The 21st Century ROAD to Housing Act, the first major housing package to become law in decades — and passed with impressive bipartisan support — has the potential to put a real dent in the nation’s affordable housing shortage.
The good news is that if carried out as intended, the law will break through a lot of the regulatory sludge holding back the construction industry. It will create a mix of financing and building incentives that will help the nation close the supply gap that has contributed to rising rents and put homeownership out of reach for many people.
The bad news is that President Trump let the act become law without his signature, calling it “a yawn” — not a great sign that his administration will dedicate the considerable resources needed to put it into effect.
Most of that work will fall to the Department of Housing and Urban Development, which has to establish an array of pilot programs, reports and other acts of rule-making and industry guidance the law calls for. After last year’s purge of agency staff members, however, HUD is down about 30 percent of its work force in many of its key offices.
As the Urban Institute has outlined, making good on the law’s potential will almost certainly require bringing on more policy specialists, lawyers, accountants and technologists to handle the flow of work — crunching numbers, drafting regulations and reports, overhauling departmental technology, and getting all of this approved by a gantlet of lawyers and accountants at HUD and the White House’s Office of Management and Budget.
Unfortunately, the administration’s budget director, Russell Vought, is an advocate for shrinking the federal government. Just last month, a group of senators wrote to Mr. Vought, demanding that he release $750 million in withheld funds allocated for affordable housing. Despite a broad mandate from Congress, the administration appears poised to shrug at the opportunity to address an issue of great importance to millions of Americans.
So, with the limited resources they still have, the dedicated civil servants left at HUD should focus on the parts of the law that have the best chance of generating new housing.
First on that list is the law’s mandate to modernize the rules for manufactured housing — often called mobile homes. Historically, federal standards required that a manufactured home have a permanent steel chassis for safer portability. That requirement makes little sense today: Few manufactured homes are moved after installation, and adding a steel chassis increases building costs and generally precludes the addition of basements, second stories and other variations in manufactured homes that consumers want.
The new law removes the chassis requirement, setting up HUD to adjust related regulations to expand the range of affordable entry-level homes coming off the assembly line. Perhaps more important, it would begin to blur the line between manufactured housing and modular housing — homes with sections made in factories and then assembled on a housing site.
In recent years, the modular housing sector has seen a level of innovation that is badly needed in the construction industry, particularly for entry-level homes. Taken together, the changes could gradually turn manufactured housing from an often-maligned alternative into an attractive, affordable option for first-time home buyers.
Another key provision in the law is the authorization of a small-dollar lending program. Roughly one in four homes in our country is valued under $200,000. Often, for lenders, the math doesn’t work for providing the smaller mortgages needed for these less expensive properties, which can mean fewer potential buyers and fewer of these homes ever being put up for sale. By creating a program that provides incentives for lenders to make smaller loans, HUD could begin to put many of these stranded entry-level homes back on the market.
From there, HUD should focus on the provisions that offer a meaningful impact with only a modest lift from HUD’s staff. For instance, the law raises the limit on the size of loans that can be made to developers of multifamily properties insured by the Federal Housing Administration — a change reflecting the increasing costs of construction. It also changes the index used to adjust these limits for inflation, to more closely track the rise in the cost of housing.
Other provisions in the law offer a considerable benefit with a relatively modest staff lift: It allows HUD Community Development Block Grants to be used for new construction, streamlines the HUD permitting process for new construction and seeks to standardize the process by which homeowners can have an appraisal reconsidered. Each of these would increase the number of homes coming to the market without requiring a prolonged rule-making effort from HUD.
It’s unfortunate that we must ask the question: What happens when a good bill meets a seemingly indifferent administration?
But whether they get the support they need from the White House, the staffs at HUD and other agencies have an opportunity to make a considerable difference on housing affordability even with their limited resources. If they choose their battles wisely, they can indeed begin to build toward a future with more affordable housing. If not what the full act envisions, enough, at least, to add significantly to the housing supply and perhaps even push back on the growing skepticism that the federal government can meet the nation’s needs.
Jared Bernstein is a distinguished policy fellow at the Stanford Institute for Economic Policy Research and a senior fellow at the Center for American Progress.
Jim Parrott is a nonresident fellow at the Urban Institute and an owner of Parrott Ryan Advisors.
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