On July 11th, the bipartisan “21st Century ROAD to Housing Act” became law. Despite President Trump opting not to sign the bill, it became law after 10 days of the bill sitting on his desk without his signature. When a bill comes before the President’s desk, passed by both chambers of Congress, he has the option of vetoing it, signing it into law, or doing nothing with it for 10 days, in which case the bill becomes a law without his signature.
President Trump is not against the bipartisan housing bill per se, but he chose not to sign it as a form of protest against the Senate choosing not to pass his SAVE Act, a sweeping voter ID bill. However, President Trump’s unwillingness to veto the new housing bill indicates his understanding that any veto would be overridden by a 2/3s majority in Congress. The bill was passed in the Senate 85-5 and in the House 358-32, both veto-proof majorities, in June.
The great support for this bill should not be surprising, given growing concerns about the lack of affordable housing in this country. What then does the 21st Century ROAD to Housing Act do, and does it meaningfully address the high housing prices Americans are struggling with?
Key Provisions of The New Housing Law
The bill has 12 titles, under which there are various provisions to address housing affordability.
Under section 107, the Department of Housing and Urban Development (HUD) provides guidelines for state and local land-use regulations. The idea is to use guidance as a tool to streamline regulations in a way that developers can more easily navigate them and build housing. One of the biggest barriers to developers is navigating the complications of each housing regulation, as these are usually governed at the local level. Creating a more centralized framework can help alleviate some of the costs associated with the development of new housing.
However, sometimes the issue is not just about the variance in housing regulations – or even how complicated they can be – but rather about how unnecessary they can be. That is why the bill, under section 301, also gets rid of certain regulations, such as the permanent chassis rule; the rule requires that manufactured homes have a permanent chassis, a steel frame that makes those homes movable. Removing this rule is estimated to save $5,000 to $10,000 in construction costs per home, according to housing policy experts.
Under provision 206, NEPA (National Environmental Policy Act) reviews will ensure that environmental compliance has a more streamlined process to ensure that processing times are quicker, further allowing more housing supply. Indeed, environmental review will still be there, but the federal review process will be delegated to state and local authorities instead. In my view, this is a form of federal deregulation, but it runs the risk of allowing more regulation at the local level.
The bill also provides incentives to local governments to build housing supply and reduce local housing regulations, via the $200 million Innovation Fund, established under section 208. The federal government cannot mandate that local governments deregulate or change certain rules to make way for more housing; however, it can use incentives to get them to align their regulatory policies with national priorities.
In summary, the bill uses guidelines to help local and state authorities centralize housing regulations in a way that can be more easily understood by developers who need to follow them. The bill reduces some federal regulations, while offloading some of those regulations to the state and local authorities. Thirdly, the bill uses incentives by making localities compete to boost housing supply to get access to federal funds.
Of course, there are other important provisions in the bill, but the above is a recounting of the core aspects that will boost housing supply. For a full summary of each provision of this new law, you can find it here, under a report from Emma Waters at the Bipartisan Policy Center.
Concluding Thought
21st Century ROAD to Housing Act is a start. However, the federal government is notably limited in its ability to boost housing supply through deregulation. Most of the change will have to come from the state and local level, across all 50 states. To borrow a phrase from Amy Dain, who has worked extensively on housing policy in Massachusetts, the problem of “regulatory innovation” is very real. When each locality invents its own rules on housing construction, whether it’s parking rules, height rules, or rules on dimensions – or other regulations on how to build houses – it gets confusing for developers and builders, who now need to pay consultants just to understand what rules they have to follow.
So, creating a more centralized rule set, whatever it is, simplifies things. Developers should not have to hire consultants to understand all the different, complicated housing regulations that come with each county. Of course, some variance is necessary, but not to the point where it stifles housing supply.
The relationship between housing prices and housing supply is well established and corroborates a report I did on the issue, which you can find here. The economic argument makes sense; when you keep outdated rules on the construction of housing, the supply of new housing is unable to keep up with population growth. Hence, you get a housing shortage, especially in regions with higher regulatory intensity, and housing prices go up.
The new federal law on housing is a start, because it makes certain tweaks that change the landscape. However, most of this change still has to come from the state and local levels. The 21st Century ROAD to Housing Act paves the pathway for reform, but there is still much to be done. However, bipartisan support in Congress for the passage of this bill should serve as a springboard that drives more significant change among the 50 states.
Acknowledgement: The opinions expressed in this article are those of the individual author, not necessarily Our National Conversation as a whole.