NEPA requirements on construction or modification of housing located on infill sites.

Beyond the NEPA exemption, the law has additional benefits for rural and small communities, including setting aside 10% of the Accelerating Home Building grants — for local governments to select and implement pre-reviewed housing designs — specifically for rural areas.

The law makes changes to the U.S. Department of Agriculture’s Rural Housing Service program, including permanently establishing the Housing Preservation and Revitalization program for multifamily rental housing. The law directs the U.S. Department of Housing and Urban Development and the USDA to coordinate and streamline implementation of their respective programs so that rural areas will receive their funding more quickly and with less of an administrative burden.

The law aims to unlock additional private capital by raising the cap on public welfare investments by banks, such as for affordable housing and community development projects, from 15% to 20%.

The law limits the number of single-family homes that can be owned by large institutional investors, but creates exemptions for those seeking to purchase or build and then rent single-family homes, requiring that they then be sold to individual homeowners after seven years.

The law also directs HUD to create an advisory group, including local officials, to help develop best practices and frameworks for zoning and land-use policies, while avoiding mandates and preemption of local governments.

Agencies will need time to prepare these programs, and full implementation of the law is expected to take several years.