A bipartisan bill aimed at increasing the U.S. housing supply and improving affordability has passed, but experts say home buyers and sellers shouldn’t expect quick relief.
The 21st Century ROAD to Housing Act automatically became law on Saturday after President Donald Trump failed to sign or veto it in time. The law combines dozens of housing measures aimed at spurring home construction, expanding access to financing, and restricting purchases by large institutional investors.
Bill Owens, president of the National Association of Home Builders, said in a statement after the bill passed Congress on June 23 that the bill “will help expand the nation’s housing supply by reducing regulatory barriers and encouraging local governments to reform the zoning and land use policies that limit home construction.”
Housing affordability continues to worry buyers
The new law comes at a time when housing affordability remains challenging. Home prices are near record highs, and 30-year fixed mortgage rates continue to hover above 6.5%.
The median price of existing homes in the U.S. reached $440,600 in June, an increase of 49.2% from June 2020, according to data from the National Association of Realtors. There’s also an estimated housing shortage of about 4 million units, according to Realtor.com.
“This bill directly targets some of the biggest drivers of housing costs, including land-use restrictions, permitting delays, financing constraints and regulatory hurdles,” said Thelma Hepp, chief economist at real estate data firm Cotality.
“Unfortunately, homebuyers should not expect immediate relief,” Hepp said, adding that “housing development takes time and many of the benefits are likely to be realized gradually rather than overnight.”
Restrictions on home purchases for institutional investors
David Paul Morris | Bloomberg | Getty Images
Among the many technical and policy changes in the new law, there are several provisions that are likely to be the most important to consumers.
A key provision prohibits large institutional investors that own at least 350 single-family homes from purchasing additional single-family homes, with some exceptions. These exceptions include certain build-to-rent and renovate-to-rent projects, as well as programs that help renters build credit and eventually purchase a home.
Supporters argue the measure could help limit competition from large corporate buyers in some housing markets, particularly in some parts of the Sunbelt region where institutional investors have been blamed for soaring home prices. But economists say institutional buying activity remains relatively light even in many of these markets.
Broad definition of “housing”
Another provision aims to reduce barriers to homeownership and encourage widespread use of factory-built housing, which is often one of the cheapest paths to homeownership.
Specifically, the bill expands the federal definition of a “manufactured home” to include homes built without a permanent steel chassis, metal frames during manufacture, and mobile homes that can be easily transported by tow truck. But few homes are relocated after installation, according to the Lincoln Institute for Land Policy.
Among other things, the chassis requirement could reduce the cost of manufactured housing by $5,000 to $10,000, which could make homeownership more affordable for more families, according to the Niskanen Center, a nonpartisan think tank.
Pilot program aims to make small mortgage loans available
The bill also creates a four-year pilot program to expand the availability of small mortgage loans (under $100,000), which some lenders have shied away from due to compliance costs. Proponents argue that improving access to small loans could help buyers in lower-cost markets and those buying less expensive homes.
The pilot program includes paying subsidies to lenders to originate these small mortgages and providing subsidies to borrowers for down payments and closing costs.
John Walkup, co-founder of Urban Digs, a New York City real estate price intelligence platform, said that overall, the bill could help housing supply “more marginally and certainly not overnight.”
Walkup said housing supply is ultimately a regional issue.
“Complex calculations involving construction costs, labor availability, land prices, infrastructure constraints, local zoning rules, and community opposition will determine how much housing will be built,” he said. “Laws can help create incentives and remove barriers, but they alone cannot solve the housing shortage that has been going on for years.”
President Trump canceled a June 24 bipartisan bill signing ceremony hours before the event and said he would not sign the bill until Congress passed the Republican-backed SAVE America Act, which would require proof of U.S. citizenship for voter registration. The move caught lawmakers from both parties by surprise and delayed enactment of the bill.
House Speaker Mike Johnson (R-Louisiana) sent the housing bill to the White House on June 29, starting the clock for the president to take action. After 10 calendar days, excluding Sunday, the bill became law without the president’s signature, as President Trump did not veto the bill or sign it.
