The Success of the New Federal Housing Law Now Rests on States and Localities

The 21st Century ROAD to Housing Act, enacted on July 11, marks the first comprehensive federal law in decades designed to increase homebuilding. The bipartisan package contains more than 50 provisions designed to boost housing production by streamlining federal rules and directing new funding, incentives, and technical assistance to states, localities, and tribes that modernize their housing policies. 

Across the country, state and local pro-supply reforms are already bearing fruit. Austin, Texas eased zoning for accessory dwelling units (ADUs) and apartments, streamlined permitting restrictions to allow more homes near jobs and transit, and implemented other initiatives to allow more homebuilding. These reforms added 120,000 new homes between 2015 and 2024. As supply increased, the city’s median rent fell from $1,546 in 2021 to $1,296 by 2026, even as the population grew. Other cities, including Minneapolis; Raleigh, North Carolina; and Spokane, Washington, have enacted similar reforms, as have states including Montana, Texas, Maine, and Washington. 

21st Century ROAD scales these state and local lessons nationwide, and ties federal dollars to future reforms. The law’s provisions include grant programs that support state and local efforts to construct new homes and restore existing ones, among other policy changes. Congress still needs to appropriate funds for many of the law’s programs, and federal agencies must issue regulations and guidance — but jurisdictions that begin to update their zoning, building codes, and permitting policies now will be best positioned to win new funding and capture the opportunities the law creates to address the housing shortage and deliver more affordable homes.

States, localities, and tribes should prioritize: 

• Modernizing zoning, permitting, and building code regulations. Outdated laws and rules are blocking and raising the cost of townhomes, apartments, ADUs, manufactured homes, duplexes, and other, more affordable homes. 
• Certifying to HUD that state laws and regulations treat all manufactured homes — with or without a chassis — with parity. This certification allows changes to the federal manufactured housing code to take effect in that state, lowering the cost per home by thousands of dollars.
• Positioning themselves to win federal grant dollars by implementing results-based reforms that make it easier to build homes of all shapes and sizes – while making housing more affordable for their residents now.

Grant programs to incentivize new and innovative home-building

The following parts of the law support states and localities’ efforts to build more homes of all types: 

• Carrots and sticks to allow new homes in expensive places (Section 213): This provision incentivizes homebuilding in the most constrained and expensive metro areas by allocating additional Community Development Block Grant (CDBG) funds to jurisdictions that add new homes, while reducing funds for those where home construction lags the median growth rate of their peers. High-demand jurisdictions that modernize zoning, building codes, and permitting policies to allow more homebuilding will be best positioned to benefit. New Rochelle, New York, represents a model for others to follow: by allowing the construction of more apartments near its downtown train station and streamlining permitting, the city added housing at more than double the national rate from 2017 to 2021, and inflation-adjusted rents fell 13% from 2017 to 2023. Under the Build Now Act, such reforms would be rewarded with additional CDBG funding.
• Funding to encourage regulatory reform (Section 208): This provision authorizes grants to encourage localities to adopt results-based, pro-supply reforms. Jurisdictions that implement pro-housing reforms that result in new homes — such as allowing apartments, ADUs, or manufactured housing by right; revising parking mandates and minimum lot sizes; and streamlining permitting, environmental review, and code enforcement — would receive flexible funding for local needs. 
• Preapproved plans (Section 209): This provision would provide grants to help localities and tribes create preapproved building plans, cutting months off permitting timelines by allowing homebuilders to use designs the jurisdiction has already approved. South Bend, Indiana, found that homes permitted and built through its preapproved plans saved $5,000 to $10,000 per project.
• Federal guidelines and grants for “single-stair” apartment buildings (Section 102): This provision directs the Department of Housing and Urban Development (HUD) to develop guidance for single-stair apartment buildings, which are compact, less expensive to build, and enable family-friendly apartments. The provision also authorizes competitive grants for jurisdictions to test the safety and cost-effectiveness of these buildings. Beyond their increased affordability, there is strong evidence that single-stair buildings up to six stories are as safe as other housing, and the new apartment buildings this building code innovation enables are drastically safer than the older homes they typically replace. States and localities don’t need to wait: Colorado, Montana, New Hampshire, and Texas all recently legalized single-stair apartment buildings, joining Seattle and New York City, where they have long been permitted.
• Grants for housing in Opportunity Zones (Section 201): This provision allows HUD to prioritize competitive housing grants for projects located in or primarily serving low-income communities designated as Opportunity Zones, where certain forms of investment qualify for tax incentives.

Grant programs to support home repairs and upgrades

21st Century ROAD also authorizes grant programs to help lower-income Americans repair and improve their homes.

• Home repair grants (Section 202): Nearly 49 million homes need repairs, most costing less than $10,000 but still beyond the reach of many homeowners. This provision authorizes a pilot grant program that state and local governments could use to help low-income homeowners and landlords pay for accessibility, habitability, safety, and energy and water efficiency repairs and improvements. Pennsylvania and Maine have created similar initiatives to help residents remain safely and affordably in their homes. 
• Support for manufactured homes (Section 304): This provision reauthorizes the PRICE grant program that allows local governments, housing authorities, tribes, nonprofits, and resident-owned communities to fund repairs and infrastructure and utility upgrades in manufactured home communities. 

Actions state and local governments must take

21st Century ROAD creates new obligations that states and localities must meet in order to benefit from federal regulatory reforms that will support building more housing.

• Certify parity for manufactured housing (Section 301): To benefit from new flexibility removing the burdensome chassis requirement from homes built using the federal manufactured housing code, states must certify to HUD that their rules treat manufactured homes with and without a permanent steel chassis (necessary for delivery but redundant afterward) equally. Removing the federal chassis requirement will lower construction costs by thousands of dollars per home and facilitate the construction of duplexes, triplexes, fourplexes, and multi-story buildings using off-site construction.
  
  Most states will need to amend their statutes for this reform to take effect, because many use definitions of “manufactured home” that specify a permanent chassis. HUD will release guidance for the certification process, and states that amend their laws now will be best positioned to certify on time. Amending the definition is also an opportunity for states to take broader action, such as preventing localities from banning manufactured homes, titling manufactured homes as real property, and reforming minimum lot sizes, to unlock this especially affordable housing type. Kentucky and New Hampshire have taken action on local bans and property titling, and localities such as Atlanta, Georgia; Knoxville, Tennessee; San Bernardino, California; and many across New York state are already using manufactured housing to quickly and affordably increase housing supply.
  
• Create a database of publicly owned land (Section 104). CDBG grantees must now maintain a public, searchable database of undeveloped land owned by the jurisdiction and can use CDBG funds to create it. A well-built land inventory can serve as a tool for identifying sites suitable for new housing, as illustrated in Chicago, Philadelphia, and Rochester, New York. 

New flexibilities that can help jurisdictions increase housing 

21st Century ROAD creates flexibilities in existing federal programs and their requirements for states and localities.

• Streamlining environmental review (Sections 205, 206, and 501): These provisions allow low-impact housing that is unlikely to pose environmental risk — such as homes on previously developed land — to either bypass or undergo simplified federal environmental review, reducing delays and costs. California and New York State have already enacted reforms exempting new housing in developed areas from state-level environmental review, and New York City expects to save as much as $82,000 per home through the state’s reforms.
• Expanding Rental Assistance Demonstration program (Section 212): This provision permanently reauthorizes and expands the Rental Assistance Demonstration (RAD) program, allowing public housing authorities to rebuild aging public housing. Expanding local authorities’ ability to convert units to long-term, project-based Section 8 contracts unlocks debt and tax credit financing, allowing localities to develop higher-quality apartments and mixed-income communities. 
• Reforming HOME program (Section 501): This provision reauthorizes and modernizes one of the largest federal affordable housing programs for states and localities. Key reforms replace the per-unit funding cap with new limits that accommodate different areas’ construction costs and account for inflation, raise the income limit for families receiving HOME homeownership assistance to 100% of area median income, and repeal the 24-month deadline for obligating HOME funds, which had previously forced jurisdictions to forfeit money they could not commit in time. The provision also exempts small- and medium-sized projects from certain labor rules and allows jurisdictions that do not receive CDBG funds to use HOME funding for infrastructure that supports subsidized housing. Taken together, these changes solve many of the pain points for jurisdictions seeking to use their HOME funds to improve housing affordability.
• Allowing CDBG funds to construct new affordable housing (Section 204): This provision adds affordable housing construction — not just rehabilitation — as an eligible CDBG activity.

Improved and enhanced financing tools

21st Century ROAD expands housing financing, improving the feasibility of new construction.

• Manufactured housing and ADU financing (Section 303): This provision raises loan limits for Federal Housing Administration (FHA)-insured manufactured housing, and allows FHA property improvement loans to cover the construction of ADUs, two of the most affordable types of homes. As states and localities move to legalize ADUs and treat manufactured homes equally to other housing, these financing provisions will make them easier to build. 
• Removing barriers to modular housing (Section 302): This provision directs a review of FHA construction financing to reduce barriers to modular housing development, a form of off-site construction.
• Enabling bank financing for affordable housing (Section 203): This provision raises the cap on the amount of a bank’s capital that may be allocated to public welfare investments, including community development and affordable housing activities, from 15% to 20%. This increase could attract more private capital to fund affordable housing.

Technical assistance and support for best practices

21st Century ROAD establishes multiple technical assistance programs to help state and local governments successfully implement reforms. In addition to the single-stair, preapproved plan, and manufactured housing provisions described above that all include technical assistance elements, the law also includes broader technical assistance for better state and local land use:

• Housing supply frameworks (Section 107): This provision directs HUD to compile best practices in land use reform that can help states and localities identify and implement proven housing supply policies. States are already leading the way: in 2025, Texas lawmakers passed seven bipartisan bills addressing zoning, parking, office-to-residential conversions, and manufactured housing. And between 2023 and 2025, Washington State lawmakers legalized duplexes, triplexes, and fourplexes on most residential lots; eased parking requirements; allowed co-living homes; and permitted taller buildings near transit. This provision will help other states and localities adopt similar reforms.

What comes next

Taken together, these provisions send a clear signal from Congress: new flexibility and funding sources are on the way, but the jurisdictions that benefit most will be those that modernize zoning, building codes, and permitting policies to enable more homebuilding. While federal implementation steps remain, state and local officials need not wait and should act now. 

The 21st Century ROAD to Housing Act puts the federal government on the side of state and local reform activities by removing federal obstacles and rewarding jurisdictions that pursue pro-housing reforms. It’s up to state and local governments to seize this opportunity and deliver housing affordability to their constituents.