One of the most comprehensive pieces of housing legislation in decades just became law. But if you’re waiting for home prices to come down as a result, it could be a long time.
In a rare display of bipartisanship, legislators in both chambers overwhelmingly approved the 21st Century ROAD to Housing Act in late June. President Donald Trump abruptly canceled a signing ceremony on June 24, but under the Presentment Clause, the bill automatically became law at midnight on Saturday.
The landmark law was years in the making and combined input from mortgage lenders, home builders, housing advocates, property appraisers and others. The goal? To craft a piece of housing legislation to increase housing supply and, in turn, improve affordability.
Housing experts were nearly unanimous in support of the 21st Century ROAD to Housing Act. Among the most talked-about provisions were those that streamline rules and regulations for homebuilding and encourage housing development. This is crucial because adding more homes for sale has long been identified as the primary way the market could lower home prices.
But building homes and adding supply still takes time, and would-be buyers shouldn’t expect an immediate improvement in affordability.
Jeremy Ray Davis, president of mortgage at Southern Bancorp, a community development financial institution, says the legislation was designed to address some of the underlying causes of the homebuying roadblocks currently being experienced. It was not supposed to instantly lower prices.
“That’s significant because we didn’t arrive at today’s affordability challenges overnight, and we won’t solve them overnight either,” Davis says. “For most markets, I view this as a multiyear affordability strategy rather than a short-term affordability solution.”
While the majority of the law focuses on improving supply over time, it also addresses another important aspect of the housing crisis: providing underserved communities with greater access to home and financing options.
How the ROAD to Housing Act impacts accessibility
The affordability crisis has had a severe effect on low- to median-income families and first-time buyers. With no equity to count on for a down payment or income high enough to afford the current median home price of $403,000, many of these households have been pushed out of the market.
Tia Boatman Patterson, president and CEO of the California Community Reinvestment Corporation, points to provisions in the bill that enable and encourage modular and manufactured housing, which are energy-efficient and can be built faster and more economically at scale. (Think: houses that are prebuilt at a factory and assembled on-site and homes that can be trailered to different locations.)
Incentivizing alternative homebuilding techniques can increase housing supply faster and at a lower price point than traditional ones.
“We’ve been building housing the same way for over 200 years,” she says. “Bringing some modernization and innovation to that is going to be extremely helpful.”
The ROAD to Housing Act’s elimination of the chassis requirement, in particular, can make manufactured housing even more affordable. Since 1974, these homes have been required to have a chassis, a feature that is intended to provide stability when the home is moved.
This requirement means that lenders consider these homes to be personal property rather than real estate. Manufactured homes can’t be financed with traditional mortgages; they must be financed with chattel or personal loans, or some other form of financing, usually at a higher interest rate than a home loan.
Eliminating the chassis requirement also helps improve affordability by lowering the price of a manufactured home by $5,000 to $10,000.
Other provisions in the ROAD to Housing Act address small-dollar mortgages, generally defined as loans of $70,000 or less. The law authorizes the Department of Housing and Urban Development to establish a pilot program expanding access to FHA-guaranteed mortgages to loans of up to $100,000 — the price range that many moderate-income households seek.
The ROAD Act also requires the Consumer Financial Protection Bureau to review and revise the fee structure for these smaller loans and amend any regulations that increase costs and discourage lenders from offering them. According to Vishal Garg, CEO of mortgage lender Better, expanding and reviewing these smaller loans is important, since many lenders opt not to originate them due to their low profit margin.
“What’s great about this bill is it asks regulators to revisit the rules that make those loans uneconomical,” Garg says. “That matters, because many buyers at the lower end of the market have been shut out by this math, not by credit.”
