Texas Border Business
In a rare bipartisan effort, both the US House and Senate recently passed the 21st Century ROAD to Housing Act, the most significant federal housing law in decades. The goal of the legislation is to make housing more affordable, primarily by encouraging expansion in supply. It’s a basic economic principle that when demand is higher than supply, there will be upward pressure on prices. Across the nation, the shortage of housing is estimated to be 5.5 million units, with particularly acute issues in some locations (including many parts of Texas).
The Act’s provisions remove unnecessary regulatory barriers to streamline housing development and affordability, allowing the use of ready-to-use, pre-approved home designs so builders can obtain permits and build homes more rapidly. Federal and local housing processes are also streamlined, with an emphasis on the capacity to produce more affordable homes in rural and urban areas.
The Act also modernizes HUD programs to speed up homebuilding and expand financing opportunities. Rules for manufactured homes were updated to make these units easier and less expensive to produce and finance. The largest federal block grant program for states to increase the supply of affordable housing was also modernized. Grants and forgivable loans to keep existing properties viable are also available. Small-scale housing developments are now exempt from federal environmental reviews, and there is more flexibility and time to commit funds with fewer constraints.
Financing measures were also included, such as updating banking regulations to expand local lending while maintaining financial responsibility. Red tape was reduced, and the examination processes were streamlined. Community and rural banks often have greater access to stable deposits; thus, they can lend locally and support small businesses, farmers, and households.
Additionally, the Act limits the number of homes large institutional investors can own. Companies that already own more than 350 single-family homes are prohibited from further purchasing, although they may continue developing new build-to-rent housing in many cases.
The strongest “pro” arguments are that the Act focuses on the housing supply shortage, which is a significant contributor to the affordability crisis. It also updates regulations and encourages greater use of lower-cost options. In some areas, major investment firms may have been pricing other buyers out of the market. The major “con” is that, by only focusing on the supply side, any meaningful effects will take time and are unlikely to move the needle in the near future.
The bill attracted welcomed and unusually broad support across the spectrum. It’s a practical response aiming to gradually improve affordability through modernizing the federal process and providing the private sector with tools to make progress. It will take time to work, but the result ultimately should be a healthier housing market. Stay safe!
___________________
Dr. M. Ray Perryman is President and Chief Executive Officer of The Perryman Group (www.perrymangroup.com), which has served the needs of more than 3,000 clients over the past four decades.
