A significant shift in federal housing policy is creating the potential for a new wave of infrastructure and community development projects throughout America. The opportunities will extend well beyond residential construction, reaching water and wastewater systems, transportation infrastructure, redevelopment of public property and improvements to existing neighborhoods.
The 21st Century ROAD to Housing Act, signed into law on July 11, is designed to accelerate housing production, reduce regulatory barriers and give state and local governments additional flexibility in using federal funding. The legislation also authorizes several new competitive grant programs that could eventually support billions of dollars in housing-related investments, depending on congressional appropriations.
The timing is interesting. An Oct. 1 analysis by the Bipartisan Policy Center identified six newly authorized competitive grant programs and urged state and local officials to begin preparing projects and establishing partnerships. Although Congress has not yet appropriated funding specifically for these programs, local governments can begin positioning themselves for future opportunities. Changes to existing federal housing initiatives also create new possibilities for public-sector planning and investment.
One of the most significant provisions is the creation of a new Housing Innovation Fund. The legislation authorizes $200 million annually from fiscal years 2027 through 2031, potentially making $1 billion available over five years. The program is designed to reward local governments and tribal communities that demonstrate measurable increases in housing supply. Individual grants could range from $250,000 to $10 million, with funding available for eligible housing and community infrastructure improvements.
This program also creates incentives for local government officials willing to modernize zoning regulations, streamline permitting, encourage higher-density development and eliminate barriers that have historically delayed housing construction. Communities that can demonstrate progress in increasing housing production will be better positioned to compete for funding once appropriations are approved and the program is operational.
Another beneficial change involves expanded flexibility in the use of Community Development Block Grant (CDBG) funding. The legislation allows eligible communities to use a portion of these federal allocations for affordable housing construction. Previously, federal restrictions generally limited the use of CDBG funds for new residential construction, with only certain exceptions.
The HOME Investment Partnerships Program is also worthy of note. The legislation expands flexibility for certain jurisdictions that do not receive Community Development Block Grant assistance to use HOME funding for infrastructure improvements directly associated with eligible affordable housing developments. These projects could include water and sewer lines, roads, sidewalks and utility connections located within or immediately adjacent to qualifying housing developments.
This provision addresses a problem that has become increasingly serious for communities throughout the country. Local governments may have available land and strong demand for additional housing but lack the infrastructure capacity to support new development. Water treatment facilities, wastewater collection systems, transportation networks and other public assets often require major upgrades before new residential construction can proceed.
A National League of Cities survey found that 80 percent of municipal leaders identified infrastructure needs as an obstacle to increasing housing production. That finding illustrates why federal housing policy has implications for engineering firms, construction contractors, utilities and other companies involved in public infrastructure.
The new law also places greater emphasis on the use of publicly owned property. Recipients of Community Development Block Grant funding are required to develop publicly accessible, searchable databases identifying undeveloped land owned by their jurisdictions. This requirement took effect October 1, although federal implementation guidance is still pending.
As these inventories are developed and become available, public officials, developers and infrastructure companies may be able to identify properties suitable for residential development, mixed-use projects and related community improvements. Preparing those properties for development could require site assessments, environmental reviews, utility extensions, transportation improvements and other professional services.
Another newly authorized initiative, the Revitalizing Empty Structures into Desirable Environments program, or RESIDE, will support the conversion of vacant commercial and industrial buildings into affordable housing. This pilot program is authorized for fiscal years 2027 through 2031 and could create opportunities for architectural and engineering services, environmental remediation, building modernization and adaptive reuse projects if Congress provides the necessary funding.
The legislation also establishes a planning and implementation grant program to help eligible governments undertake planning and community development activities. This initiative could support work associated with land-use planning, regulatory modernization and preparation for future housing development.
Other provisions address rehabilitation of existing housing, manufactured housing communities and the use of preapproved building designs to reduce construction costs and shorten development timelines.
Unfortunately, implementation of this legislation will not occur immediately. The Bipartisan Policy Center notes that the law contains 60 sections and requires numerous federal administrative actions, including new guidance, regulations and program implementation decisions. The Department of Housing and Urban Development will carry much of that responsibility.
Funding is the big consideration. The legislation authorizes new funding programs, but Congress must now appropriate the money required to operate them. The timing and amount of those appropriations, along with federal implementation decisions, will determine when many of the anticipated opportunities can begin moving forward.
Nevertheless, local governments have reasons to begin preparing now. Communities that identify potential projects, document housing needs, evaluate infrastructure deficiencies and establish partnerships with private-sector firms will be better positioned to compete for funding when these new federal programs become operational.
The good news is that the federal government has established a new policy framework intended to accelerate housing development. The next challenge will be translating that policy into funded projects. As state and local government officials begin preparing, a new wave of public infrastructure and community development opportunities is likely to emerge.
