21st Century ROAD to Housing Act Reshapes Federal Housing Policy

New Housing Legislation Aims to Transform Federal Housing Policy

This month, the 21st Century ROAD to Housing Act was signed into law, representing a significant shift in federal housing policy aimed at addressing the ongoing housing crisis. This bipartisan initiative impacts a wide range of stakeholders, including institutional investors, those involved in manufactured housing, and veterans seeking assistance. A key feature of the act is the newly granted flexibility for local governments in how they utilize federal grants, providing them with both financial incentives and penalties related to housing production.

With zoning and land use largely determined by state and local authorities, this legislation empowers municipalities to leverage federal block-grant funding for the first time to finance affordable housing construction. Ben Harrold from the National Apartment Association noted, “The federal government is going to give you a whole lot of carrots, a whole lot of support, and just a couple sticks, in order to encourage these communities to start building more housing.” This emphasis on incentivization is expected to accelerate local housing development initiatives.

The law, which passed with bipartisan support despite a divided Congress, does not involve a large influx of new funding. Andy Winkler from the Bipartisan Policy Center highlighted that the act comprises multiple smaller provisions that together could significantly shape the housing market. According to Mark Kudlowitz of the Local Initiatives Support Corporation, the law simplifies the process for municipalities to access existing federal housing funds, allowing local leaders to allocate resources strategically to improve housing availability.

Key Components of the Legislation

One of the pivotal changes introduced by the 21st Century ROAD to Housing Act is its modification of the Community Development Block Grant (CDBG) program. Traditionally used for infrastructure and economic development benefiting low-income households, the grants can now be directed towards affordable housing construction. Cities failing to meet certain construction benchmarks may see their funding reduced, a measure intended to stimulate local housing development.

Under the new Build Now provision, CDBG funding is linked to housing growth rates. Communities that see significant housing development will be rewarded, while those lagging behind may face funding cuts. Areas experiencing low rental rates, high vacancy levels, or those recently impacted by disasters are exempt from this provision. David Garcia from UC Berkeley’s Terner Center remarked, “This goes even a step further from other programs, which provide money to cities and states to just do reforms. This is actually tying money to outcomes.”

Concerns have arisen regarding the Build Now provision, with some advocacy groups warning it could create unpredictability in funding. Jared Grigas from the National Association of Counties acknowledged that while this provision might encourage local governments to reform zoning, it could lead to funding challenges in the future. The new funding stipulations will take effect in fiscal year 2029, allowing localities time to adapt to the changes.

Implementation Challenges Ahead

As the implementation of this new law begins, the U.S. Department of Housing and Urban Development (HUD) faces a considerable challenge. Funding for HUD's staffing has been reduced by 24% in fiscal year 2026, raising questions about its capacity to manage new programs such as the Innovation Fund and Build Now initiatives. Andy Winkler emphasized the need for efficient implementation of these provisions, while Pomponi expressed concern that HUD may struggle with its workload amid these staffing cuts. Despite these hurdles, cities like Hartford are actively seeking innovative housing solutions, including converting vacant buildings into residential spaces.