The 21st Century ROAD to Housing Act, passed by Congress this summer, is its most significant effort in decades to address the nation’s affordable housing crisis.
The legislation touches a wide range of housing programs across multiple federal agencies and at the state level, and the industry is now working to understand its full scope.
In the latest Housing Huddle, we discuss some of the most talked about provisions:
Boosting LIHTC Investment
One of the most talked-about changes affects the low-income housing tax credit (LIHTC). The public welfare investment cap for banks was raised from 15% to 20%, a shift expected to drive billions of dollars in additional LIHTC investment.
RAD Conversions
On the public housing side, the cap on Rental Assistance Demonstration (RAD) conversions was raised by 100,000 units, allowing more units to convert to Section 8.
Preserving Rural Rental Assistance
Rural affordable housing also benefits significantly. The Act makes permanent a USDA pilot program that decouples the Section 515 direct loan program from rental assistance, which functions much like HUD’s Section 8 project-based rental assistance. This should allow USDA to keep subsidizing properties that would otherwise lose rental assistance when their Section 515 loans mature—an impact we expect to reach a substantial number of units over the next three to four years.
The Act additionally revitalizes the HOME Investment Partnerships Program, with agency staff just beginning to work through what the changes will look like in practice.
Limiting Institutional Ownership of Single-Family Homes
Finally, the provision that drew the most public attention was the prohibition on large institutional investors owning more than 350 single-family homes. Because the law defines a single-family home as a building with up to two dwelling units, there was real concern that the ban could prevent the operation and rehabilitation of existing scattered-site affordable housing and two-unit buildings tied to LIHTC or other developments.
Ultimately, the final language exempts build-to-rent and renovate-to-rent properties, and the industry is now comfortable that multifamily deals can proceed largely as envisioned.
How Developers and Providers Should Respond
Many of the Act’s provisions are not effective immediately. Agencies still need to work through the statutory language and determine how to implement new and existing programs.
As the details are being sorted out, it’s an opportunity for developers and providers to dig into the relevant provisions, assess how they might affect a given project, and work with legal counsel as implementation takes shape.
Our client alert, “New ROAD to Housing Act would reshape affordable housing,” provides a deeper look at the programs affected.
