The 21st Century ROAD to Housing Act became law on July 11. It’s the biggest federal housing package in about 30 years, and both chambers passed it with large bipartisan majorities. If you build or finance housing, you’ll hear it pitched as a new source of money.
It isn’t, at least not yet. A few provisions change your deals today. Most create programs that are authorized but not funded. Underwrite the first group now, and keep the second out of your numbers until Congress pays for it.
Authorized doesn’t mean funded
Congress handles money in two steps. First it authorizes a program, which means the program may exist and may receive up to a set amount. Then, in a separate appropriations bill, it provides the cash. The ROAD Act only authorizes. It contains no new money for housing.
The Act authorizes 14 new or expanded programs. Many don’t exist yet, because HUD or another agency has to set them up first. A few could receive money in FY 2027. Many may wait until FY 2028.
Don’t expect that money to come easily. The House Appropriations Committee’s FY 2027 HUD bill would fund the department at about $71.4 billion, nearly $5.9 billion below current levels. New programs would compete with existing ones for less money.
Take the Housing Innovation Fund (Section 208). It’s authorized at up to $200 million a year from FY 2027 through 2031, and HUD has until July 2027 to create it. Leave it out of your sources until HUD launches it and Congress funds it.
Two changes to underwrite now
Two provisions took effect the day the Act became law. Build them into your deals now.
Higher FHA multifamily loan limits. Section 211 raised the statutory limits on multifamily mortgages that FHA insures. Future increases now track the Census Bureau’s multifamily construction price deflator, an index of what it costs to build apartments. Rerun any deal that missed FHA eligibility because of the old cap.
More room for bank investors. Section 203 raises the cap on “public welfare investments” by national and state member banks from 15% to 20% of unimpaired capital and surplus (the bank’s capital base as regulators measure it). For a bank with $1 billion in capital and surplus, that’s $200 million of capacity instead of $150 million. That extra $50 million can go into Low Income Housing Tax Credit (LIHTC) equity and other vehicles that fill financing gaps. If an investor told you they’d hit their limit, go back and ask again.
Shorter environmental reviews and a new definition
Section 206 widens the exemptions from National Environmental Policy Act (NEPA) review for federally supported housing. Section 103 removes federal environmental review entirely for USDA infill housing assistance. If your project uses either kind of support, ask your counsel whether it now qualifies, and tighten your schedule if it does.
Section 301 drops the permanent chassis requirement from the federal definition of “manufactured home.” That changes what counts as manufactured housing for financing and insurance. If you lend on manufactured homes, update your product guidelines and insurance requirements to match.
The January 7 deadline for single family rentals
Section 1001 bars a “large institutional investor” (an entity controlling more than 350 single family rentals) from buying more. The ban starts January 7, 2027. The penalty is the greater of $1 million or three times the purchase price.
The Act exempts new construction, build to rent, and renovate to rent, so how you structure a deal matters. Say you control 400 rentals and buy an existing portfolio of 50 homes for $15 million. If no exception applies, you could face a $45 million penalty. Adding 50 homes through new construction or build to rent avoids that risk.
Treasury published its first proposed rule on October 22. Under it, purpose built rental homes that no owner has ever lived in would be exempt if bought within 18 months of the certificate of occupancy. If you build to sell to an institutional buyer, plan to close within that window. Treasury hasn’t set a date for the final rule. Read the proposal now, and file comments if single family rental is part of your plan.
Track these next
If you build modular, watch for HUD’s report on barriers to modular construction financing, due July 11, 2027 (Section 302). Rules on alternative draw schedules (when a lender releases construction funds as work progresses) will follow. If you finance accessory dwelling units, watch for FHA guidance on the expanded Title I program, which raises loan limits and allows terms up to 30 years (Section 303).
Authorized but not funded
Treat the following as future possibilities, not sources:
- RESIDE Act adaptive reuse grants (Section 210), authorized at $100 million a year for FY 2027 through 2031
- A Community Development Block Grant (CDBG) growth pilot (Section 213), running FY 2030 through 2043
- A pilot for mortgages of $100,000 or less (Section 105)
One related change is worth acting on now. Section 204 lets CDBG recipients spend up to 20% of their allocation on new affordable construction, which wasn’t allowed before. Ask your local grantee whether and when it plans to use that authority.
Ask two questions first
Before any ROAD Act provision goes into your sources and uses, ask whether it’s in effect and whether it’s funded. If either answer is no, leave it out.
Then do three things this quarter. Rerun FHA eligibility on deals the old limits shut out. Ask your bank investors how they’ll use the higher cap. And if you’re in single family rental, comment on Treasury’s proposal.
David J. Murphy is the Managing Attorney of Murphy PC, a Boston-based real estate and business law firm, and is Of Counsel to McDermott, Quilty, Miller & Hanley LLP. With over 20 years of experience, David counsels developers, sponsors, owners, and investors in commercial real estate transactions throughout New England and other states, with a focus on joint ventures, preferred equity, and complex deal structuring. He can be reached at dmurphy@murphypc.com or 617.993.0650.
This article is for general informational purposes only. It is not legal, financial, or investment advice and does not create an attorney-client relationship. Consult a licensed attorney before acting on anything discussed here. This may constitute attorney advertising.