Layla Zulfa
The passage of the most comprehensive federal housing legislation in decades, hailed as a potential game-changer for boosting housing supply and affordability, now faces its most significant challenge: the arduous journey of implementation. While industry leaders universally applauded the bill’s aims to increase attainable and affordable housing through a host of new programs and regulatory adjustments, stakeholders are now grappling with the stark reality that translating legislative intent into tangible results will be a protracted and complex process, potentially extending well into 2028, even under optimistic projections.
A recent session convened by the Bipartisan Policy Center and the National Association of Affordable Housing Lenders (NAAHL) shed critical light on the formidable roadblocks that could significantly delay the realization of many of the bill’s supply-focused provisions. While some immediate impacts are anticipated, the broader benefits and the creation of new housing stock are contingent on a cascade of funding approvals and intricate regulatory overhauls.
The Labyrinth of Funding and Implementation
At the heart of the implementation challenge lies the creation of approximately a dozen new programs mandated by the legislation, collectively referred to as the "ROAD" provisions. Each of these programs necessitates explicit funding approval from Congress. This legislative process is notoriously slow, often marked by partisan contention and bureaucratic inertia. While certain deadlines are slated to commence this year, a significant number of these new initiatives face the specter of substantial delays due to a lack of federal appropriation.
Compounding this issue, the House of Representatives’ fiscal year 2027 Transportation, Housing and Urban Development appropriations bill, which was finalized prior to the passage of the ROAD legislation, does not include funding for these new housing provisions. The Senate’s appropriations bill remains pending, and it is currently unclear whether it will allocate resources for any of the programs tied to the new housing law.
Kristen Klurfield, associate director at the Bipartisan Policy Center, articulated the potential timeline during the session, stating, "The Senate has not yet released its own funding bill, but it’s possible that many of the programs authorized in ROAD will not receive funding until fiscal year 2028 at the earliest." Aaron Shroyer, Director of Policy and Advocacy at NAAHL, underscored the precariousness of this situation: "Until those programs get funded, they really only exist on paper." This highlights a critical dependency: without congressional appropriations, the innovative programs designed to increase housing supply remain theoretical constructs, incapable of delivering real-world solutions.
Beyond funding, the bill mandates significant changes to existing regulations and public reporting requirements, primarily impacting federal agencies like the Department of Housing and Urban Development (HUD). These agencies are tasked with a monumental administrative undertaking: writing new rules, issuing comprehensive guidance, establishing operational programs, and completing extensive administrative work before the legislative provisions can achieve their intended impact.
HUD, which is responsible for approximately 70% of the 125 identified federal actions stemming from the bill, must develop nine new rulemakings. Historically, HUD rules undergo a lengthy finalization process, typically spanning 18 months to two years. This suggests that some of the critical rules within the ROAD legislation may not be fully codified until early 2028. Furthermore, existing agency workloads and competing priorities could potentially extend these timelines even further.
A significant wildcard in this equation is HUD’s current staffing levels. The agency employs approximately 5,800 individuals, a stark decrease from the 8,800 employees it had during fiscal year 2024, representing a 34% reduction in its workforce. Concerns are mounting among industry leaders that this diminished capacity could substantially prolong the implementation of what is being hailed as the first comprehensive housing bill in decades. Shroyer elaborated on this concern: "One of the biggest tasks for them at HUD and for other agencies is to figure out how to stack up these new rulemakings they’re tasked with against what was in their queue before ROAD." This administrative juggling act, performed with a reduced workforce, could create significant bottlenecks.
Manufactured Housing Poised for Transformation, Pending Regulatory Clarity
Among the most potentially transformative changes introduced by the legislation is a new rule that will remove the permanent chassis requirement from HUD’s definition of manufactured housing. This modification holds the promise of unlocking greater design flexibility for manufacturers, enabling them to construct homes with a vertical element. Such innovation could lead to lower-cost manufactured housing options suitable for high-density urban and infill markets, where manufactured homes have historically been less prevalent. Moreover, chassis-free designs would allow manufactured housing to more closely resemble traditional site-built homes, potentially mitigating long-standing stigmas and misconceptions often held by local officials and planning boards, thereby increasing their acceptance and integration into diverse neighborhoods.
However, manufacturers cannot fully capitalize on this newfound design flexibility until HUD fulfills its mandate to draft new standards specifically for chassis-free homes. Lesli Gooch, CEO of the Manufactured Housing Institute, emphasized this crucial dependency during the session: "The challenge is that the law needs to be updated so that we can bring forward the innovations that we have in the factory and build homes that can fit in those neighborhoods that are in need of attainable housing solutions."
In previous discussions, Gooch noted that manufactured housing developers are already prepared to embrace new home designs. The timeline for this adaptation, however, is intrinsically linked to the pace of the regulatory process. HUD must revise the manufactured housing code through a structured process involving its advisory committee, a public comment period, and a final rulemaking. Following these federal steps, manufacturers will be able to submit their chassis-free designs for review and approval by HUD-approved third-party inspection agencies before production can commence.
The duration of this federal regulatory undertaking remains uncertain. Furthermore, Gooch highlighted that states and localities will also need to amend their zoning ordinances to permit manufactured and factory-built housing in a broader range of neighborhoods. "We’ve got the law passed, but now our job is to make sure that, at the state level and at the local level, the policies catch up with the federal law so that we can actually see this come to reality," Gooch stated, underscoring the necessity of a synchronized approach across all levels of government.
USDA’s Section 515 Program: Preserving Rural Affordability Faces Implementation Hurdles
The new housing bill also incorporates several provisions specifically designed to bolster affordable housing in rural America. The Multifamily Preservation and Revitalization (MPR) program has been made permanent, empowering certain nonprofits and limited partnerships to acquire properties prior to rehabilitation, thereby preserving them as affordable housing. Additionally, the legislation aims to expand access to housing capital in underserved rural areas and enhance the accessibility of federal housing programs for smaller rural developers and communities.
Perhaps the most impactful changes are those affecting the U.S. Department of Agriculture’s (USDA) Section 515 program, which provides low-interest (1%) loans for the development and preservation of rural multifamily housing. A key provision within the ROAD legislation allows the USDA to decouple Section 521 Rental Assistance for low-income tenants from a Section 515 loan in specific properties nearing their loan maturity. This critical decoupling mechanism ensures that properties developed or preserved with Section 515 loans can continue to receive rental assistance even after the USDA mortgage has concluded. The significance of this measure cannot be overstated, as the loss of even a single affordable housing project can have devastating consequences for small communities with limited housing stock.
Jonathan Harwitz, Director of Public Policy at the Housing Assistance Council, articulated the stakes involved: "For those who work in rural America, you know there’s very little affordable housing available. So, if you lose a project in one of these places, it really distorts the market and puts the [residents] at risk of not being able to live in the community."
However, the successful implementation of this decoupling hinges on formal rulemaking by the Rural Housing Service (RHS) within USDA. Compounding the delay, Congress has not yet released the technical assistance funds that were appropriated for the RHS to facilitate this crucial decoupling process. "Those of us who are trying to make decoupling work are hamstrung by that," Harwitz explained, illustrating how a lack of dedicated funding is hindering progress on a vital initiative.
HOME Program Reforms: Potential Hampered by Administrative Overload
The legislation also sought to enhance the HOME Investment Partnerships Program, a HUD-administered block grant program instrumental in developing and preserving affordable housing for low-income households, often utilized by organizations like Habitat for Humanity. Reforms include exempting small housing projects from the National Environmental Policy Act (NEPA) review, raising income eligibility to 100% of area median income, and increasing purchase price limits. Proponents contend that these updated rules will streamline the process, reduce costs, and accelerate the development of much-needed affordable housing supply.
Liz Osborn, Vice President of Policy at Enterprise Community Partners, acknowledged the significant potential of these reforms during the session but also highlighted their administrative complexity. "There’s a lot that HUD needs to do to implement these changes," she stated. "They’re going to have to issue new regulations and guidance around the updated eligibility rules, clarify and provide guidance on which projects qualify for the streamlined review process, update their internal systems to reflect new eligibility and streamlined rules, and they’re going to need to do all of that on reduced staff."
Given this substantial administrative workload, the anticipated benefits of these HOME program reforms are unlikely to be immediate. Osborn concluded, "There’s a tremendous amount of work that the administration needs to do. And I think that’s all to say, we might not see the impact of the changes to the HOME program for a little while." This sentiment underscores the widespread challenge of implementing ambitious policy changes within federal agencies facing resource constraints.
Public Welfare Investment Cap: A Swift and Direct Impact
Not all supply-focused provisions within the ROAD legislation are subject to lengthy implementation timelines. One notable exception is the increase in the statutory cap on bank public welfare investments (PWI) from 15% to 20% of a bank’s capital and surplus. Public welfare investments incentivize banks to finance community development projects in low- and moderate-income areas by offering incentives such as tax credits.
Sarah Brundage, President & CEO of the National Association of Affordable Housing Lenders, expressed optimism regarding the swift impact of this particular change, which complements the permanent expansion of the Low-Income Housing Tax Credit (LIHTC). While regulators at the Office of the Comptroller of the Currency (OCC) may eventually issue rulemaking and guidance, banks are in a position to act immediately. "We believe OCC will need to eventually do some rulemaking and updates of guidance, but banks should be preparing imminently if they’re near or at their PWI cap," Brundage advised.
Brundage emphasized the immediate benefits of this provision: "Again, it’s a big win. No need for appropriations. No new programs. This is a policy that leverages private-sector investments with a direct tie to supply. This should be one of the most fast-acting direct-to-supply provisions in the bill upon enactment." This stands in contrast to other provisions that require extensive federal appropriations and regulatory rulemaking, highlighting the varied pace at which different aspects of the housing bill will manifest their intended effects.
In conclusion, while the landmark housing legislation represents a significant step forward in addressing the nation’s housing crisis, its journey from Capitol Hill to the communities it aims to serve is fraught with the practical challenges of securing funding, navigating complex regulatory landscapes, and overcoming administrative hurdles. The success of these ambitious reforms will ultimately depend on sustained political will, adequate resource allocation, and the efficient execution of administrative processes across multiple federal agencies and levels of government. The early successes, like the PWI cap increase, offer a glimpse of what is possible, but the broader impact on housing supply and affordability will likely unfold gradually over the coming years.
