After months of negotiations accompanied by back-and-forth political drama in the final few weeks, the bipartisan 21st Century ROAD to Housing Act officially became law Saturday.

The subdued welcome at the stroke of midnight arrived after President Trump abruptly canceled a signing ceremony weeks earlier in protest of Senate inaction on his priorities. Despite calling the bipartisan act a "big yawn," the president quietly allowed the bill to take effect by declining to veto it. 

Celebration over the legislation's passing is being tempered with the acknowledgment that it could still take years for the bill to generate significant savings for many lenders and homebuyers, with some pointing out the need for ongoing investments. 

"There is no silver bullet when it comes to solving the national shortage of affordable housing," National Association of Affordable Housing Lenders President and CEO Sarah Brundage wrote in a statement on Monday, labeling the bill as a start and not the endgame. 

Still, the removal of a major sticking point in a prior Senate version of the bill led housing groups and lenders to universally welcome the news, having pushed for the passage of comprehensive legislation over most of the past year. In a prior version of the act, institutional investors would have been required to sell new single-family rental units after seven years, leading the National Association of Home Builders to threaten to withdraw support in March. 

With that provision removed, NAHB applauded the introduction of the law on Saturday. "By reducing regulatory barriers, helping builders increase supply and expanding opportunities for homeownership and rental housing, this landmark law is an important step toward easing the nation's housing affordability crisis," said NAHB Chair Bill Owens in a press release.   

The act should also lower barriers to new construction, including eliminating a decades-old rule requiring all components of manufactured homes to sit on steel chassis that had hampered the ability of lenders and builders to market the products.  

Similarly, a coalition of homebuilding and finance groups, including the NAHB, Mortgage Bankers Association and National Housing Conference, called the ROAD Act the most important housing-related legislation in a generation. 

"The revised bill will help communities expand housing supply, improve affordability and create more pathways to both rental housing and homeownership," the coalition said. 

What next steps could look like

In an implementation guide issued on Monday, NAAHL pointed to 124 actions now required by the federal government to meet affordability goals and noted that roughly 70% require the Department of Housing and Urban Development to take the lead. Close to half of all actions are expected to be completed within the next 12 months. 

"We can't be limited to no- or low-cost solutions. The reality is that the market is not producing enough affordable housing on its own," she continued while lamenting that recent HUD cutbacks will make the work even more challenging than it already is. 

The legislation stipulates the establishment of over a dozen new programs all under HUD's purview, the guide said. 

Along with changes to the steel-chassis requirement, the ROAD Act also included the following policy measures designed to encourage homebuilding and preservation across communities: 

• Authorization of a whole-home repairs program to help preserve existing stock
• Streamlined environmental reviews for homes built with HUD or U.S. Department of Agriculture funding
• A seven-year authorization of the Preservation and Reinvestment Initiative for Community Enhancement program, which helps support residents living in manufactured housing 
• Modernization of rural housing programs to help preserve hundreds of thousands of affordable units

"We thank lawmakers for prioritizing and enacting this bipartisan legislation, which will help community banks promote access to credit in local communities nationwide," said Independent Community Bankers of America President and CEO Rebeca Romero Rainey in a press statement. 

The legislation includes provisions to loosen restrictions on deposits held at community banks to open up lending to customers.

While much of the attention on the ROAD Act focused on supply solutions, veteran homeowners will also see benefits with its introduction, lenders said. The legislation mandates side-by-side comparisons with other government-backed loan options for Department of Veterans Affairs borrowers, including products from the Federal Housing Administration and the U.S. Department of Agriculture. 

"Veterans stand to gain some of the most direct benefits in the ROAD Act," said SimplyPMG Chief Production Officer Fernando Ospina. "New side-by-side comparisons will let them make smarter decisions."

The impact on institutional investors

A frequent point of contention in policy conversations about housing legislation is the volume of homes available for purchase to institutional buyers, who have found themselves criticized for their alleged role in driving up costs.

Data suggests that the effect of implementation of the ROAD Act on institutional purchases is likely to be limited, according to Cotality Principal Economist Thom Malone. 

"Large institutional investors have already pulled back sharply in response to the prospect of regulation alone. Purchases by the largest investors — those owning more than 1,000 homes—fell by more than half earlier this year and have remained subdued since," Malone recently said immediately after the bill's Senate passage. 

"In effect, the market began adjusting before the legislation was even finalized," he added. 

Although institutional purchases of single-family rental homes figured into negotiations, analysts at Kroll Bond Rating Agency also saw minimal impact of the bill on the SFR segment. 

"The legislation primarily affects future portfolio growth rather than existing collateral, and SFR values are expected to remain supported by individual home sales to owner-occupants rather than institutional buyer demand," KBRA said in a research report on Monday.