How The Road To Housing Act Could Improve Home Affordability

There seem to be very few things that Democrats and Republicans on Capitol Hill can agree on these days, but one of them is that housing has become increasingly unaffordable for the average American. And with good reason: housing affordability is the worst it’s been in over 40 years – since the 1980s when mortgage rates routinely approached 20%.

According to the Federal Reserve Bank of Atlanta, there’s a 37% “affordability gap” today between the income needed to afford a median priced home ($117,403), and the actual median U.S. household income ($85,497). This means that a household with a median income would need to spend 41% of its monthly income on housing, well beyond the 30% amount that’s typically regarded as affordable.

How we got here is a play in three acts. In act one, homebuilders underbuilt for over a decade after the housing market meltdown in 2008, leading to a housing shortage. From 2000 through 2007, builders completed almost 1.4 million single-family homes annually; since then, the number of homes built has averaged just over 767,000 a year.

Meanwhile, the country’s population grew from 304 million to 344 million since 2008, increasing the demand for housing.

The second act stars COVID-19 and the Federal Reserve. The former threatened to decimate the economy; the latter acted to ensure that didn’t happen by deploying a zero interest rate policy while buying over $1 trillion in mortgage-backed securities to provide ample liquidity to the mortgage industry.

This resulted in mortgage rates dropping to historically low levels, and a led to a veritable feeding frenzy among prospective homebuyers. As these buyers rushed to take advantage of low mortgage rates, demand far outstripped supply and bidding wars ensued, causing prices to soar by 30% between early 2020 and mid-2022. But rising wages and low financing costs largely offset these price increases, keeping homes relatively affordable.

Until act three.

That’s when the Federal Reserve, in an effort to get runaway inflation under control, initiated an unprecedented series of hikes to the Fed Funds rate, unsettling the financial markets and causing mortgage rates to double in mid-2022. Affordability was decimated, and many homes were suddenly out of reach for many prospective buyers.

Further complicating supply and demand dynamics, these higher mortgage rates “locked in” many homeowners who might otherwise have listed their homes for sale, but no longer could afford to do so, as it would have meant trading a 3% mortgage for a 7% mortgage on a more expensive property. Inventory tightened up significantly while the population aged into prime home-buying years, with about 5 million adults reaching the age of 35 every year. Many of these potential homebuyers opted to rent, as there were few homes to buy and even fewer they could afford.

So Washington decided to act, vowing to make homes affordable again.

A ROAD paved with good intentions

To address this issue, the Senate has proposed the 21^st Century Road to Housing Act, which is a well-intended effort with some commendable ideas – but is also an example of how difficult it is to impact home affordability, and the limits that the federal government has in attempting to do so.

Remember that the White House previously floated a few trial balloons that didn’t meet with much enthusiasm from the housing and mortgage industries, consumers or Congress. There was the 50-year mortgage (which wouldn’t have lowered monthly payments very much, and would have burdened the homebuyer with many thousands of dollars in extra interest payments while delaying equity accumulation).

There was the order to have Fannie Mae and Freddie Mac buy $200 billion in mortgage-backed securities to bring down mortgage rates (which had a short-term impact on rates, but those have since been obliterated by market concerns about the war in Iran). And there was the idea to ban institutional investors from buying single-family homes, a popular but misguided idea which has unfortunately found a place in the Senate bill.

Much of the 303-page ROAD act rehashes existing programs that probably won’t have much of an impact on affordability, either now or in the long run. For example, the first section of the bill, Title 1 – Improving Financial Literacy, is dedicated to evaluating the performance of HUD housing counselors; a worthwhile initiative, but not something that will make a noticeable difference in the market.

Likewise, other sections focus on prohibiting the Federal Reserve from creating a central bank digital currency through 2030; modernizing the appraisal process; improvements in reporting and oversight from government housing and finance agencies; addressing homelessness; raising awareness of loans available through the Veterans Administration; and improving disaster recovery response.

While there’s nothing necessarily wrong with any of these ideas, none of them is likely to improve affordability, and none of them address the fundamental issue of inadequate supply, which is often constrained by local and state government regulatory hurdles. Despite that, there are some aspects of the ROAD act that are noteworthy, and which may ultimately move the needle a bit.

Life in the Fast Lane

Showing that the Senate understands the need to address the housing shortage, the act does offer a few solid ideas for increasing supply. Title 2 – Building More in America enables HUD to prioritize projects based in communities designated as Opportunity Zones for any competitive housing development grants, ensuring that funds go where they’re most needed.

It also creates a program that provides financial incentives for property owners to make necessary repairs to affordable homes that can be used by owner-occupants or renters. And it provides grants to local governments that can be used to convert vacant office, retail, or industrial buildings into affordable housing.

Manufactured and modular homes, which are often much less expensive than traditional ground up construction, are included in the act’s Title 3 – Manufactured Housing for America. That section of the bill eliminates the permanent chassis requirement for manufactured homes, making them less expensive to build, easier to finance and allows them to more aesthetically integrate into neighborhoods.

The bill also increases FHA loan limits on those properties, and reinstates a program that provides funding for repairs to manufactured homes and communities. Additionally, it calls for removing barriers to FHA lending for modular homes and for allowing FHA property improvement loans to be used for the construction of accessory dwelling units (ADUs).

Another interesting aspect of the bill is an attempt to address an unintended consequence of the CFPB’s qualified mortgage rules, which rigidly limit loan officer compensation and have made it difficult for borrowers to find mortgages for low dollar home purchases – even if buyers manage to  find an affordable home, they often have a hard time financing the purchase. The ROAD act calls for the CFPB to adjust these compensation rules in a way that encourages more small dollar mortgages – typically loans of less than $100,000.

Incentives for state and local governments

But perhaps the most encouraging part of the ROAD act is that it acknowledges that the key to affordable housing rests with state and local governments, not with politicians in Washington. To that end, the bill attempts to use federal dollars as both a carrot and a stick to encourage these local entities to allow more homebuilding in their markets – specifically more development of affordable housing.

A great example of this approach is the Build Now Act within the bill, which ties localities’ Community Development Block Grant (CDBG) funding to their housing production, providing bonuses for accelerated homebuilding and funding reductions for those who don’t achieve their housing goals. The bill also changes the rules around CDBG funding to allow it to be used for the construction of new affordable housing.

The ROAD Act includes funding a $200 million annual competitive grant program for local governments that incentivizes regulatory reforms such as streamlined permitting, density bonuses and relaxed zoning, while also demonstrating increases in housing supply. Similarly, there are grants earmarked for municipalities that utilize pre-reviewed housing designs for ADUs, duplexes and townhouses that streamline affordable housing construction.

Finally, the ROAD Act identifies a number of federal regulatory hurdles that will be lowered, such as compliance with the National Environmental Policy Act, in order to simplify and lower the costs of development.

Missed exits and dead ends

While promising, the ROAD Act isn’t perfect, by any means.

Many of the initiatives mentioned above require submission of formal plans back to Congress, and most of those plans aren’t due for a year or more, pushing any market impact out into 2027 or 2028 at the earliest.

The bill also misses some opportunities that should be low-hanging fruit, such as a temporary exemption from capital gains taxes for investors – or even traditional homeowners – who list their properties for sale. There are millions of property owners with more than the $250,000 ($500,000 for married couples) capital gains exclusion that was set back in 1997, and may be enticed to sell if given the chance to protect their equity.

Then, of course, there’s the egregious purchase ban for investors who own 350+ homes. This group – collectively – bought just under 36,000 of the 4 million homes that were sold in 2025, or 0.9%, according to data provided to HousingWire by BatchData. They also sold about 34,000 homes last year, meaning they had almost no impact whatsoever on the market.

And the arbitrary requirement forcing these investors to sell off build-to-rent community homes within seven years to an individual homeowner almost guarantees that these new rental communities of single-family homes won’t be built, depriving the market of much-needed housing units for families who want or need to rent – and possibly raising the rental costs of existing inventory.

As the bill works its way through the reconciliation process with the House and Senate, it will be interesting to see what changes are made, but it’s encouraging to know that improving home affordability is at least on the roadmap for Congress in 2026.