This July, Congress passed the most sweeping bipartisan housing legislation in a generation: the 21st Century ROAD to Housing Act (ROAD). ROAD provides various policy and regulatory tools to help cities build, repair, and finance homes faster—and at a lower cost. ROAD is not a spending bill, and its long-term success will depend on future appropriations from Congress. Irrespective of this, the policy provisions in the law have potency and steer the law’s benefits toward jurisdictions that produce more housing.
The bill’s authors acknowledge that it is on cities and states to implement the reforms they just passed in ROAD to Housing. The National Housing Crisis Task Force, where we both spend a lot of time, has recently released two guides to help local leaders with this task: one for city leaders and one for state leaders seeking to modernize the construction industry using the Bill’s provisions.
Amidst the pragmatic guidance, both of us have been reflecting on what ROAD means in the context of how federalism works in the United States, particularly for housing —and more broadly for economic development.
Three reflections in turn.
1. An old-school federalist circuitry made anew
ROAD is a lesson in the federalist circuitry of policy innovation. In some ways this bill is oddly old school. There is a long and storied history of the federal government scaling proven state and local innovations for national impact. In many respects, Obamacare was the national expression of Romneycare. Closer to housing’s policy domain, the creation of thousands of public housing authorities in the aftermath of the 1937 Housing Act followed New York City Mayor Fiorello LaGuardia’s incorporation of the New York City Housing Authority (NYCHA) in 1934.
ROAD embraces this federalist circuitry, something rare for Congress to do these days. It identifies state and local policy innovations that are working (from whole home repair in PA, to single stair reform in MI and WA, to public land activation in Atlanta, to the land use reforms emerging in states and cities that the bill incentivizes) and creates federal laws that either (a) directly mirror these policies on a bigger scale; or (b) reward additional jurisdictions for undertaking these policy reforms.
There is a lesson here: in our view, we’re in another “Romneycare to Obamacare” or “LaGuardia to Nation” moment for housing. After years of kicking the can down the road, elected officials in both political parties at all levels of government are scrambling to respond to voter unrest, making this an issue characterized by unusual bipartisanship and consensus. The housing crisis is generating a burst of policy and practice reforms to liberalize land use, expedite permitting, innovate construction methods, apply disruptive technologies and generate new pools of federal, state, local, private and philanthropic capital.
ROAD only scales a portion of the state and local innovations that are bubbling in the country. We are particularly struck by the scaling possibilities of institutional innovations (e.g., Atlanta’s Urban Development Corporation and other Public Asset Corporations) and capital innovations (e.g., Housing Accelerator Funds, Revolving Loan Funds, starter home production funds, and philanthropic concessionary investment) that are underway. As these innovations prove themselves out, we could see an interesting federalist circuitry emerge: not a 1:1 copy and paste but rather a set of actions to structure incentives for more states and localities to adapt what first mover communities have done. This presents, in some ways, a different model of federalist policy development and scaling — which for housing (and certain other areas of domestic economic policy) may inform new and effective ways of getting results.
2. New pathways for implementation at speed
The traditional path for implementation of federal legislation runs through federal agencies. Agencies promulgate rules to set national standards and states and localities follow. In other words, “wait for the regs.”
The implementation of ROAD will be different. As others have documented well, for ROAD there is a lot (125 actions, most of which are HUD’s) that the federal government must do and this will take time. The key federal agencies are vastly distracted and under capacity. This turns the typical “implementation” process on its head. It will take a while for HUD and other agencies to promulgate rules and for Congress to appropriate funds (one need to look no further than HOTMA, the last major housing authorizing legislation passed in 2016 which will only be fully in effect in January 2027 to temper their expectations here).
ROAD is different because states and localities do not need to wait to act. The law’s key competitive programs (like section 208, the innovation fund) are based on measured growth in housing supply –which requires both policy action and clear and consistent local tracking. Likewise, many of the programs and rule changes ROAD makes –from manufactured housing rule changes to public land documentation to environmental review streamlining—require local action to see the full benefit. This action can take place before the federal program exists.
The playbooks and guides the Task Force just released show a plethora of actions that cities, states, and their private partners can take now — often drawing from the best practices that local leaders have been deploying around the country. This approach is consonant with the urgency of the challenge.
For example, the recent guide for local leaders suggests that (among other actions) they:
- Create a Housing Strike Force modeled off of Atlanta’s successful effort to measure, prioritize, and coordinate local housing production to maximize ROAD’s impacts and drive the urgency and success of the complementary actions listed below.
- Build and maintain a public inventory of city-owned land that could be viable for housing, starting as soon as possible to ensure continued access to certain federal funding flows — and then begin working to activate that land through municipal property advisors and public asset corporations.
- Update local zoning and land use rules to redefine factory-built homes and allow them in more places to prepare for new low-cost housing types — a further guide provides some potential language for code updates
- Position the city to be first in line for the upcoming competitive programs that ROAD created by updating local codes, rules, and permitting processes within city control — examples of best practice zoning and code updates can be found here.
3. Show Us the Money
One of ROAD’s primary insights is that streamlining rules can cut costs of housing. This allowed it to shift the conversation from traditional fights over levels of appropriations funding to conversations about driving down production costs to expand the pie of funding available for homes. That is new for the federal government. But it also belies a more fundamental point: someone’s gotta pay to build homes.
In our view, the private sector will drive a large portion of new capital. ROAD, to its credit, makes that more likely through its provisions that both change the rules to open markets for new construction technologies and catalyze more community development financing. Namely:
- The Chassis Rule: Section 301 ROAD removes the chassis rule for manufactured housing. This enables whole new markets to be unlocked for factory-built housing, which can be financed and built through the private market, provided the rules are written correctly and state rules are permissive. Read more about the implications of this change here and here.
- Public Welfare Investment Cap: section ROAD increases the public welfare investment (PWI) cap on banks from 15% to 20%. This change is estimated to unlock billions in private investment into CDFIs, New Markets Tax Credits, and LIHTC equity.
- FHA Loan Limit Increase: Section 211 of ROAD increases the maximum loan limits across FHA’s multifamily lending programs (widely used by apartment builders, including for market-rate buildings) and adjusts these programs for inflation going forward. As we and other have written these lending programs like 221(d)(4) are very successful products for drawing private financing into housing.
States and localities, as well as financial institutions and philanthropies, can also step up, as they are starting to do — which we have documented in Philanthropy in Housing: Past, Present and Future – The New Localism.
But let’s be real. Some of the most exciting programs in the bill need appropriations to incentivize states and cities. And that will be a heavy lift.
Bottomline: the success of ROAD did not end with the enactment of authorizing legislation. Congress must finish what it started and fund key provisions as quickly as possible. In particular, funding for some of the incentives for local reform is high leverage and a big deal:
- The Innovation Fund (Sec 208): ROAD authorizes a $200 million fund to drive production outcomes from a named set of local land use reforms (which taken together will leverage private funding to build new homes). However, the bill does not appropriate any funding for this fund.
- Pilots for single stair apartments and preapproved plans (Sec 102 and 209): ROAD authorizes two pilots at HUD. The first requires HUD to establish guidelines for single-staircase apartments and allows the agency to create a competitive grant program to implement; the second creates a competitive grant program to fund pre-reviewed designs for duplexes, triplexes, fourplexes, townhouses, and similar small structures. These programs do not yet have rules or funding.
- Planning and implementation grants (Sec 207): ROAD directs HUD to establish a competitive planning grant program for states, cities, counties and regional planning agencies to fund capacity to implement local reforms. It currently does not have any appropriated funding.
Where next?
Each of our observations inform where we go from here. We see the period post ROAD’s passage as one fertile for state and local innovation, harnessing the federal platform to experiment and build new solutions and homes — across land use, zoning, public assets, construction innovation, disaster preparation/recovery, and ways to repair our nation’s crumbling housing stock.
The genesis and driving thesis of the National Housing Crisis Task Force is that the housing crisis needs to be treated like a crisis and that it requires not only a federal set of actions or a public set of actions, but rather a response that harnesses the full energies of the country to address a fundamental challenge to the nation’s economic life. The implementation of ROAD — not just federally but across the country — is a test case for states and localities to embody this principle.
Colin Higgins is Executive Director of the National Housing Crisis Task Force. Bruce Katz is the Founder of New Localism Associates and a Senior Advisor to the Task Force.