The United States housing market is currently navigating one of the most challenging periods in its modern history, characterized by a persistent shortage of inventory and record-high price points that have pushed the dream of homeownership out of reach for millions. In response to these systemic pressures, the 21st Century ROAD to Housing Act has emerged as a cornerstone of legislative strategy for the 119th Congress. Touted by industry leaders and policymakers as the most significant housing legislation package in decades, the bill seeks to pivot federal policy away from traditional demand-side subsidies toward a more aggressive, supply-centric approach. By targeting the root causes of the inventory deficit—ranging from restrictive local zoning laws to the growing influence of institutional investors—the act aims to fundamentally restructure the American real estate landscape.
Michael Merritt, Senior Vice President of Customer Care and Default Mortgage Servicing at BOK Financial, recently provided an in-depth assessment of the legislation. While Merritt characterizes the bill as a "good start," he emphasizes that it represents only the beginning of a necessary long-term overhaul. His insights highlight a critical realization among housing experts: the affordability crisis is not merely a product of high interest rates or temporary economic fluctuations, but a structural failure of supply to meet the demands of a growing population.
The Shift from Demand to Supply-Side Policy
For decades, federal housing policy has largely focused on the demand side of the equation. Programs such as down-payment assistance, first-time homebuyer tax credits, and various mortgage interest deductions were designed to make it easier for consumers to enter the market. However, many economists argue that in an environment of limited inventory, these measures often have the unintended consequence of driving prices even higher by increasing the pool of buyers without increasing the number of available homes.
The 21st Century ROAD to Housing Act represents a departure from this trend. By focusing on supply constraints, the bill acknowledges that the primary driver of the current crisis is a lack of physical housing units. Estimates from various housing authorities, including Freddie Mac and the National Association of Realtors (NAR), suggest the U.S. is currently facing a housing deficit of between 4 million and 7 million units. This shortage has created a "seller’s market" that has persisted despite fluctuating mortgage rates.
Merritt noted that the legislation’s focus on the supply side is its most significant attribute. "It’s important to really look at the full picture of housing affordability," Merritt stated. "Most fixes for it have focused on the demand side, and that’s why we haven’t really seen huge gains. It’s got to be addressed on both the supply and demand side, and this is the great thing about what this legislation can do."
Addressing the Role of Institutional Investors
One of the more controversial aspects of the modern housing market is the rise of institutional investors—large corporations and private equity firms that purchase thousands of single-family homes to convert into rental properties. In some markets, these entities account for a significant percentage of all home purchases, often outcompeting individual buyers with all-cash offers and waived contingencies.
The ROAD to Housing Act includes provisions specifically designed to limit the impact of these large-scale investors. While some critics argue that investors provide necessary liquidity and rental options, Merritt suggests that their impact is often felt most acutely at the local level. In certain ZIP codes, an institutional investor can dominate the market, effectively setting a floor for prices that excludes traditional families.
"In certain metro areas, you usually see the bigger impact from some of the institutional investors," Merritt explained. "They can come in and push out your everyday homebuyer who has to get financing and probably has a hard cap on what they’re approved for." While the bill sets limits on the scale of these purchases, Merritt warned that larger companies might still find ways to circumvent these restrictions through complex corporate structures like LLCs. Nevertheless, the provision is seen as a vital step in restoring a level playing field for first-time buyers.
Zoning Reform: The Silent Barrier to Affordability
Perhaps the most significant, yet least discussed, obstacle to housing supply is the web of local zoning regulations that restrict the density and type of housing that can be built. In many American cities, "exclusionary zoning"—such as mandates for large minimum lot sizes or bans on multi-family units—prevents developers from building the "missing middle" housing that is essential for affordability.
The 21st Century ROAD to Housing Act attempts to address this by providing a federal framework for zoning reform. While the federal government generally lacks the authority to dictate local land-use laws, the bill uses incentives and guidelines to encourage states and municipalities to modernize their codes. Merritt identified zoning as one of the most "under-reviewed and under-talked about" factors impacting the market.
"If you look at some of the most unaffordable housing areas in the country, it can be traced back to some very specific zoning frameworks," Merritt said. He advocated for a firmer federal-to-state framework that creates consistency in regulatory standards, which could help lower the overall cost of construction. By streamlining the approval process and allowing for more diverse housing types, the act aims to unlock development that has been stalled for years.
HUD Pilot Programs and Small-Balance Loans
Beyond broad regulatory changes, the legislation introduces several pilot programs through the Department of Housing and Urban Development (HUD). One of the most promising initiatives involves the expansion of small-balance mortgage loans. Historically, many lenders have been reluctant to issue mortgages for lower-priced homes (typically under $100,000) because the fixed costs of originating the loan make them less profitable. This creates a gap where affordable homes exist, but buyers cannot secure the financing to purchase them.
By incentivizing HUD to support small-balance loans, the ROAD to Housing Act seeks to open up the lower end of the market to entry-level buyers. Merritt pointed out that these pilots are designed to provide data that will inform future legislation. "When you do a pilot, it has to prove that it works," he said. "The opportunity to see data and results in different communities—and across different borrower groups—could have provided useful information about the next major piece of legislation."
Timeline and Economic Context
The path to passing and implementing the 21st Century ROAD to Housing Act comes at a critical economic juncture. Following the housing boom of 2020-2022, the Federal Reserve’s aggressive interest rate hikes aimed at taming inflation led to a "lock-in effect." Homeowners who secured 3% mortgage rates became unwilling to sell, further strangling inventory.
The timeline for the bill’s impact is expected to be gradual. While provisions regarding institutional investors could provide some immediate relief in specific "hot" markets, the supply-side reforms—particularly zoning and construction incentives—will take years, if not decades, to fully manifest. Merritt cautioned that the housing crisis was decades in the making, and the solution will require a similarly long-term commitment.
Supporting data from the U.S. Census Bureau indicates that while housing starts have seen sporadic growth, they remain below the levels needed to keep pace with household formation. The ROAD to Housing Act is positioned as a catalyst to bridge this gap, but its success will depend heavily on the cooperation of local governments and the private sector.
Critical Gaps and Future Considerations
Despite the optimism surrounding the bill, Merritt and other industry experts have identified several areas where the legislation could go further. One primary concern is the "cost of capital." In a high-interest-rate environment, the cost of borrowing remains a significant barrier for both developers and buyers. Merritt suggested that the federal government could explore subsidies or other mechanisms to lower the cost of capital, particularly for projects targeting low-income families.
Additionally, while the bill includes pilots for small-balance loans, Merritt noted a lack of a "true low-income focus" in some of its broader provisions. Ensuring that new supply actually reaches the populations most in need remains a persistent challenge. There is also the question of state-level adoption; without significant buy-in from state legislatures to mirror the federal framework, the impact of zoning reforms may be limited to a handful of progressive jurisdictions.
Broader Implications for the American Economy
Housing is often described as the bedrock of the American economy, influencing everything from labor mobility to generational wealth building. The 21st Century ROAD to Housing Act is more than just a real estate bill; it is an economic strategy aimed at ensuring the long-term stability of the middle class.
If successful, the act could lead to a more balanced market where price appreciation is driven by sustainable growth rather than artificial scarcity. It could also revitalize urban and suburban centers by encouraging denser, more walkable developments that align with modern consumer preferences.
As the bill moves through the legislative process in the 119th Congress, it will undoubtedly face scrutiny from various interest groups. However, the consensus among experts like Michael Merritt is clear: the status quo is no longer tenable. By shifting the focus to supply and addressing the structural impediments to building, the 21st Century ROAD to Housing Act offers a blueprint for a more affordable and accessible future for American homeowners. The success of this "good start" will ultimately be measured by the number of keys handed to new homeowners in the years to come.
