How the ROAD Act will impact housing supply

HousingWire

On today’s episode, Editor in Chief Sarah Wheeler talks with reporter Tyler Williams to talk about the ROAD Act and how it’s already impacting homebuilders and housing supply.   Related to this episode:   How ROAD aims to boost housing supply and cut red tape  HousingWire | YouTube⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠  HousingWire AI Summit – August 11  HousingWire Mortgage Banking Summit – October 1  More info about HousingWire  Top 5 Trending   Housing Market Spotlight: What the national median price isn’t telling you  Zillow to lay off 500 staff in restructuring  Mortgage experts call ROAD to Housing Act a starting point for improved supply, affordability  Former FHA chief Frank Cassidy on JPMorgan Chase housing pledge  Exclusive: Lower launches mortgage option with minimum 1% down payment  Want more from Sarah? Don’t forget to subscribe!   The HousingWire Daily podcast brings the full picture of the most compelling stories in the housing market reported across HousingWire. Each morning, listen to editor in chief Sarah Wheeler talk to leading industry voices and get a deeper look behind the scenes of the top mortgage and real estate.

Transcript

00:11Welcome, everyone. My guest today is reporter Tyler Williams to talk about the Road Act and

00:15how it's already impacting home builders and housing supply. Before we dive in, here are the

00:20top five trending stories on housingwire.com. First, we have our housing market spotlight,

00:25What the National Median Price Isn't Telling You, followed by Zillow's layoff of 500 staff.

00:31Then we have mortgage experts call Road to Housing Act a starting point for improved supply

00:36and affordability. And former FHA Chief Frank Cassidy on JPMorgan Chase Housing Pledge.

00:43Finally, our exclusive on Lower Launch's mortgage option with minimum 1% down payment.

00:48Lots to see over there. Okay, we are ready to go. Tyler, welcome to the podcast.

00:53Hey, Sarah. Thanks for having me. I appreciate it.

00:56I appreciate having you on. You've done a great job. You're our home building reporter and you've

01:01covered this area from all different sides. And the first thing I wanted to ask you about is the

01:06Road Act because you, along with other people in our newsroom, have been all over that for a couple

01:12months, you know, as it worked its way through, as it was like last minute, you know, maybe he wasn't

01:17going to sign it. He didn't sign it. But now that it's now that it's done, you've also done a

01:23lot of

01:23reporting on what it means for the industry. So I would love to ask you first, can you give us

01:28an

01:28overview of what the Road Act really covered for those in housing?

01:32Sure. I think specifically from a home building perspective, because, you know, a lot of these

01:35provisions are focused on the supply aspect and, you know, streamlining development and that sort of

01:41thing covers a lot of different things. And I'll give you kind of a high level overview. And then maybe

01:46we can kind of dig into some of the more specifics after that. You know, I think one of the

01:51big things

01:51it does is it incentivizes local governments to adopt pro-supply measures. And that's on the zoning

01:57and kind of regulation side. The way that the federal government is looking to do that is by

02:02tying federal grant funds, like the community development block grant funding, to municipalities

02:07that adopt those pro-supply reforms. That is something that the federal government is trying to do

02:12to incentivize these little governments to make building, make housing development a little bit

02:17more streamlined. On the federal level, a lot of federal affordable housing development projects

02:25receive federal funding. So one thing that the federal government is doing is streamlining some

02:31federal environmental reviews. And that's a big deal because a lot of NIMBY groups will use

02:37use environmental reviews to essentially slow down affordable housing projects or even kill them

02:42altogether. So one example of that is the HOME program. That's a program that organizations like

02:50Habitat for Humanity use a lot and essentially exempts small projects from environmental reviews. So if

02:57you're building a 10-unit project, it allows you to build that quicker, potentially at a lower cost.

03:03Those are a couple main things. A lot of it too is just creating guidelines for local municipalities

03:08on pre-approved building plans and single staircase building and stuff like that. Essentially giving

03:17local municipalities more resources to streamline those sort of developments. And then a couple really

03:23big things I think we can dig into a little bit more too are the bill to rent provisions that

03:28exempt

03:28bill to rent from the institutional investor ban. That's a really big thing for the home building

03:34industry specifically. Another thing too is the efforts to make factory-built housing a little bit

03:40easier to build, a little bit cheaper. The big provision on that is the permit chassis removal.

03:46Removal of the permit chassis requirement. So that's one thing that can really move the needle on

03:52manufacturer housing development. So I think those are a couple really big things. Kind of a high-level

03:57overview and happy to kind of dig into any of the specifics from there.

04:01Yeah, I love that. So let's talk first about the carve out that we got for build to rent on

04:06the

04:06ban on institutional investors because that was causing a lot of pushback, right? And I think we

04:14saw a pretty immediate effect on the home builders where they were just like, we're not doing it. If

04:19we're going to have to sell these into the market in seven years or whatever it is, it's like

04:23we saw an almost immediate effect. So maybe walk us through what that means, what exactly the carve

04:28out is. Sure. So in early March, the Senate released a version of their bill that had the

04:33institutional investor ban. The problem is that it didn't provide exemptions for build to rent.

04:41And when it did provide exemptions for build to rent for new construction, it mandated that build to

04:45rent developers sold, you know, they would build, let's just say 300 homes in a build to rent community.

04:51And it was a mandate that they sell all 300 homes to individual homeowners after seven years.

04:56Every single build to rent developer I spoke to said that that math didn't work and essentially

05:01made it impossible to make a profit. So as a result, they just stopped building new homes.

05:08New capital flowing into build to rent projects for several months essentially dried up. So the problem

05:14there was built to rent developers didn't know how they can make a profit and it essentially

05:21really greatly slowed down new construction. Over the last few weeks in my conversation with

05:25built to rent developers, they say that capital started flowing back into projects and essentially

05:30has saved the built to rent industry. So it could take a couple months to really

05:38really get back that time loss because there was several months there where

05:42new construction really grinded to a halt. But the new changes in the final version of the bill

05:48essentially got rid of the seven-year self-requirement and provided generous

05:53exemptions for built to rent communities. So after all of that sort of legislative uncertainty,

06:00built to rent is basically back to where they were at the beginning of the year.

06:02Are the developers and builders for built to rent, is there a lot of overlap in single

06:07family developers and builders? Yeah. So there are built to rent developers that

06:11only do built to rent. There's home builders that only do for sale and then there's home builders that

06:16do both. A lot of home builders that do both got into it around COVID times when built to rent

06:21got a little bit bigger, but there's some overlap. I would say most focus on one or the other, but

06:27some do focus on both. Yeah. The thing that was so shocking to me when the Senate said,

06:35hey, this is what we're going to do, this institutional ban, is the thought that you would

06:39build something and then have to sell it all at the same time. I mean, it would just drive down

06:44the... First of all, you don't know what the market's going to be in seven years, but also

06:48you're selling 300 homes, basically an entire community at the same time. No one is going to make

06:53any money on that. It's already a pretty thin margin. Also thinking about, imagine if they

06:57mandated that multi-family developers do that. Let's just say you build a 200 unit multi-family

07:02building and they say, well, after seven years, you have to sell those as condos. No one would

07:06really think to do that. So I think a lot of those conversations with the built to rent industry,

07:10it was the topic of built to rent being treated differently than multi-family. And I think a lot

07:16of that is just because single family rentals, it's kind of gone into the political crosshair with

07:21the increase in renting and an unaffordability issue. So that is an issue. But I think to your

07:27original point, I mean, they wouldn't be able to make a profit. And even if they did, it would be

07:32so minimal, but it really made it impossible to, from a business standpoint, to invest in built to

07:38rent. I'm so glad that got taken out, obviously. One thing I want to say, too, is just all across

07:43the political spectrum, you saw the libertarian types on the right wing and then far left types on

07:49the left wing. So it was really across the political spectrum of people who kind of spoke

07:52out about it. And I think that was really one of the most interesting parts of covering this.

07:56It's just the bipartisan pushback against it. I think that's what we've seen with this whole

08:01Road to Housing Act is that housing is one of the things that is bipartisan that, you know,

08:07across the aisle, everybody's interested, their constituents are interested. And so I feel like

08:13the fact that we were even able to get this passed through in a pretty partisan time just speaks to,

08:18you know, the power of housing that way. Yeah, definitely.

08:21One of the things I wanted to talk about when I was in D.C. in June, right before we

08:26thought it

08:26was going to get signed into law. And so I met with a lot of industry leaders in D.C.,

08:31and they were so

08:33excited about that chassis change. So maybe explain to us what that is. Like, I was like, chassis,

08:38like in a car. And yeah, it's basically manufactured homes, right? Maybe explain to us a little bit

08:43why that was such a big deal. Sure. So the original reason for the permit chassis,

08:48and that's essentially a steel frame for manufactured homes. So the reason why those

08:52were put in originally from a historical standpoint was, number one, they wanted mobile homes to be

08:57mobile. So the permit chassis with wheels allows mobile homes to be moved quite freely. There was

09:03also the fact that, you know, mobile homes or manufactured homes built 40, 50 years ago were not

09:09structurally sound. So that the frame helped kind of make it more structurally sound. The problem is

09:14that the chassis, it doesn't really play an important role anymore. Very few mobile homes are

09:19actually moved after being placed. And they're so well built now that they don't need the chassis.

09:25So really what it does is it adds, first of all, it adds some cost. The cost estimates I've seen

09:30range

09:31from five to $10,000 per home. But in my conversation with manufacturer housing builders,

09:38they add this caveat that the five to $10,000 cost benefit, it's hard to kind of calculate because

09:45it's hard to know exactly how much would actually be passed on to the consumer. What they tell me is

09:49really the benefit of this chassis removal is that it adds so much design flexibility. When you remove

09:55the chassis, you're able to, you know, you can build the homes lower down to the ground. So it looks

10:04a lot

10:04more like site-built homes. And that means that these homes could be used more in info locations.

10:09They could probably get greater approval and, you know, from local municipalities and from the

10:15greater community. It just makes them look nicer. And that's a big part of it. A lot of the,

10:21a lot of people, when people think about mobile homes, they think about these kind of 90s era

10:24mobile home parks that are kind of ugly. But the new manufactured housing in combination with the

10:30chassis removal would make them a lot more aesthetically appealing. And also this change

10:38in combination with another proposal to remove the chassis requirement for upper level sections of

10:43mobile homes would allow for two-story manufactured housing, which is a thing now, but it's, it's pretty

10:49hard to build. So I think the way of contextualizing this change for the audience is that

10:56it will make two-story manufactured housing a lot easier to build. And that just opens up more

11:01opportunities in these really high cost markets where you need to add multiple, or you need to build

11:05multiple stories to make it work financially. I spoke to a developer out in Sonoma County, California,

11:12which I think the city he was building in had average home costs of over a million dollars, right?

11:17So this idea of being able to build more multifamily manufactured housing, which is cheaper,

11:22and these really expensive markets can add some more attainable housing supply in those areas.

11:27And I think that's really, really exciting. That might be perhaps the biggest change I think

11:31this bill makes from a supply standpoint. Well, we know that our audience was super

11:35interested in that because your story on the fact that they could do two-story manufactured housing

11:40was top of our traffic charts for like a week. People were just couldn't believe it. And so again,

11:47it feels like a lot of this was really modernizing or at least bringing into the modern era. Like you

11:54said, I mean, manufactured housing is completely different than it was like in the 50s.

11:58A hundred percent. Yeah, it's completely different. And I think a lot of what this bill does in general

12:03is it looks at a lot of these regulations that have been around for a while, and maybe their original

12:08intent

12:09doesn't make sense, or maybe it's been misused in certain ways. So it's a lot of it's modernizing these

12:15reviews and regulations. And manufactured housing, when you look at the new homes that are being

12:21built, I mean, they are starting to look more and more like traditional homes. And I think

12:25this just makes it more and more similar to a traditional home, but it comes with lower costs.

12:32Yeah, that's exciting. Also, I mean, I feel like this Housing Act really maybe took more seriously

12:40things like modular builds, factory built, not just manufactured homes, but accessory dwelling units.

12:46Like it was a pretty broad based bill when it came to like, here's how we attack the problem.

12:52Yeah, I think that is important. I mean, it doesn't just look at single family or multifamily or kind

12:57of what we think of, you know, the kind of big housing categories we look at. It looks at everything.

13:03It looks like, as you mentioned, ADUs, which is really important in a state like California.

13:08Modular and manufactured really looks at the gambit of housing. And I think that that's really

13:13important. Also looks at rental and for sale. And as we know that, you know, rental housing,

13:19obviously, everyone wants to buy a home or not everyone, but sorry, I'm gonna do that again. But

13:24I think one thing I want to add is just, you know, it looks at rental housing as a really

13:30important

13:30aspect of the supply picture. And when you look at in many markets, it's renting a home is up to

13:38upwards of $1,000 or more cheaper than buying a home. It looks at rental housing as being an

13:43important part of the housing supply, which I think is important. That's really interesting. I mean,

13:48you mentioned incentives a little bit earlier. What, from the builder's perspective, is the biggest

13:54incentive they're getting that like spurs them to do more building in the Road Act?

13:59Yeah, unfortunately, there's not a lot. There are some things to bolster the Opportunity Zones

14:04program, which provides tax incentives for developers that build in underprivileged areas.

14:10But that's already an existing program. Most of the incentives in this are really tied to

14:16municipalities. And so unfortunately, there are not a lot of incentives for market rate. If you think

14:23about kind of like the Pulte groups and Lennars of the world, a lot of those incentives that they would

14:28get would be on the local level. On the federal level, there's not a ton. There is some funding

14:33for affordable housing and the like. But for market rate, the incentives are really tied

14:39towards like the regulatory level on the municipality side and the state level.

14:45As you've been talking to builders after this got passed, what changes are they most excited about?

14:50I think it depends on who I'm talking to. Obviously, if I'm talking to a bill to rent developer, they're

14:54elated by the bill to rent changes. A lot are very excited by the manufacturer housing. I would say that

15:00of all the stories that I've written, the biggest reception has been the manufacturer housing. So I

15:06would say that's probably number one. You know, I hear a lot on the streamlining federal environmental

15:12reviews as being a big one, particularly for affordable housing. A lot of builders are excited

15:17about the incentives on the local level to incentivize localities to adopt pro-housing reforms.

15:25But I think what I hear a lot in general, and you probably hear this a lot from housing professionals

15:30too, is it just the fact that on a bipartisan level, the federal government stated that housing is

15:36a big priority and sends a signal to localities that they need to change. I think that that's

15:41really from an overarching standpoint, the big change. The problem for home builders is that

15:49most of the roadblocks that they face come on the local level. And that comes from impact fees and

15:54just elongated reviews and approval processes. And there's only so much the federal government can

15:59do. And that's something I touched on in my reporting. The federal government only has so much

16:03power. So I think the way of looking at this is that it's a good start and it's up to

16:08these states and

16:09localities to pick up the ball and start running from there. Well, listeners, continue to watch our

16:16space because Tyler's doing a ton of things on this as it rolls out and as it's adopted in different

16:22ways. So it's been really great. It's not just like, oh, that's done. Okay. The bill got passed.

16:28Okay. But it's, it's really like what comes next. The first step in a very long process is,

16:32is basically what I think about it. Absolutely. Well, you know, the other

16:36topic I want to talk to you about was tariffs. So 2025 felt like, um, you know, we did a

16:42tariff

16:42story once a week because they were, um, they were so, uh, such a big part of, of the president's

16:50policy initiatives in 2025. And they changed a lot and it, it was unclear what was happening,

16:55you know, and then it kind of settled down. People, uh, including builders got used to it or

17:00whatever. Um, those, those things are still in effect, but then, you know, recently president

17:05Trump, uh, proposed a 50% tariff on most, uh, Canadian goods, which, you know, would affect

17:10home builders, I would think. So we'd love to know what you found out in your reporting there. Like,

17:14what does this mean for, for home builders? Sure. The, the answer is that it, it doesn't have as

17:20big of an impact as some might think. So first of all, there's, there's already some tariffs on

17:26Canadian goods already. Uh, these new tariffs essentially affect building materials like

17:31cement, glass, glass, um, doors and plywood, you know, the biggest impact there might be from cement,

17:38which accounts for maybe, I think Canadian cement, uh, accounts for only about 5% of the U S's overall

17:45cement usage. So it's not a huge percentage. Um, so the way I would think about this is that there's

17:51already Canadian tariffs in place. The new ones might not have a huge impact. Um, but the existing

17:58ones I think could are already having a big impact. And those include a, um, you know, a big tariff

18:05on

18:05Canadian softwood lumber, which accounts for, I believe about three quarters of, uh, American, uh,

18:12softwood lumber imports. So that's, that's been a huge impact, other impacts like copper and, um,

18:18you know, kitchen cabinets and the like. So I think the way I would think about this is it adds

18:23more uncertainty and a lot more noise, but the Canadian tariffs that were already the most impactful

18:29were already in place and, and kind of remain unchanged by this. So builders have already absorbed

18:34that, figured it out, know, know what they're getting into. It's been around for a while. I think, um,

18:38um, any, any new impacts will be, uh, less than the impacts that have already been felt.

18:43When, when we were reporting a lot on it last year, we, we were tracking kind of like what,

18:47what those tariffs, as they went along, what they added to the cost of, of building a house. Um,

18:53what are the, what are the most recent numbers on that?

18:56Yeah, it's, it's anywhere from seven, 8,000, upwards of 10,000. Those are sort of the general estimates.

19:02The analysts that I've spoken to that have done these estimates, they, they acknowledge that

19:07estimating a specific cost impact is really, really difficult. Um, partially just because

19:11the estimation process is difficult, but it's always changing. So, um, you know, I've seen 8,000,

19:169,000, 10,000. Uh, the way that I would think about this though, is that, uh, that doesn't mean

19:22it's necessarily going down to the home builders and down to the consumer. Um, you know, it's really

19:27interesting looking at the, the public home builders and their operations and their earnings calls, because

19:32without fail, I mean, almost, almost unanimous, unanimously that the big public home builders,

19:37as these tariffs have gone through over the last year, they've actually reduced their, their

19:41construction costs over the last year. And that's because they're able to, with their scale and

19:46negotiate with suppliers to reduce costs. Um, so the public home builders have not felt this at all.

19:53It's really a lot of the suppliers and kind of the distribution chain that that's received,

19:58these are kind of absorbed these cost impacts. Uh, the smaller private regional home builders,

20:04let's just say your home builder in Florida, you do maybe a hundred homes a year. You're,

20:08you're likely feeling those impacts, uh, a lot more than, you know, like the Pulte groups

20:13and the Lennars of the world. But I think when people say $7,000, $8,000, $10,000 per home,

20:19that doesn't mean that that's actually going to be passed on to the consumer or even pass on to the

20:23builders. I love that context. This is, this is why, um, you know, I think it's so important to

20:29have like housing focused, um, new sites like ours, because you do hear, you know, we, we always hear

20:36like these crazy headlines, uh, where someone will take something and there's not the context there.

20:40So, I mean, that's really good to know that like, you know, whatever, whatever those tariffs are,

20:44it's not like, Oh, homes are now $10,000 more than they used to be just because of tariffs.

20:49Not exactly. And I've seen crazy, I've seen upwards of $20,000 per home. And I think, you know,

20:55obviously being in news, I think we both understand that when you have kind of sensational headlines,

20:59it draws clicks, but I mean, there are, there is a concern, obviously when you pair this with the

21:06war in Iran and, and higher oil prices, um, some suppliers with, with oil prices have

21:12announced price hikes to, you know, things like shingles and, and paint and stuff like that. So

21:17there is a risk over the next year of cost increases that could be passed on to the consumer.

21:23When I've, when I've looked onto earnings calls, for example, like Pulte group or the, or the big

21:27home builders, a lot of the cost impacts they say, what might be more negligible, maybe like $500,

21:32$1,000 per home. And so it's not like all this is passed on to the consumer. And that,

21:38that's definitely important context. Thank you so much, Tyler. This has been really interesting.

21:42We're going to have you on, uh, on a regular basis to find out what's happening in the home

21:46building space, because it's such an important part of our whole ecosystem, no matter where you

21:50are in housing. So thank you so much. Appreciate that. Thank you.

21:54We'll be on a slide.

22:03You

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