When President Donald Trump dialed Elizabeth Warren back in January to talk housing, she almost didn’t pick up because she didn’t recognize the number. This president cold-calling one of the Senate’s most prominent progressives is itself highly unusual. Even more extraordinary is the result: bipartisan passage of the 21st Century ROAD to Housing Act.
The United States needs an estimated 4 to 5 million additional homes. As long as that deficit persists, homeownership, the primary vehicle for middle-class wealth accumulation, recedes further from reach. Young workers are priced out of opportunity, families delay buying homes and having children, and the gains from rising home values increasingly accrue to those who already own property.
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The recent political achievement deserves acknowledgment. But the ROAD Act mistakes America’s housing shortage for a failure of federal program design when the real obstacles are local land-use rules and federal cost mandates that make building expensive. Exclusionary zoning, Davis-Bacon prevailing wages, and costly energy mandates are not incidental to “the housing crisis.” They are the crisis. The bill is best understood, unfortunately, as selective deregulation wrapped in an expansion of administrative discretion.
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Minimum lot sizes, height limits, parking requirements, and single-family mandates have made it functionally illegal to build densely in most of the U.S.’s most economically productive cities, defined by gross domestic product per capita and job growth. Places such as Washington, D.C., Los Angeles, and Seattle consistently rank among the least permissive for new housing construction despite having the highest demand for it. The ROAD Act toothlessly addresses these hurdles with mere guidelines that are explicitly nonbinding, paired with a clause that forbids penalizing any locality that ignores them entirely.
Meanwhile, Davis-Bacon prevailing wage requirements add an estimated 10% to 20% to the cost of federally assisted construction. They apply whenever a developer combines multiple federal funding sources, which is nearly always required to make affordable housing financially viable. The Congressional Budget Office estimates Davis-Bacon costs taxpayers $18 billion per year. The ROAD Act does nothing to reform it. Worse, its new grant programs actually trigger Davis-Bacon, meaning Congress has created additional spending.
National Environmental Policy Act streamlining looks meaningful on paper, but evaporates the moment a developer combines funding sources, which, again, is standard practice for virtually every federally assisted project. Energy mandates that on average add more than $11,000 per home essentially go untouched.
U.S. Department of Housing & Urban Development’s new financing structure also misses the central problem. The U.S. needs more housing, not more refinancing of the housing that already exists. Because refinancing existing properties is faster, easier, and less risky for the Federal Housing Administration’s insurance fund than financing new construction, capital naturally flows toward existing buildings instead of new ones. At the same time, HUD’s financing process for new construction still takes nine to 12 months, adding costly delays that discourage the very projects needed to increase housing supply.
Rather than addressing these structural costs, the bill builds administrative machinery. The Innovation Fund grants jurisdictions up to $10 million for demonstrating housing supply growth, but eligibility depends on a methodology defined by the HUD secretary. The Build Now Act likewise ties Community Development Block Grant allocations to a HUD-calculated growth score that the department designs, measures, and can revise at will, concentrating power over billions in grants in a single executive official.
The housing counseling reforms give the HUD secretary authority to deny renewal of funding to any counseling agency found noncompliant, and when agencies appeal that decision, their case is heard not by an independent body but by the deputy assistant secretary of Housing Counseling, a subordinate of the same office that made the original determination. The appraisal provisions similarly create a new credentialed trainee designation supervised by the existing licensing apparatus, expanding occupational licensing under the guise of workforce development.
The bill’s approach to institutional investors is equally misguided. Title X’s prohibition grandfathers every property the largest single-family rental firms already own, exempts their primary growth strategies through 11 carve-outs, and raises compliance costs for smaller competitors. The outcome is a policy that is simultaneously anti-market and anti-competitive.
Rather than layering new grant programs atop the existing system, Congress should adopt a simple principle. Any federal rule that makes housing more expensive without materially improving safety or health should be presumed unnecessary unless policymakers can prove otherwise. That means repealing Davis-Bacon for residential construction, replacing prescriptive energy mandates with performance standards, streamlining environmental review for projects in already-developed areas, and conditioning federal housing dollars on states allowing more homes to be built where demand is greatest.
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Congress should also rethink what federal housing policy is trying to accomplish. Success should not be measured by the number of grant programs created, applications processed, or guidance documents issued. It should be measured by how many additional homes are built, how quickly projects move from proposal to construction, and whether housing becomes more affordable without perpetual taxpayer support.
Until Washington makes building easier instead of governing it more extensively, the families priced out of the market will keep waiting while the federal bureaucracy keeps growing.
Julia R. Cartwright is a Senior Research Fellow in Law and Economics at the American Institute for Economic Research.
