Housing bill clears House 396-13 with key regulatory reforms

The House passed the 21st Century ROAD to Housing Act 396-13 on May 27, modernizing manufactured housing codes for the first time since the 1970s and cutting duplicative environmental reviews that add months to project timelines.

"The bill isn't a silver bullet, but lawmaking is about progress, not perfection," Representative J. French Hill, an Arkansas Republican who helped craft the legislation, said in a statement. "These supply-side reforms will have a meaningful effect, increasing housing construction across the country."

The legislation updates the Department of Housing and Urban Development's HOME Investment Partnership Program, the largest federal block grant dedicated exclusively to affordable housing, which has not been reauthorized since 1992. It also eliminates the federal permanent chassis mandate for manufactured homes — a requirement dating to the 1970s that added unnecessary costs to factory-built housing. Community banking provisions modernize the regulatory treatment of custodial and reciprocal deposits, allowing local lenders to retain more capital for mortgages and construction financing.

The bill now returns to the Senate, which passed an earlier version containing a provision requiring build-to-rent investors owning more than 350 units to sell within seven years. The House removed that clause, drawing relief from an industry that had halted new investment in the segment. Phoenix, the nation's leader in build-to-rent growth with 30,000 units citywide, had seen capital shift toward townhome communities as developers sought to avoid the forced-sale requirement, according to Adam Baugh, a land-use attorney at Withey Morris Baugh PLC.

Build-to-Rent Reprieve

The Senate's original seven-year divestiture requirement had effectively frozen new build-to-rent investment, Baugh said. Investors stopped committing capital to single-family rental communities — developments that feature cottage-style homes intended for long-term leasing rather than homeownership — and redirected funds toward townhome projects with three or more units per structure to circumvent the regulation.

"The ability to attract investors into that asset class immediately ceased," Baugh said. The House's amended version "improves the outlook for the build-to-rent industry in the Phoenix area," he added, though industry participants remain in "wait-and-see mode" until the bill becomes law.

The divergence between the House and Senate versions means the final shape of the legislation remains uncertain. House Speaker Mike Johnson described the bill as "transformational legislation that will immediately address the housing affordability problem," while Representative Maxine Waters, the California Democrat, called it "a huge step towards finally addressing the affordable housing and homelessness crises."

Regulatory Streamlining and Community Bank Impact

Beyond the build-to-rent dispute, the bill's most durable effects may come from its regulatory streamlining provisions. The elimination of duplicative environmental reviews under the HOME program targets a specific bottleneck: projects that require multiple federal approvals often face sequential rather than concurrent reviews, adding months of delays and millions in carrying costs. The manufactured housing code update — the first since the 1970s — addresses a sector that accounts for roughly 10 percent of new single-family homes but has been constrained by outdated federal mandates that made factory-built units more expensive than site-built alternatives.

The community banking provisions address a separate constraint on housing supply. By modernizing how custodial and reciprocal deposits are treated for regulatory purposes, the bill aims to keep deposits local rather than forcing community banks to park funds with larger institutions. That shift could increase the pool of capital available for construction loans and mortgages in markets where large national banks have limited presence.

The housing affordability crisis — driven by a cumulative shortfall estimated at 3.8 million units nationally — has become a rare area of bipartisan agreement in Congress. The 396-13 vote margin in the House reflected that consensus, though the Senate's response to the amended bill will determine whether the reforms become law or stall in bicameral negotiations.

This article is for informational purposes only and does not constitute investment advice.