Senate Passes ROAD to Housing Act—Builders, Housing Advocates Weigh In

In March, the U.S. Senate passed the housing bill called the 21st Century ROAD to Housing Act. The intent of the law is to make U.S. housing more accessible to more people. The price tag on a typical home sold in the U.S. is sidelining hopeful buyers caught in a troubled economy.

The ROAD to Housing Act is the most significant housing law to be proposed in decades. Still, some groups are frustrated with it. Most of the pushback involves provisions that bar large investment companies from expanding too far into U.S. housing.

Here are some questions now surrounding this bill.

Who Is Promoting This Housing Law?

The two Senate sponsors are Republican Tim Scott of South Carolina and Democrat Elizabeth Warren of Massachusetts. They have received a good deal of support. Their bill passed with a wide margin: 89 out of 99 senators voted for it. The National Association of REALTORS® (NAR) supports the bill, as we have noted previously. NAR points out that three-fourths of people who don’t currently hold the deeds to their home believe they will never get that opportunity.

The National Association of Affordable Housing Lenders has also spoken in support of the bill. Advocates like provisions in the bill such as a higher cap (20% rather than 15%) for affordable housing projects.

Does It Also Have Support in the House of Representatives?

Yes. The House version has already passed, and the two bills are similar.

But the Senate version has a key difference. This difference is the focus of a heated debate. It would bar large investors (those who own 350+ homes) from buying more. Homes, says Elizabeth Warren, shouldn’t be investment vehicles for Wall Street. Most of the U.S. public agrees.

So, the Senate Bill Says All Large Investors Would Have to Stop Buying Homes?

Exceptions would allow investors to buy homes in need of major repairs. Also, investors could still own new homes constructed for renting, known as build-to-rent. But investors would be required to sell those homes after seven years, with the renter having the first option to buy. The renters would get 30 days to exercise their right of first refusal.

That seven-year limit can be extended to ten years, depending on the status of the renter’s lease. 

And Everyone Agrees That Investment Companies Should Release Their Deeds Into the Market, Right?

In fact, industry groups don’t want to force the investment companies to sell. For example, the National Association of Home Builders (NAHB) insists that “blaming investors for the high cost of housing is a distraction” and barring them from the market would reduce the total amount of available homes.  

Turns out a significant number of housing advocates think that’s true. The Urban Institute calls the build-to-rent business “an increasingly promising source for rental supply.”

Why Would It Be a Deal-Breaker for Investment Corporations to Sell Their Homes to Renters After 7 Years?

Investment companies will avoid build-to-rent projects if forced to sell, say builders’ groups. The companies would lose time and money dealing with readying homes for sale, dealing with real estate agents, marketing homes to potential buyers, and getting to closing.

Then there is the red tape and difficulty involved in splitting up townhome developments and transferring properties to new homeowners’ associations. It all adds up to a hassle the investors would want to avoid.

Who Are the People Who Choose Build-to-Rent Houses?

These developments are marketed to middle-income households. More and more households are applying. At this point, the segment makes up about 7% of the housing market. The renters are people who want single-unit homes, and yet cannot afford to acquire their own deeds at this point in time. That’s a good number of people who would like to hold deeds—and the Senate’s bill is attempting to give them the chance.

So, Does This Bill Do Anything to Help Renters Get Deeds?

Yes. Remember that right of first refusal for renters? To exercise that right and buy the home, a renter would need to apply for financing. But as renters, how would their credit profiles be sufficient in a lender’s eyes?

Under this bill, investor-owners could agree to report rental payments to credit agencies, boosting the renters’ profiles. It’s called the “home boosting” exemption. Investor-owners would see this as a low-cost way of getting their exemptions to own housing under the bill. The cost of compliance is much lower than opting for exemptions for build-to-rent housing and then having to sell in 7-10 years.

Doesn’t the Bill Loosen Certain Restrictions on Builders?  

Correct. For example, it would loosen environmental rules for new buildings that are created between already-existing buildings.

Also, the bill provides for “pattern book” grants. Local governments could issue approved designs for homes, so that builders could follow the design books and avoid having to seek approvals from the building code departments. This is all about getting homes to the market faster.

What About Homes That Already Exist, But Need Renovations?

The bill includes a pilot program for home modification and repair support. This would fund home repair initiatives coming through local, state, and tribal agencies.

The funds would come in the form of outright grants, as well as forgivable loans. Both owner-investors and individual deed holders could apply.

Where Does the Senate Stand on Producing More Manufactured Homes?

The Senate bill stimulates the production of manufactured homes. It would end the rule that says these homes have to come with a permanent (and expensive) frame structure to make them moveable.

This frame structure, called a chassis, gets in the way of creating varied designs for manufactured homes—like making them multi-level dwellings. In any case, many manufactured homes aren’t moved, once installed.

Creating these stationary homes in factories and installing them on land is cost-efficient and quick. That’s why several states have been easing zoning to boost manufactured housing.

What’s Next for the ROAD to Housing Act?

Industry groups are asking the House and Senate to reconcile their two versions—keeping the best, and dumping the rest. A big question is whether the senators will agree not to force big investment companies to sell off build-to-rent homes.

Also, advocates are pressing the lawmakers to do more in the way of “home boosting” if they opt for that method. For example, are they willing to have investment companies offer down payment help to the renters who’d like to acquire their deeds?

Congress seems close to agreeing on a final bill, although it won’t be easy. And when they get language that they can all support, then what? ROAD blocks ahead! The Trump White House has said no bills will be signed until a stricter ID requirement for voters gets passed first.

And so it goes…