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, represents the first comprehensive federal law in decades designed to increase homebuilding. The bipartisan package contains more than 50 provisions aimed at boosting 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, pro-supply reforms at the state and local levels are already bearing fruit. Austin, Texas, eased zoning for apartments and accessory dwelling units (ADUs, such as small backyard cottages); streamlined permitting restrictions to allow more homes near jobs and transit; and implemented other initiatives to allow more homebuilding. These reforms led to the addition of 120,000 new homes between 2015 and 2024. As the housing 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 such as Montana, Texas, Maine, and Washington.

The 21st Century ROAD to Housing Act applies 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 grant funding and capture the opportunities the law creates to address the housing shortage and deliver more affordable homes. 

Grant programs to incentivize new and innovative homebuilding

The following provisions of the 21st Century ROAD to Housing Act 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 places 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 by 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 this provision, such reforms would be rewarded with additional CDBG funding.
• Funding to encourage regulatory reform (Section 208): This provision authorizes federal grants to encourage localities to adopt results-based, pro-supply reforms. Jurisdictions that implement reforms resulting in additional homebuilding—such as policies allowing apartments, ADUs, or manufactured housing without lengthy, discretionary review processes; 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 that 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 U.S. Department of Housing and Urban Development (HUD) to develop guidance for single-stair apartment buildings, which are compact and economical 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, single-stair buildings up to six stories have been shown to be as safe as other housing, and new single-stair apartment buildings are drastically safer than the older homes they typically replace. States and localities don't need to wait to add this type of housing: 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

The 21st Century ROAD to Housing Act also authorizes grant programs to help Americans with lower incomes repair and improve their homes.

• Home repair grants (Section 202): Nearly 49 million homes need repairs, most costing less than $10,000, an amount beyond reach for 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 in their home safely and affordably.
• Support for manufactured homes (Section 304): This provision reauthorizes the Preservation and Reinvestment Initiative for Community Enhancement (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

The 21st Century ROAD to Housing Act creates new obligations that states and localities must meet to benefit from federal regulatory reforms that will support more homebuilding.

• Certify parity for manufactured housing (Section 301): The 21st Century ROAD to Housing Act removes a burdensome requirement that manufactured housing have a permanent steel chassis, which is necessary for delivery but unneeded afterward. To benefit from new flexibility in the law, states must certify to HUD that they accord equal treatment to manufactured homes with and without a chassis. Removing the federal chassis requirement will lower construction costs by thousands of dollars per home and facilitate the construction of duplexes, triplexes, fourplexes, and multistory buildings using off-site construction.
  
  Many states use definitions of “manufactured home” that specify a permanent chassis and thus will need to amend their statutes for this reform to take effect. HUD will release guidance for the certification process, and states that amend their laws now will be best positioned to obtain certification quickly. Amending the definition of manufactured home also gives states an opportunity to take broader action, such as titling manufactured homes as real property, preventing localities from banning manufactured homes, and reforming minimum lot sizes to unlock this especially affordable housing type. Kentucky and New Hampshire have addressed local bans and property titling, and localities such as Atlanta; Knoxville, Tennessee; San Bernardino, California; and towns and cities throughout 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 help identify sites suitable for new housing, as illustrated in Chicago, Philadelphia, and Rochester, New York.

New flexibilities that can help jurisdictions increase housing

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

• Streamlined 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 an independent analysis found that the state’s reforms would save as much as $82,000 per apartment in New York City.
• Expansion of the Rental Assistance Demonstration program (Section 212): This provision permanently reauthorizes and expands the Rental Assistance Demonstration program, or RAD, which helps public housing authorities 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.
• Reform of the HOME program (Section 501): This provision reauthorizes and modernizes the HOME Investment Partnerships (HOME) Program, 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 regional variability in construction costs. The provision also accounts for inflation, raises the income limit for families receiving HOME homeownership assistance to 100% of the area median income, and repeals the 24-month deadline for obligating HOME funds, which had previously forced jurisdictions to forfeit money that they could not commit in time. In addition, the provision 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 will meaningfully help jurisdictions seeking to use their HOME funds to improve housing affordability.
• Use of 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

The 21st Century ROAD to Housing Act expands housing financing, improving the feasibility of new construction.

• Manufactured housing and ADU financing (Section 303): This provision raises loan limits for manufactured housing insured by the Federal Housing Administration (FHA) and allows FHA property improvement loans to cover the construction of ADUs. As states and localities move to legalize ADUs and treat manufactured homes the same way they treat other housing, these financing provisions will make them easier to build.
• Fewer 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.
• Easier 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%. The increase could attract more private capital to fund affordable housing.

Technical assistance and support for best practices

The 21st Century ROAD to Housing Act 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—all of which include technical assistance elements—the law 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 to 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. Although 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 efforts by removing federal obstacles and rewarding jurisdictions that pursue policies that support increased homebuilding. It is now up to state and local governments to seize this opportunity and deliver housing affordability to their constituents.

Tushar Kansal is a senior officer, Tara Roche is a project director, and Gabe Kravitz is a senior manager with The Pew Charitable Trusts’ housing policy initiative. Will Poff-Webster is director of infrastructure policy and Reed Schwartz is an associate infrastructure fellow with the Institute for Progress.