Senate passes major housing bill to boost affordability & supply

The Senate has passed a sweeping housing bill aimed at increasing affordability and availability, a rare bipartisan achievement in a deeply divided Congress. The legislation, dubbed the “21st Century ROAD to Housing Act,” tackles issues ranging from deregulation of manufactured homes to restrictions on large institutional investors, and is now headed to the House for consideration. The bill passed with a vote of 89 to 10, signaling broad support for addressing the nation’s housing challenges.

At the heart of the bill is an attempt to boost housing supply, a critical factor driving up costs for both renters and prospective homeowners. The U.S. Is currently facing a significant housing shortfall, estimated at around 4 million units, according to realtor.com. The legislation seeks to address this through a variety of measures, including streamlining building processes and incentivizing the construction of more housing units.

Addressing Institutional Investment in Housing

A key provision of the Senate bill focuses on limiting the influence of large institutional investors in the single-family housing market. The legislation would prevent any entity owning 350 or more homes from purchasing additional properties. This measure is intended to prioritize homeownership for families, rather than allowing homes to be treated solely as investment vehicles. Senator Elizabeth Warren, a cosponsor of the bill, emphasized this point, stating, “We put this bill together with the deep-seated belief that it is families who should live in homes, and that’s what homes are for. They’re not there simply as investment vehicles for Wall Street private equity.”

However, the impact of these restrictions is a subject of debate. Research from the Urban Institute suggests that large investors currently own only about 3% of single-family rentals nationwide. Freddie Mac has also indicated that whereas institutional investors may contribute to price increases, their impact is less significant than factors like limited building and migration to high-cost cities, as noted in their research. The bill does include exceptions for investors who renovate distressed properties or build new rental homes, with a requirement to sell those homes to renters after seven years.

Streamlining Manufactured Housing and Expanding Tax Credits

Beyond addressing investor activity, the bill aims to reduce barriers to building more affordable housing types. One significant change involves deregulating manufactured homes by removing the requirement for a permanent chassis. This could lower construction costs by an estimated $5,000 to $10,000 per unit and allow for more flexible designs. Nine states have already begun to relax zoning restrictions on manufactured housing to address affordability concerns, as reported by the Pew Charitable Trusts.

The legislation also seeks to expand access to the Low-Income Housing Tax Credit (LIHTC) program, a key tool for financing affordable housing development. The bill would increase the Public Welfare Investment (PWI) cap, allowing banks to invest more in LIHTC projects. Sarah Brundage, president and CEO of the National Association of Affordable Housing Lenders, described this as “the most impactful part of this bill when it comes to housing supply,” potentially unlocking billions of dollars in additional investment.

Additional Deregulatory Measures

The bill includes several other provisions designed to streamline the construction process. These include measures to expedite environmental reviews for infill housing projects (building between existing structures) and to encourage the adoption of pre-approved housing designs through state and local “pattern books.” These efforts aim to reduce bureaucratic delays and lower construction costs.

Potential Roadblocks and Next Steps

While the Senate passage represents a significant step forward, the bill’s future is not guaranteed. Differences between the Senate and House versions, particularly regarding the restrictions on institutional investors and a proposed ban on a Federal Reserve digital currency, will likely require a conference committee to reconcile. President Trump has indicated he will not sign any legislation until Congress addresses voting laws, potentially creating another hurdle.

Even if these obstacles are overcome, some experts remain skeptical about the bill’s overall effectiveness. The Cato Institute, for example, argues that federal housing incentives have historically failed to address the root causes of the housing crisis and that the bill represents a continuation of ineffective policies.

The bill’s progress will be closely watched by housing advocates, industry stakeholders, and policymakers alike. The coming weeks will determine whether this bipartisan effort can translate into tangible improvements in housing affordability and availability for Americans across the country. The next procedural step involves the House taking up the bill and initiating negotiations to resolve the differences between the two chambers.