TucsonforEveryoneRoadtoHousingSummary

Introduction:

The 21st Century Road to Housing Act is the first major federal attempt to address the nation’s housing crisis in decades. Currently, the US is estimated to have a shortage of 7.2 million affordable housing units. In addition, aging housing units are in drastic need of repair, new housing production requires more financing, and many housing aid programs are underfunded and too restrictive.

This bill addresses many issues, including regulatory review, federal funding, banking and financial reform, public housing livability, and veterans' access to housing. It received broad bipartisan support in both the House and Senate. Representatives Grijalva and Ciscomani both voted in support, along with Senators Gallego and Kelly. The bill became law due to a Constitutional requirement without the president’s signature.

Summary:

The 21st Century Road to Housing Act addresses a variety of issues and has undergone many revisions. This is a general summary of what is included in the final bill; a more in-depth explanation of some sections can be found further below. A crucial point to note is that while the bill authorizes and calls for the creation of new grants and programs, it does not actually appropriate funding, meaning that future budget appropriations will have to include funding for the Department of Housing and Urban Development (HUD) to carry out these programs. The items listed below are not a complete overview of the bill, but general highlights. A more in-depth look at certain sections can be found here on our website. A more complete overview has been done by the Bipartisan Policy Center and other organizations.

What the bill does:

Authorize new grant programs, expands flexibility
Streamlines review for some federally supported housing projects
Directs the creation of new guidelines and studies

What the bill does not do:

Override or preempt any local control with regards to zoning or land use
Directly allocate funding to HUD or new programs

A major theme of the bill is expanding housing supply of all types. It pushes to remove several regulatory barriers to housing, namely through land-use and code reforms. Within three years, HUD will study and release new guidelines on zoning, permitting, and building codes to encourage new housing. The bill expressly does not preempt or restrict local control, while HUD will publish new guidelines and support regulatory reform, there is nothing mandating municipalities to alter their existing development rules. More details on this (Section 107) can be found in our other article breaking down the bill section by section.The bill also aims to remove other barriers in several key ways:

Streamlines environmental review process for federally subsidized housing projects and other housing-related activities, including NEPA categorical exceptions for infill projects and projects under 15 units
Reforms to allow for greater production of manufactured and modular housing, removal of the permanent chassis requirement. States must certify that their laws support modular and manufactured housing.
Initiates studies on future code reforms and a review of the impact of BABA on the cost of HOME program projects

The bill unlocks new funding for affordable housing projects through existing HUD grants. This includes permanent HOME program reauthorization and allowing CDBG grants to be used on new affordable housing construction. The act also allows HUD to give additional weight to projects and housing proposals located in Opportunity Zones when evaluating grant applications.

The main policy highlights of the bill broadly fit into four main buckets.

Expanding housing supply:

Removes barriers to housing:
- New guidelines on zoning, permitting, land use, and building codes to encourage new housing
- Streamlined environmental review process for subsidized housing projects and other housing-related activities, including NEPA categorical exceptions for infill and small projects. Expands HUD’s ability to delegate environmental review to states, localities, and tribes
- Reforms to allow for greater production of manufactured and modular housing
- Initiates studies on future code reforms and a review of the impact of BABA on the cost of HOME program projects
Unlocks new funding for affordable housing projects through HUD grants
- Permanent HOME program reauthorization
- Allows CDBG funding to be used on new affordable housing construction.
Holds high-housing cost cities accountable by making 10% of CDBG funding dependent on new housing production
New grants for localities and tribes to:
- Select pre-approved design plans for affordable housing projects
- Adopt innovative solutions and modernize permitting and land use rules
- Adaptive reuse of existing buildings into affordable housing
- Facilitate commercial-to-housing conversions in economically distressed areas
Allows certain federally financed housing units, such as through LIHTC, to automatically meet HCV inspection requirements if they have passed inspection within the last year

Financial Reforms:

Increases the amount banks can invest in new public welfare like affordable housing from 15% to 20%
Makes it easier to establish and run credit unions
Directs regulators to support new community bank creation
Expands support and access for mortgages under $100,000
Requires federally backed mortgage lenders to have second appraisal procedures
Increases loan limits for FHA-backed loans for housing and manufacturing loans, adds ADU construction as an acceptable use of property improvement loans

Housing Livability and Support:

Creates new temperature sensor program for public and federally subsidized housing units
Expands RAD capacity by 100,000 units and codifies tenant protections
Expands funding to support local home repair programs
Reauthorizes PRICE grants to support repairs of manufactured housing
Requires informing veterans of VA home loan options on applications and allows comparison against FHA loans
Excludes disability benefits when determining eligibility for HUD-VASH program
Permanently establishes USDA's MPR program

Other:

Limits institutional investors from buying new single-family housing units if the entity is in control of 350 or more single-family homes, excluding manufactured housing
Allows Emergency Solutions Grant recipients to request a waiver of the 60% spending cap on shelter beds and outreach
Creates a new Moving to Work cohort of public housing authorities
Mandates CDBG recipients to create a database of publicly owned land
Allows HUD to give more weight to projects in Opportunity Zones when analyzing grant applications
Initiates a pilot program to study automatic family enrollment in the Family Self-Sufficiency program

Why is it Important?

This bill represents the largest effort at the federal level to address the housing crisis in decades. Many parts of the bill could have substantial effects on housing supply in the long term. For example, Section 107 is one of the sections that we are most excited to see implemented. It aims to provide new federal guidance to states and localities on zoning best practices. This section reflects a growing consensus amongst policy experts, researchers, advocates, and those in the planning field that our current zoning framework is a major impediment to affordable housing development. This guidance could greatly support Tucson and other cities in their ongoing local efforts in modernizing and updating their zoning code and development process.

Section 206’s moderate reforms to environmental review under the National Environmental Policy Act (NEPA) are also an area of promise. NEPA review does not apply to all housing projects but is currently needed anytime federal funding is used for a project, which includes any HUD or USDA funded housing projects such as the HOME program. For most projects that are not expected to have a large environmental impact, they undergo an environmental assessment that can take anywhere from 3 to 9 months and often necessitates the project sponsor spending tens of thousands of dollars on environmental consultants.

These financial and time costs can easily increase due to administrative friction. In certain cases, waiting for such an assessment can risk imperiling the project entirely as the land could be sold or the developer runs out of money to cover carrying costs. The changes to NEPA will only apply to projects of fewer than 15 units and infill housing on land that has already been developed and will still go through a form of review to confirm that there are no circumstances that would require more in-depth review of a project.

Financial reforms to support credit unions, community banks, and small dollar mortgages could greatly expand housing opportunities. Credit unions currently lend around 15% of all mortgages. Community banks also play a significant role in financing new housing development. Relative to larger, nationwide banks, community banks administer three times as much construction lending and twice as much small business lending.

Raising (Section 203) the public welfare investment cap from 15% to 20% would make financing new affordable housing easier. This cap is a limit on how much amount a bank can invest in new public welfare (such as affordable housing) relative to the size of its financial resources. Raising this cap allows banks to invest more in the production of new affordable housing, notably through the low-income housing tax credit program (LIHTC).

Other sections are a great start in moving towards better housing policies but will require time and long-term effort to expand into more substantial efforts. For example, Section 202’s pilot program for funding whole-home repairs will be impactful for those who receive it; however, with a limit of ten states or localities that can receive this grant each year, it is almost guaranteed that it will be hyper-competitive and underfunded relative to demand. Many of these pilot-programs are opportunities of great promise but require refinement of policy through trial and error along with more substantial long-term funding to reach their full potential.

What Now?

The 21st Century ROAD to Housing Act opens the door to a new era of housing policy, but there is still significant work ahead.

A notable exception from the bill is new appropriated funding. A confusing aspect of federal budgeting is that Congress authorizing funding is different from Congress appropriating funding. While the bill authorizes the creation of new programs, it does not actually include new funding, meaning that the implementation of many sections of the bill is dependent on future budget negotiations. For example, the 2021 Infrastructure Investment and Jobs Act authorized $15 billion in non-guaranteed funding for new project grants, of which only $11 billion was actually appropriated and funded by Congress.

All of these new programs have potential, but without new funding, they will fail to improve access to housing as much as they could. These new funding programs, regulatory changes, and new guidelines will also be dependent on the overall state of HUD. Recent policies have led to an overall 24% cut in HUD staff funding. Without a reversal, it is likely that many of these programs will not be administered to their fullest extent or that new guidelines will not be as informed.

Should this all get funded, cities and states cannot wait for money to show up in a few years. Many of these are competitive grants which municipalities will have to prove eligibility for. Even regulatory reforms to NEPA, modular housing, and new guidelines on land use and permitting will only be as impactful as the willingness of jurisdictions to use them.

In the time it takes for eligibility lists to be created, guidelines to be drafted, and funding to be secured at the federal level, there should be work done at the local level to prepare applications, gather data, and modernize housing laws. Tucson and Arizona more broadly should not wait to take advantage of the largest possible housing opportunity in years.

Going forward, Tucson for Everyone and our allies across the country will work to provide public comment where possible and lobby our representatives to ensure adequate funding for the programs in the bill. We will continue to work towards the adoption of more pro-housing policies in Tucson. With the door to new housing policies opened at the federal level, there is no better time to lay the groundwork so that everyone can have affordable, sustainable, and quality housing.