US Housing Policy and Zoning Reform: Federal 21st Century ROAD to Housing Act Enacted into Law
The summer of 2026 marks a historic turning point for federal housing policy and zoning deregulation in the United States. Following months of intense negotiations between the House, Senate, and the White House, the landmark bipartisan 21st Century ROAD to Housing Act (Public Law 119-101) officially became law on July 11, 2026.
The bill was enacted under the Constitution's 10-day rule without the President's signature following a legislative dispute over unrelated measures. Nonetheless, it represents the most significant federal housing package in decades, seeking to aggressively expand housing supply, streamline environmental reviews, modernize manufactured housing regulations, and restrict institutional investor competition in the single-family market.
Key Provisions of the 21st Century ROAD to Housing Act
The enacted statute contains several transformative titles that reshape homebuilding, zoning incentives, and housing finance:
1. The CDBG "Carrots and Sticks" Zoning Reform (Build Now Act & Innovation Fund)
The law introduces powerful financial incentives and penalties to pressure local municipalities into deregulating their zoning codes:
- The Build Now Act (Sec. 213): Taking effect in the third full fiscal year after enactment, this provision penalizes local governments whose housing growth improvement rate falls below the median of their peers by reducing their Community Development Block Grant (CDBG) allocations by 10%. Conversely, high-growth jurisdictions are rewarded with "bonus" allocations. This represents a massive federal "stick" to force local zoning and permitting updates.
- The Innovation Fund (Sec. 208): To support local upzoning, the law authorizes $200 million annually (for FY2027 through FY2031) in competitive grants for local governments that objectively increase housing supply through zoning reforms. Eligible reforms include:
- Increasing by-right density (e.g., allowing duplex, triplex, or quadplex buildings in areas of opportunity).
- Reducing or eliminating off-street parking minimums to lower construction costs.
- Revising minimum lot sizes, setback requirements, and building height restrictions.
- Eliminating restrictions against accessory dwelling units (ADUs).
- New Construction Eligibility (Sec. 204): The law formally adds "new construction of affordable housing" as an eligible CDBG activity, capped at 20% of a recipient's allocation.
2. Restricting Institutional Investors in Single-Family Housing (Title 10)
In an effort to expand homeownership opportunities for individual households, the law implements strict limits on large corporate landlords:
- Sec. 1001: Restricts "large institutional investors"—defined as entities with direct or indirect investment control of not less than 350 single-family homes in the aggregate—from purchasing additional single-family homes.
- Exceptions: The law allows exceptions for certain "excepted purchases," including newly constructed homes, build-to-rent communities, properties undergoing substantial renovation (renovate-to-rent programs), and homes sold under specific homeownership programs that offer price concessions and positive rental payment reporting to credit bureaus.
3. The Manufactured and Modular Housing Revolution (Title 3)
The law dismantles the century-old regulatory architecture that kept factory-built housing looking and financing like "trailers" or mobile homes:
- Housing Supply Expansion Act (Sec. 301): Amends the National Manufactured Housing Act to include homes built "with or without a permanent chassis". This allows factory-built modular homes to be financed, titled, and zoned in the same manner as traditional site-built homes, opening the door to a lower-cost, faster-to-build product class.
- FHA Title I Modernization (Sec. 303): Substantially raises the loan limits for FHA Title I property improvement and manufactured housing loans:
- Single-section manufactured home and lot limit increased to $149,782.
- Multi-section manufactured home and lot limit increased to $238,699.
- Financing alterations and repairs on single-family structures capped at $75,000.
- The law mandates that these limits be periodically indexed for inflation.
4. Environmental Review and Permitting Streamlining (Title 2)
To reduce administrative delays and costs that stall affordable developments, the law expands categorical exclusions and streamlines review processes:
- Unlocking Housing Supply Through Streamlined Reviews (Sec. 206): Reclassifies housing-related activities under the National Environmental Policy Act (NEPA) to expand categorical exclusions. Qualifying projects that do not require environmental studies include infill housing projects, rehabilitation of residential buildings with 5 to 15 units, and scattered-site developments of up to 15 units.
- Sec. 103 Exemption: Exempts USDA-assisted affordable housing projects built on infill sites from environmental impact studies or reports.
5. FHA statutory loan limit hikes (Housing Affordability Act, Sec. 211)
The law dramatically increases FHA statutory loan limits for multifamily and cooperative housing programs (e.g., in Sec. 207, raising baseline limits from $38,025 to $167,310, etc.), tying FHA capacity more directly to housing production.
Industry Impact and Outlook
The enactment of the 21st Century ROAD to Housing Act is expected to accelerate the consolidation of national homebuilders and drive a massive expansion in modular and offsite construction. By allowing manufactured homes to be built without a permanent chassis, builders can leverage factory efficiencies to deliver single-family homes at a fraction of the cost of traditional site-built construction. Furthermore, the "Build Now Act" CDBG penalties are expected to trigger a wave of local zoning reforms in high-cost, high-density metropolitan areas, expanding the pipeline of buildable lots for residential developers.