Rare bipartisan housing bill just became law — but Americans will still struggle with affordability

As sweeping as the new federal housing law is, its impact is likely to be modest. (Photo by Ilia Yefimovich/Picture Alliance via Getty Images)

A sweeping housing measure, which became law on July 11, is being widely celebrated as a crucial step in addressing the nation’s housing crisis. The ROAD to Housing Act is one of the few substantive bills passed by Congress in recent years, and the first major housing bill enacted since the 1990s.

Despite clearing Congress with overwhelming margins in the Senate and the House, the measure encountered one final hiccup when President Donald Trump abruptly canceled its signing ceremony on June 24, and then again refused to sign it on July 10. However, since Trump did not veto the bill, it automatically became law at 12:01 a.m. on July 11.

Despite the bipartisan support, however, even supporters say it doesn’t do enough to ease America’s housing affordability crunch.

Many of the 60 provisions in the wide-ranging bill are regulatory in nature, such as streamlining environmental impact reviews and reducing the frequency of inspections for homes with tenants receiving federal rental assistance. Others seek to make it easier for homebuyers to acquire financing.

These elements and more could help move the needle on the nation’s housing morass.

But as housing policy scholars, we believe the improvements will be only marginal. That’s because the reforms do not address the main source of the nation’s housing problem: that millions of renters and homeowners lack the income necessary to cover their housing costs.

Promising changes

The bill does include several important reforms.

The provision that has received the most attention limits the ability of private equity firms and other institutional investors to acquire and operate single-family homes as rental properties.

Although institutional investors account for about 2% of all single-family rentals nationally, they have a bigger presence in certain housing markets, mostly in the South. These firms will typically purchase homes in cash, disadvantaging individual homebuyers who need to take out a mortgage. They’ve also been known to more aggressively raise rents and initiate eviction proceedings than other landlords.

The legislation also includes several measures aimed at reducing home prices and increasing housing supply.

One reduces the cost of manufactured housing – often known as mobile homes – by eliminating the requirement to include a steel chassis that can be attached to wheels. This is expected to reduce building costs by around US$5,000 to $10,000, or about 4% to 8% of the average cost of a new unit.

Other cost-saving elements include streamlining environmental reviews for proposed housing developments and encouraging new designs for midsize apartment buildings that would allow for just one stairway. Fire safety regulations have long required multifamily buildings to contain two or more staircases so that residents can exit their homes safely if one staircase is impassable because of smoke or other reasons.

However, improvements in fire safety have largely eliminated the need for the second staircase in midsize buildings. By eliminating the two-stairway requirement, developers can reduce their construction costs and have more flexibility in their architectural designs.

Another component requires the Department of Housing and Urban Development to issue guidelines and “best-practice frameworks” for zoning and land-use policies, presumably to nudge cities and towns to allow developers to build smaller homes on smaller lots.

To further facilitate housing construction, the bill requires local governments that receive federal funding for community development to publish a “searchable online database of undeveloped land parcels,” which is intended to make it easier to identify potential low-cost development sites.

The bill also encourages the Federal Housing Administration and other lenders to issue “small dollar mortgages” of less than $100,000. Currently, when low-priced homes are available, it can be difficult for interested homebuyers to obtain financing because it is more profitable for lenders to underwrite larger mortgages.

Finally, the law reauthorizes for three years the Community Development Block Grant Disaster Recovery program. This program helps cities, counties and states recover from disasters declared by U.S. presidents, focusing on low- and moderate-income households.

While most of the legislation focuses on homeowner housing, a couple of provisions address important challenges for subsidized rental housing. One seeks to encourage landlord participation in the Housing Choice Voucher Program by making it easier for landlords to satisfy the federal government’s housing inspection requirements.

Another provision helps protect low-income rural renters from losing their homes when the federally funded mortgages on their buildings expire. Currently, these rent subsidies, which are provided by the Department of Agriculture, can only be used in the buildings it finances. Many of these mortgages are due to expire over the next few years, putting residents with rental assistance at risk of eviction. The legislation will enable these households to remain in place or move to other buildings without federally funded mortgages.

Americans are still being crushed by costs

Yet as sweeping as the bill is, its impact is likely to be modest.

Nearly all of the legislation involves regulatory changes. The bill does not increase subsidies available to low-income renters and homeowners, or to potential homebuyers.

The majority of all renters are cost burdened, meaning they currently spend more than 30% of their income on housing. Over a quarter of all homeowners are cost burdened, too. The legislation almost certainly will not diminish this affordability crisis.