What The Housing For The 21st Century Act Means For Real Estate Agents, Lenders

The Housing for the 21st Century Act — a sweeping housing reform package moving through Congress — is the boldest step yet in a broad federal push to increase housing supply and improve affordability.

The legislation directs the U.S. Department of Housing and Urban Development (HUD) to publish “best practices” for states and local governments to reduce zoning barriers and clear the way for more housing inventory.

Recommendations include eliminating parking minimums, allowing duplexes and triplexes in single-family zones, legalizing accessory dwelling units (ADU), reducing minimum lot sizes and streamlining permit approvals.

“With the nation facing a shortage of roughly 5 million homes and first-time buyers now entering the market at a median age of 40, bold action to expand supply and remove barriers to homeownership has never been more urgent,” said Shannon McGahn, chief advocacy officer of the National Association of Realtors. “Buying a home remains one of the greatest drivers of generational wealth and long-term financial stability. And our recent national survey shows that 85% of voters still believe homeownership is part of the American Dream.”

States that adopt reforms would receive technical guidance and pilot grant support. Those that do not face no penalties — a product of the federal government’s limited leverage over local zoning.

The bill also creates pilot grants for cities to develop pre-approved “pattern books” — standardized housing designs that builders could use without case-by-case design review.

On Monday, the U.S. House voted to pass the Housing for the 21st Century Act by a 390-9 margin. 

Housing environmental reviews narrowed

Environmental review requirements under the National Environmental Policy Act (NEPA) would be significantly narrowed for housing.

Projects under 15 units, infill developments, office-to-residential conversions and rehabilitation work would qualify for expanded “categorical exclusions,” allowing them to bypass lengthy federal reviews.

The HOME Investment Partnerships Program would receive similar exemptions, along with new planning grants for jurisdictions implementing zoning reforms.

Backers argue the changes could remove months — or years — from project timelines, lowering carrying costs and increasing overall housing inventory.

Some commentators have highlighted that reducing or exempting NEPA environmental reviews could diminish environmental safeguards and may face opposition from environmental advocates who argue NEPA serves as a critical protection and not just needless “red tape.”

FHA loan limits, new financing tools

Federal Housing Administration (FHA) multifamily loan limits would increase by roughly 300% to 400%, with per-unit caps for elevator buildings rising from roughly $38,000 to just over $167,000.

Limits would be indexed annually to construction cost inflation, aligning federal underwriting with modern building expenses.

“By modernizing outdated housing programs, reducing unnecessary barriers to development and increasing flexibility for local communities, the Housing for the 21st Century Act helps create the conditions needed to build and preserve more affordable homes across America,” said David Dworkin, president and CEO of the National Housing Conference (NHC). “The bill also appropriately emphasizes transparency, consumer protections and accountability.”

Additional financing provisions include a new FHA pilot for small-dollar mortgages under $100,000 — with lender incentives to increase participation.

Banks would be permitted to invest up to 20% of capital in community development projects. Section 8 voucher properties could rely on Low-Income Housing Tax Credit, HOME or USDA inspections rather than repeated HUD reviews.

Manufactured housing and affordability

The bill also rewrites manufactured housing rules — eliminating the requirement that homes maintain a permanent chassis.

Factory-built homes placed on permanent foundations would be treated like site-built housing for financing, titling and taxation.

“The Housing for the 21st Century Act is a meaningful step forward in tackling the affordability crisis by supporting housing supply, modernizing federal programs and reducing unnecessary barriers that slow development,” said American Land Title Association CEO Chris Morton. “As policymakers work to expand homeownership opportunities, the title insurance industry will continue to play a critical role in protecting consumers and helping ensure buyers and lenders can move through the closing process with confidence.”

Tenant protections would expand — including exclusion of Veterans Affairs disability benefits from income calculations for HUD-VASH housing assistance, creation of a national eviction helpline and expansion of Family Self-Sufficiency escrow programs.

What it means for agents, lenders and builders

For real estate professionals, most significant impacts include:

For real estate agents

• Expanded housing inventory from duplex, triplex and ADU legalization
• Greater financing availability through higher FHA limits
• Small-dollar mortgage pilot, improved access for entry-level and first-time homebuyers
• Increased resale and financing options for manufactured homes
• Workforce housing eligibility up to 100% of area median income
• Faster project approvals and reduced environmental delays

For lenders and mortgage professionals

• FHA multifamily loan limit increases
• FHA small-dollar mortgage pilot under $100,000
• Community bank capital flexibility and reduced exam burdens
• Higher community development investment caps

For developers and builders

• By-right zoning incentives, aiming for fewer discretionary hearings and faster approvals
• Environmental review exemptions for projects under 15 units and infill sites
• Pattern books containing pre-approved designs
• Manufactured housing regulation parity with site-built homes

If enacted, the reforms would mark one of the most aggressive federal efforts in decades to boost housing supply and market activity — relying less on direct mandates and more on financial incentives, regulatory cuts and expanded credit access.