With an acute national shortage of affordable homes, we must closely examine the complex regulatory landscape that too often adds cost to, and slows, the production and preservation of housing. Because there is a bipartisan consensus that we need to increase the supply of affordable rentals and starter homes, reforming regulations that unduly hinder housing construction and preservation is critical.
The cost of regulatory compliance can account for nearly 25% of the price of a typical newly-built, single-family home and an average of more than 40% for a multifamily housing development. These costs stem from a wide range of policies and processes—including navigating zoning and land use requirements, securing permits, adhering to building codes, and reviewing potential environmental impacts—formulated at all levels of government. Given the severity of the nation’s housing supply shortage and continued high housing costs, federal policymakers should encourage state and local reviews of unnecessary and excessively cumbersome regulations while also assessing and redressing federal laws and policies that unduly impede housing production and preservation.
The six targeted deregulatory proposals outlined below, which would require either administrative or legislative action, could help ease the housing affordability crisis by increasing the supply of homes and preserving the existing affordable housing stock.
Deregulatory Proposals to Increase the Supply of Affordable Housing
Categorically exclude infill housing from the National Environmental Policy Act
The National Environmental Policy Act (NEPA) requires federal agencies to assess the potential environmental impacts of proposed actions, a standard that can apply to housing developments receiving federal assistance. Complying with NEPA and related federal laws can be complicated and time-intensive, delaying the development of new projects and increasing their costs.
Federal agencies can designate certain actions as categorical exclusions under NEPA, excluding these actions from more stringent review—such as an environmental assessment or environmental impact statement—because they do not have a significant environmental impact. Currently, there is no categorical exclusion for infill housing, generally referring to developments built on vacant or underused land in existing urban areas. Consequently, a federally-assisted housing development on a parcel in a populated, well-developed area may still trigger an environmental review. California recently exempted most urban infill housing from review under its statewide environmental quality act, reflecting a growing interest in a deregulatory approach to harnessing the full potential of infill housing.
The Trump administration has prioritized modernizing and accelerating permitting, rescinding the Council on Environmental Quality’s NEPA regulations and directing agencies to update their implementation rules. Several agencies have completed these updates, but HUD has not finalized its regulations. Directing HUD and other housing-focused federal agencies to make infill housing a categorical exclusion could reduce unnecessary delays and costs for infill developments receiving federal assistance, while aligning with the Trump administration’s broader deregulatory push.
Amend the National Manufactured Housing Construction and Safety Standards Act to allow better-quality manufactured housing
HUD currently requires manufactured homes to be built on a permanent chassis, which allows these homes to be transported. While a permanent chassis can be a useful option, many manufactured homes are installed on a permanent foundation once they arrive at their destination and are never moved again. These homes must still comply with the permanent chassis requirement, which can add unnecessary costs. Local zoning boards also often use this requirement to restrict where manufactured housing can be placed.
Removing the permanent chassis requirement from Section 603(6) of the National Manufactured Housing Construction and Safety Standards Act of 1974 (42 U.S.C. 5402(6)) could allow more flexibility in deploying manufactured homes to address the housing shortage. In 2023, Rep. John Rose (R-TN) and 10 bipartisan co-sponsors proposed eliminating the permanent chassis requirement.
Manufactured homes are often less expensive and quicker to build than site-built homes. Eliminating the permanent chassis requirement could further reduce the cost of each manufactured home by $5,000 to $10,000.
Amend the Federal Housing Administration Section 203(k) program to support new, detached accessory dwelling units
In 2023, the Federal Housing Administration announced that borrowers could include future rental income from an accessory dwelling unit (ADU) as part of their income to qualify for Section 203(k) rehabilitation mortgages. FHA also expanded the program’s list of eligible improvements. These changes aimed to help more borrowers finance and build ADUs on their properties, providing borrowers with an additional income source while increasing overall housing supply.
However, FHA omitted new, detached ADUs from its list of eligible improvements for a 203(k) mortgage. Amending the program to include all types of ADUs would maximize the impact of FHA’s 2023 policy change in easing the housing supply shortage.
Direct relevant federal agencies to expedite the disposal of excess federal property for housing development
The federal government owns property across the country, including in many high-value real estate markets, from Los Angeles to Miami. Despite their potential value, unused and underutilized federal properties are often mired in the disposal process governed by the Federal Assets Sale Transfer Act and other federal laws. Although Congress has tried to streamline and improve the disposal process, years-long delays remain common.
The administration can encourage the Public Buildings Reform Board (PBRB), which was established in 2016 to identify and recommend high-value federal property for sale, to prioritize federal assets suitable for housing redevelopment in its next list of federal properties for potential sale. At the same time, the administration can direct federal agencies to quickly identify and report excess property. Federal agencies have historically struggled to identify and offload excess and underutilized office space, preventing the General Services Administration and Office of Management and Budget from executing their roles in the disposal process. A call to action to the PBRB and relevant federal agencies could help streamline and accelerate the repurposing of surplus federal property for housing development.
Proposals to Preserve the Supply of Affordable Housing
Eliminate HUD’s Rental Assistance Demonstration program cap
HUD created the Rental Assistance Demonstration (RAD) program in 2011 to give public housing authorities (PHAs) a tool to preserve and improve aging public housing properties by converting them to long-term Section 8 rental assistance contracts. This conversion unlocks private and public financing for critical repairs and modernization efforts that can extend the lifespan of public housing units. Since its creation, RAD has received bipartisan support.
Currently, the number of public housing units that can be converted through RAD is capped at 455,000. Eliminating this cap would allow PHAs to convert more of the nation’s roughly 970,000 public housing units to long-term Section 8 contracts.
This proposal was previously included in the Renewing Opportunity in the American Dream (ROAD) to Housing Act.
Clarify the 10-year rule exception for “federally- or state-assisted” buildings
Residential buildings acquired less than 10 years before the previous owner placed them into service are generally considered ineligible for credits under the Low-Income Housing Tax Credit program. While there is an exception for buildings that are “federally- or state-assisted,” there is widespread uncertainty about what this term means. This ambiguity has deterred prospective buyers from acquiring and rehabilitating residential buildings during the initial 10-year period.
Clarifying the term “federally- or state-assisted” could help prospective buyers proceed with certainty, facilitating the rehabilitation and preservation of affordable housing. This proposal is reflected in the bipartisan Affordable Housing Credit Improvement Act.
Conclusion
Deregulation is fertile terrain, and the deregulatory proposals outlined above are far from exhaustive. In response to OMB’s recent request for information on ideas for deregulation, organizations including the National Association of Home Builders, the National Council of State Housing Agencies, the National Multifamily Housing Council, and the National Apartment Association (via joint submission) offered dozens of proposals. Collectively, these ideas could serve as a starting point for the Trump administration as it prioritizes a deregulatory approach to addressing the bipartisan priority to increase housing supply and promote housing affordability.
