Enacted this month, the 21st Century ROAD to Housing Act is hailed as a landmark bipartisan federal housing law. It introduces significant shifts in federal housing policy, affecting institutional investors, manufactured housing, and veterans’ assistance. Notably, it grants local governments more flexibility with federal grants, offering financial incentives and penalties linked to housing production.
This legislative change is crucial since zoning and land use regulations are mainly controlled by states and cities, not the federal government. The law allows federal block-grant funds to finance new affordable housing construction for the first time, offering rewards and penalties to expedite city development. “The federal government is going to give you a whole lot of carrots, a whole lot of support, and just a couple sticks, in order to encourage these communities to start building more housing,” said Ben Harrold from the National Apartment Association.
The measure passed a divided Congress as it doesn’t involve large new funding, noted Andy Winkler from the Bipartisan Policy Center. Instead, it comprises numerous smaller bills and provisions that could cumulatively impact the housing market. The law aims to simplify the use of existing federal housing funds for municipalities, as Mark Kudlowitz from the Local Initiatives Support Corporation highlighted. Local governments can now decide how to allocate federal dollars to boost housing supply and prepare for new incentive-driven programs.
Although Hartford Mayor Arunan Arulampalam wished for more funding, he supports a $200 million annual grant program for cities expanding housing supply and a pilot project to convert vacant buildings into housing. The Innovation Fund will reward communities boosting housing supply with $200 million in annual competitive grants from fiscal years 2027-2031. Increases can result from measures like reducing parking requirements, revising lot sizes, and amending zoning laws.
Block Grant Changes
The new law changes the Community Development Block Grant (CDBG) program, making it easier to use funds for affordable housing construction. Previously, CDBG funds were for infrastructure and economic development projects benefiting low-income residents. The law now permits some grants for construction and reduces funds for cities not meeting construction thresholds. Jenna Pomponi from the Council of State Community Development Agencies emphasized the importance of state agencies conducting environmental reviews for smaller communities. “In a lot of small communities, they don’t have the capacity to do all the compliance work that’s required for a government to review, so the state agencies do that for them,” Pomponi said.
The Build Now provision ties CDBG funding to housing growth rates, rewarding high-growth recipients and reducing funds for those below the median. Exemptions apply to areas with lower rents, high vacancy rates, or recent disasters. David Garcia from UC Berkeley’s Terner Center noted this as a first in federal policy linking resources to new home construction. “This goes even a step further from other programs, which provide money to cities and states to just do reforms. This is actually tying money to outcomes,” explained Garcia.
Before the law’s passage, several organizations urged Congress to reconsider the Build Now provision, fearing it could make funding unpredictable. Jared Grigas from the National Association of Counties acknowledged the provision’s potential to spur local governments toward zoning reform. The funding conditions take effect in fiscal year 2029, providing time for localities to adapt.
‘Next Battle’
Federal funding for the U.S. Department of Housing and Urban Development (HUD) staffing was reduced by 24% in fiscal year 2026. HUD will oversee implementing numerous new programs and regulations, including the Innovation Fund and Build Now provisions. Andy Winkler from the Bipartisan Policy Center described the “next battle” as ensuring swift implementation by HUD. Concerns exist about HUD’s capacity to handle the workload without additional staffing. Pomponi expressed apprehension about HUD’s ability to implement the law effectively given staffing cuts. Despite these challenges, Hartford continues exploring innovative solutions like office conversions to address the housing crisis.
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