That’s a “Yes” in Our Back Yard: New Federal Law Cuts Builders’ Red Tape

The 21st Century ROAD to Housing Act is now the law. It’s winning praise for cutting red tape. And its $200 million innovation fund, while not exactly huge and yet to be funded, could stimulate local governments to ease their burdensome and restrictive rules. The new federal law speeds up reviews, updates borrowing rules, and views factory-built housing as a key component of creating affordability.

How does the construction industry see this playing out? Will it move the needle? Can we normalize affordable deeds now?

Lifting Up the YIMBY Spirit 

The federal law is nearly 400 pages long. And it does a lot to change restrictive federal policies. But it can’t force local officials to make zoning changes. Local governments still make the rules that can help or hinder building and affordability projects. Deed holders have a say in how this turns out.

Many established deed holders don’t want any more concentrated housing than they already have. Those who resist higher housing density, nicknamed the NIMBYs, have prevailed for a long time.

The tide is turning. Affordable housing has become an urgent political priority across the country. The passage of the 21st Century ROAD to Housing Act backs this up.

Now, state governors and city mayors, together with armies of local administrators and planners, will need to act on the intentions of this law. And the new federal law, once it’s properly funded, will reward them for doing so. The innovation fund will issue $250K+ in grant money to a town willing to make space for affordable housing by, for example, rethinking how much space should be allocated to parking. By extension, this will raise the profile and value of public transit. 

Does your town lean more to the NIMBY or YIMBY side? Read up on where people stand on increasing the housing supply in their “backyards.”

How Local Building Codes Influence Home Prices

According to the National Association of Home Builders, red tape makes up more than a quarter of a new home’s sale price. By red tape, the Association means the processes involved in getting the building plans approved.

If the local zoning commission votes against a plan, a given project can be stopped, or face long delays, even after major investments of resources. That adds to the costs of builders’ work.

Even where everything works out, a good deal of time and expense goes into following the local building codes, getting through the inspections, and obtaining the permits.

Sometimes, the people trying to create more housing units are ordinary deed holders. And they are not equipped with a team to help them understand or push through all the red tape. That gets in the way of regular people who would like to add extra housing units to their properties. By limiting the housing supply, this, too, contributes to high housing prices.

The new law will temper the various regulations that have pushed up costs and dragged out timelines for affordable housing. It does not order the states and towns to act. But it offers ideas, templates, and incentives. It will encourage more housing on less land. It will reward towns that adopt more user-friendly permitting.

Creating a More Flexible Paradigm for Neighborhoods

Many procedural hoops are vital for health, safety, and environmental sustainability. But some restrictions get upheld with zero flexibility because the town has “always done it this way” or departments are short-staffed, or because change is shouted down in township meetings.

Is every administrative process needed for every project? No, says Congress, through the new federal law.

And sometimes, similar reviews are required by separate agencies, when their people could be working together. There are ways to make things less complicated, less costly.

So the 21st Century ROAD to Housing Act, in effect since July 2026, peels off red tape in the following ways:

• Directs separate federal agencies to work together, consolidating and streamlining their environmental reviews. Joint building inspections are encouraged, too.

• Eases requirements under the National Environmental Policy Act (NEPA) for rehab projects and for filling in already-built areas.

• Allows developers to skip environmental reviews for public infrastructure repairs, office-to-home conversions, multi-unit developments of up to 15 units, and affordable housing projects.

• Streamlines the environmental review processes in the HOME program—a mainstay for Habitat for Humanity and other developers that work in the public interest.

• Introduces a housing conversion project into the HOME program. The idea is to renovate vacant buildings and turn them into viable homes. The project will offer flexible income eligibility, in order to serve a wide range of modest-income households. 

• Discontinues the rule that says a manufactured home must have a movable frame. The end of this requirement is expected to spark innovation in design, leading to greater urban and suburban acceptance of affordable, factory-designed homes.

• Permits manufactured housing communities to qualify for key grant funds. 

• Updates federal rules to make them less burdensome for the manufacturing, installing, and financing of accessory units (garage conversions, backyard cottages, etc.). One section of the new federal law requires the U.S. Department of Housing and Urban Development to find and dismantle the extra rules and regs that make factory-built housing harder to produce. Part of this work, notably, will include the formulation of a standard template for state and local modular building codes. The Modular Building Institute is a fan. 

• Lets developers defer or shrink their capital gains tax when they invest in financially distressed neighborhoods.

• Raises multi-unit loan caps for the Federal Housing Administration for the first time in more than two decades. According to the building industry, this will make a significant difference in achieving housing supply goals. 

• Establishes grants that support towns and cities as they make preapproved housing plans, which make approvals faster and simpler to obtain.

• Adjusts current federal funding for local development to reward commitments to additional housing.

All told, the law supports best supply-generating practices at the federal, state, and local levels. Much of its strength lies in its red-tape removal. Its goals involve relaxed zoning and more help for projects that create and restore affordable homes.

Moving the Needle on U.S. Housing Affordability

One thing is clear. The new federal law will move the needle on U.S. housing affordability. Builders say it will bring about an expanded housing supply and stimulate growth in modular home manufacturing as well.

Finally, people are being heard on housing affordability. This law is a beginning—a permission structure for local policy shifts. Because local boards are still the gatekeepers for new housing plans, local residents will play a key role in determining just how far the ROAD to Housing Act can go.