One of the most significant provisions would limit how many single-family homes that REITs and institutional investors can own — and how long they can own them. The measure also opens many opportunities for developers and homebuilders, especially those focused on affordable housing.
The act represents the most significant federal housing reform effort since the 1990s, aiming to boost housing supply, modernize government housing programs, reduce regulatory barriers and unlock private capital for housing development. Given the breadth of the legislation — spanning nine titles — clients active in real estate development, investment and finance, including real estate investment trusts (REITs), multifamily and single-family rental developers, affordable housing sponsors and mortgage lenders, should carefully evaluate its provisions and potential implications.
Key Provisions of the Act
The act is organized into nine titles addressing a wide range of housing policy, community development and financial regulation topics.
Title I — Improving Financial Literacy (Section 101). Title I authorizes the Department of Housing and Urban Development (HUD) to review the performance of housing counseling agencies and counselors, require additional training for underperforming counselors and subject consistently noncompliant counselors to enhanced oversight or loss of certification.
Title II — Building More in America (Sections 201–213). Title II is the act’s core housing supply title and contains numerous provisions designed to increase housing production and reduce barriers to development.
Title II lifts the Rental Assistance Demonstration program cap and codifies tenant protections (Section 201). It authorizes the HUD secretary to give added weight to applicants for competitive HUD grants located in or primarily serving designated Opportunity Zones, supporting housing preservation and construction (Section 202). Section 203 creates a HUD pilot program to support state, local and tribal whole-home repair programs, which provide grants and forgivable loans to homeowners and landlords for home repairs and modifications.
The bill increases the public welfare investment cap applicable to banks supervised by the Office of the Comptroller of the Currency and the Federal Reserve from 15% to 20% of unimpaired capital and surplus, enhancing banks’ capacity to make private investments in affordable housing (Section 204). It creates a pilot program to incentivize housing development of all kinds in certain Community Development Block Grant (CDBG) participating jurisdictions, with a bonus allocation for jurisdictions exceeding the median housing growth improvement rate and a 10% penalty for those falling below (Section 205). The bill adds new construction of housing as an eligible activity under HUD’s CDBG program, allowing communities to dedicate up to 20% of CDBG funds to new housing construction (Section 206).
Section 207 empowers state, local and tribal governments to streamline environmental reviews to accelerate housing development, while Section 208 right-sizes National Environmental Policy Act (NEPA) review for small and infill housing projects. The bill authorizes a $200 million housing innovation fund to support communities that are building more housing supply, with funds available for community infrastructure improvements and housing construction (Section 210). The bill also authorizes a grant program to help communities establish pre-approved housing designs, or “pattern books,” to streamline local construction approvals (Section 211). The RESIDE Act authorizes a pilot program within the HOME Investment Partnerships Program to convert vacant and abandoned buildings into attainable housing, defined as housing affordable at 120% of area median income or less (Section 212). The Federal Housing Administration (FHA) is required to increase multifamily loan limits to better match housing market costs (Section 213).
Title III — Manufactured Housing for America (Sections 301–304). Title III updates the federal definition of manufactured housing to include units not built on a permanent chassis to encourage innovation and expand affordable housing (Section 301). This title directs the FHA to assess barriers to FHA-insured lending for modular housing and to consider modifying the financing draw schedule (Section 302). It updates mortgage lending standards for manufactured housing through the FHA and expands access to financing (Section 303). It also reauthorizes HUD’s Preservation and Reinvestment for Community Enhancement program to provide grants to maintain, protect and stabilize manufactured housing communities (Section 304).
Title IV — Accessing the American Dream (Sections 401–405). Title IV addresses barriers to homeownership and mortgage access. It directs the Consumer Financial Protection Bureau to study and potentially amend rules regarding loan originator compensation to encourage small-dollar mortgage origination (Sections 401–402). It bolsters the appraiser workforce by allowing licensed and credentialed appraisers to conduct appraisals for FHA-insured transactions (Section 403). This title authorizes a pilot program under HUD’s Family Self-Sufficiency initiative to promote economic mobility and homeownership through household savings (Section 404). It also reduces HUD inspection delays by allowing units financed through other federal housing programs to automatically satisfy voucher inspection requirements if inspected within the past year (Section 405).
Title V — Program Reform (Sections 501–505). This title permanently authorizes the CDBG Disaster Recovery program and establishes a new Office of Disaster Management and Resiliency within HUD (Section 501). It reforms and reauthorizes the HOME Investment Partnerships Program with critical updates to improve administration and facilitate affordable housing construction, including an updated and more inclusive definition of community land trusts and the addition of shared equity homeownership to eligible HOME activities (Sections 502). The title also reforms the U.S. Department of Agriculture’s (USDA’s) Rural Housing Service, including by decoupling rental assistance from maturing mortgages to preserve housing access for rural families (Section 503). It authorizes a new Moving to Work expansion cohort (Section 504) and permits states and localities receiving Emergency Solutions Grant funding to request waivers of the 60% spending cap on emergency shelter beds and street outreach (Section 505).
Title VI — Veterans and Housing (Sections 601–603). This title amends Fannie Mae and Freddie Mac’s uniform residential loan application to ensure veterans are made aware of U.S. Department of Veterans Affairs (VA) home loan benefits (Section 601). It requires FHA mortgage disclosures to include VA loan cost comparison information (Section 602) and permanently excludes veterans’ disability compensation from annual income calculations under the HUD-VASH program to improve homeless veterans’ access to housing (Section 603).
Title VII — Oversight and Accountability (Sections 701–704). This title requires the HUD secretary and heads of FHA, Ginnie Mae, USDA, Federal Housing Finance Agency (FHFA) and the VA to testify annually before Congress (Section 701). HUD must report monthly to Congress on the capital ratio of the Mutual Mortgage Insurance Fund (Section 702). The U.S. Interagency Council on Homelessness must provide updates on its plan to reduce homelessness and testify annually (Section 703). USDA, FHA and FHFA must implement requirements that lenders maintain procedures for consumer-initiated second appraisals or reconsiderations of value (Section 704).
Title VIII — Coordination, Studies and Reporting (Sections 801–803). This title directs HUD, USDA and the VA to identify areas for collaboration to streamline housing program implementation (Section 801). It also directs HUD and USDA to coordinate on joint environmental reviews for jointly funded housing projects (Section 802). HUD must study the implementation of work requirements by public housing agencies (Section 803).
Title IX — Homeownership for Main Street America (Section 901). Title IX is one of the act’s most consequential provisions for institutional real estate investors. Section 901, titled “Homes Are for People, Not Corporations,” bans large institutional investors that possess 350 or more single-family homes from purchasing additional homes. The provision includes exemptions for qualified build-to-rent, rent-to-own and renovate-to-rent programs; however, investors are still required to divest from these properties within seven years.
Potential Impact on Real Estate and Financial Services Sectors
The act, if it becomes law, will have significant and varied implications across the real estate and financial services sectors.
REIT Sponsors and Institutional Single-Family Rental Investors. Section 901’s ban on additional single-family home acquisitions by investors possessing 350 or more homes poses the most immediate and direct risk to single-family rental REITs and large institutional investors. Even with the limited exemptions for build-to-rent, rent-to-own and renovate-to-rent programs, the seven-year divestiture requirement fundamentally alters the long-term hold strategies that underpin many institutional single-family rental portfolios. Build-to-rent sponsors and their capital partners should evaluate their pipeline and underwriting assumptions in light of these restrictions. Multifamily REITs, by contrast, are not directly targeted by Section 901 and stand to benefit from the act’s zoning reforms, environmental review streamlining, and expanded CDBG and HOME program flexibilities, which should facilitate new multifamily development.
Affordable Housing Developers and Syndicators. The act’s reforms to the HOME Investment Partnerships Program, including reauthorization and administrative updates, create a stronger platform for affordable housing production. The addition of new construction as an eligible CDBG activity and the authorization of the $200 million housing innovation fund expand the toolkit available to affordable housing sponsors. Developers active in the manufactured housing space should note the expanded federal definition and improved FHA lending access for modular and manufactured units. The RESIDE Act’s authorization for converting vacant buildings into attainable housing at up to 120% AMI opens additional opportunities for adaptive reuse projects.
Developers and Homebuilders. Developers stand to benefit from the act’s regulatory streamlining provisions, particularly the right-sizing of NEPA review for small and infill projects and the empowerment of state and local governments to streamline environmental reviews. The pre-approved housing design (pattern book) grant program should accelerate local construction timelines. The increase in FHA multifamily loan limits will help close financing gaps in higher-cost markets. However, the CDBG-linked Build Now pilot program introduces opportunity and risk: Jurisdictions exceeding the median housing growth rate receive bonus allocations while those falling below face a 10% funding penalty, creating unpredictable funding levels that may affect multi-year community development projects.
Mortgage Lenders and Servicers. The act’s provisions encouraging small-dollar mortgage origination, including potential CFPB rulemaking on loan originator compensation and points-and-fees thresholds, will directly affect product development and compliance obligations for lenders serving the lower-value mortgage market. The expansion of the appraiser workforce through broader eligibility for FHA appraisals, combined with the Section 704 requirement for reconsideration-of-value procedures, will require lenders to update their appraisal management processes. Lenders serving veterans should prepare for updated disclosure requirements on VA loan comparisons in FHA transactions.
Banks and Financial Institutions. The increase in the public welfare investment cap from 15% to 20% of unimpaired capital and surplus expands the capacity of national banks and Federal Reserve-supervised institutions to invest in affordable housing and community development. Banks should evaluate whether this increased capacity creates new investment opportunities, particularly in LIHTC partnerships and community development initiatives.
Investors and Capital Markets Participants. The act’s broad supply-side reforms — including zoning incentives, NEPA streamlining, increased FHA loan limits and expanded CDBG and HOME program eligibility — will reshape the economics of housing development across multiple asset classes. Investors in build-to-rent and single-family rental strategies face the most significant headwinds from Section 901 and should model the impact of acquisition restrictions and divestiture timelines on portfolio returns. Conversely, investors focused on multifamily, affordable and manufactured housing are positioned to benefit from the expanded programmatic and financing tools the act provides.
Looking Ahead
The 21st Century ROAD to Housing Act represents the most comprehensive federal housing reform package in over a generation. The act has strong bipartisan backing — originating from negotiations between Scott and Warren and building on the House-passed Housing for the 21st Century Act — and has garnered broad support from a coalition of pro-housing organizations urging swift passage. While the ultimate contours of any enacted legislation will depend on the legislative process — including committee markups, floor amendments and potential conference negotiations — the act’s trajectory suggests a high likelihood of significant housing legislation reaching the president’s desk in this Congress.
We encourage clients to monitor the progress of the act closely and to assess their portfolios, pipelines and compliance infrastructure against its provisions. Institutional single-family rental investors, in particular, should begin contingency planning now in light of the Section 901 acquisition ban and divestiture requirements.
For questions about the act and the opportunities it may create, contact the author, your McGuireWoods contact, or a member of the firm’s Real Estate Transactions Practice Group.