Congress delivers on housing reform

Key Takeaways

On June 23, Congress passed a landmark housing reform package, the 21st Century ROAD to Housing Act, following nearly 18 months of stakeholder engagement, bill drafting and bicameral negotiation. This marks the most comprehensive federal housing legislation in more than three decades and reflects thoughtful feedback from county stakeholders. It became law July 11.

The bill’s passage represents a timely response from Congress, coming against the backdrop of a housing affordability crisis felt in communities across the country. Early in the 119th Congress, members displayed a rare level of consensus on tackling housing costs. This showed in the bill’s initial markup in the Senate Committee on Banking, Housing and Urban Affairs: not only did the bill pass with unanimous support, but every member also contributed at least one section. The House Financial Services Committee’s own vision for housing reform similarly passed with overwhelming support. 

Still, at times, the legislation’s path forward seemed uncertain. Between complex policy disagreements, delicate bipartisan truces and only so many days in a crowded congressional calendar, there were moments when the bill appeared to be on life support. 

Through it all, the county message stayed the same. First, that housing is one of the best investments a community can make. Access to stable, high-quality housing makes for healthier, more productive residents, safer, more connected neighborhoods and reduced strain on public services. And second, that counties are uniquely positioned to understand and meet the housing needs of their community. As on-the-ground administrators of key housing programs, who also guide broader development through land use and planning tools, counties have as much to gain (or lose) as any stakeholder. 

In March, the Senate touted a new hybrid package, marrying its ROAD to Housing Act with cherry-picked sections from the House’s Housing for the 21st Century Act. They also earned the White House’s blessing by targeting private equity and other institutional investors’ activity in the single-family home market. This left the House with a decision to make —  accede to the Senate’s changes or risk threatening the bill’s fate by amending it. 

The balance of power shifted again when the House passed its own amended bill — winning both the White House and the construction industry’s favor with a pared-back version of the Senate’s “institutional investor” ban. This “old school” approach to lawmaking of incremental concessions between committee leaders went back and forth until late June, when the chambers reached a true bipartisan, bicameral compromise. 

Ultimately, the final product is something that counties can celebrate. Unlike landmark housing bills of the past, the bill contains no singular flagship program—the bill sponsors themselves have often remarked that there is no silver bullet to cure our housing crisis. Instead, what we have been given is a holistic suite of tools that enhance the local housing response rather than micromanaging it. 

Some of the most impactful changes for counties include: 

• Streamlined access to critical disaster recovery funding: the three-year standing authorization of the Community Development Block Grant – Disaster Recovery (CDBG-DR) program will allow counties to access critical recovery funds and begin rebuilding sooner, rather than waiting on supplemental appropriations. 
• HOME program expansion: As frontline administrators of the Home Investment Partnerships (HOME) program, counties rely on these funds to meet the demands of renters and homebuyers alike. Communities with workforce housing gaps will benefit from raised income thresholds, while those with limited funding streams for community development will benefit from expanded uses for neighborhood infrastructure. 
• New local grant programs: the bill authorizes a new innovation fund for high-performing counties to promote housing growth, as well as regional planning grants and a program to restore abandoned homes. It is important to note that the bill was “budget-neutral” by design. Therefore, these programs remain unfunded for the time being and will require additional action from Congress to set spending levels. 
• Key financing tools: the bill raises banks’ “public welfare investment” cap from 15 percent to 20 percent, allowing for greater equity investments in projects such as affordable housing. Many banks were previously approaching this regulatory cap, limiting the usefulness of tools like the Low-Income Housing Tax Credit. 
• Rural renter protection: the bill decouples Rural Housing Service subsidies from maturing RHS mortgage loans, effectively preserving rental assistance for more than 400,000 rural renters. 
• Thoughtful approach to institutional investors: limits to private equity’s activity in the housing market enjoy broad public support as a way to keep families and first-time buyers competitive. However, when the Senate released their initial language, counties raised operational concerns with a requirement for institutional owners of detached rental properties to divest within seven years: namely, that rental households who could not afford to purchase their home may be displaced, and that local governments may encounter administrative headaches when trying to subdivide a master parcel that was never intended for single-family use. The two chambers’ compromise removed this requirement, reflecting key feedback from counties and industry stakeholders. 

Counties should appreciate these reforms both at face value and as a broader signal of program credibility going forward: Congress wants to invest in programs that have been thoughtfully reviewed and have evolved to meet modern needs. These changes will hopefully pay dividends when discussing the future spending levels of key programs. 

While counties’ advocacy delivered these key wins, there are also several regulatory changes and cost mandates to be aware of: 

CDBG allocation changes: the legislation’s Build Now Act would tie Community Development Block Grant (CDBG) formula funding to local housing growth. Higher performing grantees will be eligible for small bonus payments, funded directly from penalties to lower-performing grantees. While some counties expressed concern about the impacts to multi-year projects, NACo estimates that the universe of grantees subject to Build Now will be small thanks to a series of exemptions for disaster recovery, limited zoning authority, and narrow supply and demand criteria. 

Public land database: CDBG entitlement grantees will also be required to maintain a public database of undeveloped land owned by the jurisdiction. Grantees may use CDBG funding to meet this requirement. 

Model zoning frameworks: the bill directs the U.S. Department of Housing and Urban Development to develop a series of best practices for states and local governments to promote housing growth. While these guidelines would not have the force of law, they may present a blueprint for state-level preemption. 

While counties should not overlook these changes, the bill as a whole represents remarkable buy-in from the federal government and places a great deal of trust in local housing administrators. Though there is always more work to be done, this legislation marks a promising step in securing a stable home for many within our communities. 

With congressional passage secured, counties will soon turn their eye to implementation.