The 21st Century ROAD to Housing Act, which became law this month, is arguably the most significant federal housing legislation in decades. Its primary goal is to increase the supply of homes, which policymakers believe is the key to making homeownership more affordable over time.
Here are the highlights that matter most to current and future homeowners:
1. Restricts large institutional investors from buying single-family homes
One of the headline provisions limits large corporate investors’ ability to purchase single-family homes in many circumstances.
Potential impact:
- Less competition from Wall Street investors.
- More homes available for individual buyers.
- May help moderate price increases in some markets over time.
This isn’t expected to dramatically reduce home prices overnight, but it could improve inventory in markets where institutional investors have been active.
2. Encourages construction of more homes
The legislation attempts to reduce the nation’s housing shortage by:
- Streamlining permitting.
- Speeding environmental reviews.
- Encouraging local zoning reforms.
- Reducing regulatory barriers that slow development.
More housing supply is generally expected to put downward pressure on prices over the long term.
3. Makes manufactured housing easier to finance
The law modernizes lending rules for manufactured homes and eases restrictions that have limited financing.
This could:
- Expand affordable homeownership options.
- Increase production of lower-cost housing.
- Make financing easier for qualifying buyers.
4. Expands affordable housing programs
The legislation updates several federal housing programs by:
- Modernizing HOME Investment Partnerships funding.
- Improving community development programs.
- Increasing flexibility for affordable housing construction.
While many of these provisions are aimed at affordable housing developers, they can also increase the overall housing supply.
5. Helps preserve existing homes
A new pilot program provides grants and forgivable loans for:
- Home repairs
- Safety improvements
- Health hazard mitigation
This is intended to keep older housing in service rather than allowing it to deteriorate or be lost from the housing stock.
6. Improves financing for apartment construction
The law raises certain FHA multifamily loan limits to better reflect current construction costs.
Although this doesn’t directly help someone buying a home, increasing apartment construction can ease overall housing shortages and reduce pressure on home prices.
7. Provides relief for some rural homeowners
The legislation gives the U.S. Department of Agriculture additional authority to modify certain rural housing loans for borrowers experiencing payment difficulties, helping some homeowners avoid foreclosure.
What it does not do
The law does not:
- Lower mortgage interest rates.
- Create a national down payment assistance program.
- Offer a federal first-time homebuyer tax credit.
- Reduce monthly mortgage payments for existing borrowers.
Mortgage rates will continue to be driven primarily by inflation, the bond market, and Federal Reserve policy rather than this legislation.
Bottom line
The legislation is designed to improve affordability mostly by increasing the supply of homes rather than subsidizing buyers directly. Most experts expect any meaningful effect on home prices to take several years as new housing is built and regulations are implemented, rather than producing immediate savings for buyers.
