The new ROAD to housing

Transcript:

Russell McIntyre:

So yeah, I think I agree with Chay. I am optimistic about a lot of the provisions in this bill to take great strides in reducing that supply gap, but it's not going to completely close it. And that's for a lot of reasons. But again, I am optimistic that a lot of portions of this bill will do great things to lower the cost of housing, to provide new housing opportunities for people who might not have otherwise had them, but there's still definitely work to do.

Maiclaire Bolton Smith:

Welcome to Beyond the Buildings by Cotality. I am your host, Maiclaire Bolton Smith, and I'm just as curious as you are about everything that happens in the property industry. On this podcast, we satisfy our collective curiosity, explore questions from every angle and look beyond the obvious. With every conversation, we illuminate what is possible. For years, the US property market has struggled with a shortage of homes and an outdated regulatory framework, but that's about to change. The bipartisan 21st Century Road to Housing Act just passed, and this is the most significant piece of federal housing legislations in decades. This bill targets everything from local zoning restrictions and environmental review timelines to institutional investor limits and appraisal modernization. The goal is to modernize how we buy, value and build homes, but change at this scale will require understanding how these shifts will shape the future and that means data.

So today we're joined by two key members of Cotality's policy team to help us break down what this historic legislation means for the market. Russell McIntyre and Chay Halbert. Russell and Chay, welcome to Beyond the Buildings.

Russell McIntyre:

Thanks for having us.

Chay Halbert:

Yeah, excited to be here.

Allie Barefoot:

Before we get too far in this episode, here's a friendly reminder about how to see what's coming up next in the property market. To make it easy, we curate the latest insight and analysis for you online. Find us using the handle at Cotality on all of our social media channels, but now let's get back to the show.

Maiclaire Bolton Smith:

Okay. Well, let's just dive in. Russell, let's start with the primary focus of this, the 21st Century Road to Housing Act, which stands for Renewing Opportunity in the American Dream. It's all about increasing housing supply. So the bill incentivizes local zoning reform and transit oriented development. So how will these federal initiatives push cities to change and why will this create a surge in demand for land use and parcel analytics?

Russell McIntyre:

Yeah, so as we all know, housing supply is notoriously very local, which is why it's been very difficult for the federal government to really address a lot of the issues.

Maiclaire Bolton Smith:

Sure. Yeah.

Russell McIntyre:

But there are some levers it can pull. So first, to your point on incentivizing local zoning reform, this bill actually creates a list of best practices for zoning and land use frameworks that local governments can use.

Maiclaire Bolton Smith:

So

Russell McIntyre:

This is in section 203. It's called the Housing Supply Frameworks Act. And this is important because a lot of local governments lack the analytical capability to actually evaluate how their zoning rules constrain their housing production. So by providing some frameworks and best practices, HUD or Housing and Urban Development is able to set some benchmarks and standards that the communities themselves can use to assess their progress.

Maiclaire Bolton Smith:

And

Russell McIntyre:

Then on the data side of that, as these communities are going through that assessment, local governments will need land use and parcel analytics to help measure their housing shortages to identify parcels that are suitable for redevelopment. And then as they start enacting reforms, they'll need more data to actually evaluate the zoning outcomes and track their housing production trends. So a lot of hope that these federal tools can actually help communities with their zoning reform. And then second on the transit oriented development, this bill actually changes how federal transit projects are going to be evaluated moving forward.

Maiclaire Bolton Smith:

Oh,

Russell McIntyre:

Interesting. So it directs the Department of Transportation to provide more favorable scoring for transit projects in communities that adopt pro - housing policies around their transit infrastructure. So as an example, some of the policies that could lead to a favorable score include things like eliminating or reducing parking minimums, reducing your minimum lot size, allowing for taller buildings, streamlining development aprovals, and so on and so on. The underlying problem that this is looking to tackle is the fact that so many workers, especially those at or near minimum wage, are more and more often priced out of living in the communities where they work. And as a result, they're living in outer communities that have less options for transit, which increase their commuting costs. And I'm just thinking of Washington DC, the broader DMV where I live, you can see this a lot if you just travel down the Metro.

So as you go through the heart of the city, there's plenty of housing options off of each stop, but the farther you go out, the less housing you see and the more parking lots you see, the more parking rides. And for those who are working at or near minimum wage, it is just a much larger financial burden and a time burden for them to commute to work if you have to find a car ride just to get to the Metro and then take the Metro in.

So by building more housing near these transit stops, it just provides more opportunities for work for those individuals.

Maiclaire Bolton Smith:

That is really interesting. Okay, so Chay, I want to now look at this legislation. It streamlines environmental reviews to help accelerate housing construction. So like the National Environmental Policy Act or NEPA. So as the development pipeline speeds up, how will this affect our market forecasting models and how can builders use the site selection intelligence to help find the most viable locations?

Chay Halbert:

Well, yeah, I think it's going to help models to get more accurate. So it's like as you're accelerating the timelines, as you're removing processes, review processes,

NEPA review, all those kind of things as those start to get waived or shortened, it's taking uncertainty out of the formula, so to speak. So I would think those models will benefit from this in the places where this applies. In terms of builders being able to use site selection, it's like the devil's really going to be in the details. So for instance, in the place where you can exempt NEPA review for rural housing service projects that are for residential projects that are infill. So if you're a builder, then you want to know where that infill is. That's going to be really important. And those lots, they're going to be pretty valuable because you don't have to go through that NEPA review process or you're going to go through an accelerated one. And so down to the parcel understanding of is this infill? Does this meet the requirement to get some kind of review waived?

That's all extremely important information.

Maiclaire Bolton Smith:

Russell, I also want to talk about appraisals because part of this bill includes the Appraisal Industry Improvement Act, which is really focused on modernizing valuation methods. And we've talked about this on this podcast a lot over the last few years. So how does this push towards data-driven and hybrid and automated valuation models really reshape traditional appraisal practices? And what does it mean honestly for accuracy and getting everything right?

Russell McIntyre:

Yeah, so as you mentioned, over the past several years, we've been seeing a push from pretty much all the federal agencies with any sort of role in the housing market from FHFA, the Federal Housing Finance Agency, Fannie Mae, Freddie Mac, the Department of Veterans Affairs, the Consumer Financial Protection Bureau. All of them have started embracing alternatives to the traditional appraisal workflow. These are forms that have focused on items like property inspection waivers, desktop appraisals, and hybrid appraisals, and obviously automated valuation models or AVMs.

So this bill, the 21st Century Road to Housing Act, builds on all of that progres in a few ways. One, it addresses the current shortage of appraisers that we have, especially in rural areas by allowing state licensed appraisers to perform FHA appraisals, which have been seen a lot longer wait times. If you were getting an appraisal through FHA for an FHA financed home, you are often having to wait a lot longer to get those appraisals done due to these regulations. So hopefully that'll speed things up a bit. The bill also improves the review and resolution procedure for when a homeowner initiates a reconsideration of value or a subsequent apraisal on a property. And then it just also modernizes a number of industry regulations.

But as you alluded to in your question, AVMs are becoming increasingly more critical to the housing market, which means AVM quality is becoming increasingly more critical. So thinking about things like the coverage of property records that you have, the ability to refresh data in a quick and timely manner, just how accurate you are, how well your models perform, but also things like data providence, making sure you have that documented historical record of a data set and a number of other quality assurance measures. So all in all, I think this trend just increases demand across the broader housing ecosystem for partial level housing data, neighborhood analytics, market forecasting, those sorts of tools.

Allie Barefoot:

At Cotality, we value knowing a home inside and out. Whether you're buying a home, originating a mortgage, or managing portfolio risk, accuracy matters, especially when you're searching for the value of a property. That's why our THVX system starts from a database with 99.9% coverage of US properties for property valuations. Our models are built with core AI technology to deliver the most up-to-date property values whenever and wherever you need them.

Maiclaire Bolton Smith:

It's not just automation and speeding things up, but it's all about accuracy.

Chay Halbert:

Exactly.

Maiclaire Bolton Smith:

Yeah. Chay, I want to go back to you because there's a ton in this bill and there's a lot of discussion around the provisions limiting the number of homes large institutional investors can buy. And we've talked about this on this podcast before, and I know we've done a lot of analysis on this on our Cotality Insights page as well. So even though the seven-year divestiture rule was ultimately dropped, what limits remain with this new bill?

Chay Halbert:

Well, at a high level, it's pretty straightforward and the title tells you everything in terms of homes being owned by institutional investors. But I think what's important are some of the exceptions that were added. So if you're an investor, you can still own build to rent, you can still own renovate to rent,

Maiclaire Bolton Smith:

You

Chay Halbert:

Can still own homes as part of a home ownership boosting program. And if you are a mortgage servicer or a lender of some kind and you obtain a property through foreclosure, those are all still categories that as an institutional investor, you're still allowed to own, so to speak. And so those are really important exceptions because you don't want to take away that stock of build to rent. You don't want to have a lender in some kind of weird situation where they have to foreclose, but then they're not allowed to own that property. So there were examples like that that luckily they did get ironed out through the billmaking process.

Maiclaire Bolton Smith:

Very interesting. And I know these types of limits are continuing to be talked about. They're definitely a hot topic with this legislation and just across the industry as well. Something else that's interesting, Russell, I want to go back to you, is manufactured housing is really taking stage as an affordable housing solution complete with FHA lending standards. So why is this specifically becoming a new affordability target or is it a new affordability target?

Russell McIntyre:

Absolutely. For the past several years now, affordable housing advocates have been pushing for more manufactured housing as part of our solution to the broader supply crisis. And that's for many reasons. When compared to traditional site-built housing, mafactured housing typically has lower construction costs, faster production timelines, more standardized quality control, less labor requirements, even just fewer weather delays.You're building a home indoors versus on the site. Weather can be a factor. So manufactured housing can also be scaled up much more quickly while maintaining those lower price points. But however, manufactured housing has been held back over the decades by regulatory constraints. So going back to the mid - 1970s, HUD code has required that all manufactured homes be built on a permanent steel chassis. So a chassis is a 10 to 12-inch metal frame, 10 to 12-inch thick metal frame attached to the underside of a manufactured home that enables it to be transported on a truck.

We see them going down the highway. This chassis is what connects it to the truck. In the past, this was so homes could be easily transported and owners move them a lot more frequently. Today, however, data shows us that only about 5% or even less of all

Maiclaire Bolton Smith:

Manufactured

Russell McIntyre:

Homes are ever moved after their initial placement.

Maiclaire Bolton Smith:

Interesting.

Russell McIntyre:

Yeah. So this chassis requirement has become very outdated. It doesn't serve a purpose, but it does add about five to $10,000 to the overall cost of the home. And it just adds other difficulties. The home has to be raised off the ground, it makes it harder to add a basement, things like that.

Maiclaire Bolton Smith:

Interesting.

Russell McIntyre:

Thankfully, this bill is getting rid of that chassis requirement. So this is expected to raise supply due to lower manufacturing cost. You still have to have that chassis to transport the home, but if it doesn't have to stay attached to the home, you can reuse that chassis over and over on that truck, which brings down costs for the producer. So as communities start to look at manufactured housing as a way to increase housing supply, there's going to be a greater demand for data to help them identify vacancies, understand property conditions, look at revitalization data at a neighborhood level. So a lot of optimism for the manufactured housing industry coming out of this bill.

Allie Barefoot:

It's that time again. Cotality just dropped new numbers about what's happening in the housing market. Here's what you need to know. When Washington announced intentions to curb institutional home buying, mega investors, those who own at least a thousand properties, pulled back almost instantly. This reaction is heavily concentrated in major bellwether metros. San Jose saw mega investors' share drop 3.2% followed by declines in Huntsville, San Diego, Seattle, and Riverside. Interestingly, Atlanta, the only major market where institutional buyers account for more than 10% of all purchases, showed no significant decline. While a retraction institutional capital could slow the build for rent pipeline and shrink rental options, it also signals a massive opportunity. First time home buyers are suddenly on a more level playing field to compete for limited starter home inventory where nearly half of all investor transactions occur. To read the full report, visit Cotality.com/insights and that's a sip.

See you next time.

Maiclaire Bolton Smith:

That is great to hear. And I think optimism coming out of change is always a positive thing, so that's really good to hear. And there's so much in this bill that I feel like this podcast could go on for about two and a half hours. But you both have been here enough to know that I like to end these podcasts with your pull out your crystal ball. So Chay, let's start with you. The Road to Housing Act is set to reshape the property landscape. If we look towards 2030, which is not that far away, do you expect that this legislation will have successfully closed this national housing supply gap that we currently have?

Chay Halbert:

Well, I hate to be kind of a downer on this, but I mean I'll just say short answer is no. The gap is really, really big.

It's millions of homes across the country. And I want to be very clear that overall I think this is a great step in the right direction. But at the end of the day, like Russell had said, homes are local. Every home exists in a specific place. And so each of those places have all of their own rules and regulations and it's great that you have a bill like this. So for things that float over the top of those rules and regulations, you're getting clarity, you're eliminating red tape. But at the end of the day, homes also cost money to build.

Maiclaire Bolton Smith:

And

Chay Halbert:

This bill and this collection of bills, it doesn't have this huge infusion of money to build homes. There is money here and there and that's a good thing. And again, clearing the red tape and making stuff clear, that's great. But I do think it's a step in the right direction, and I think it's going to make a lot of improvements in the places that it targets though.

Maiclaire Bolton Smith:

Okay. Russell, do you have the same view or what do you think?

Russell McIntyre:

So yeah, I think I agree with Chay. I am optimistic about a lot of the provisions in this bill to take great strides in reducing that supply gap, but it's not going to completely close it. And that's for a lot of reasons. But I think the main one is that while this current housing crisis might be just the tip of the spear, it's part and parcel of a larger affordability crisis in the country. So if we want to see a housing market that's operating at peak efficiency that's able to match supply with demand, we've got to change more than just our zoning rules and other things in this bill. I think the cost of living crisis extends way beyond housing in this country. However, again, I am optimistic that a lot of portions of this bill will do great things to lower the cost of housing, to provide new housing opportunities for people who might not have otherwise had them, but there's still definitely work to do.

Maiclaire Bolton Smith:

Yeah. Well, I guess that's what I expected from the two of you. I think it would've taken a lot for it to be, yes, this is the magic cure. So thank you both as always for sharing your insights. And I know the two of you will be back again, but thank you so much for joining me today on Beyond the Buildings by Cotality.

Russell McIntyre:

Thanks, McClaire. Of

Chay Halbert:

Course. Great talking with you.

Maiclaire Bolton Smith:

All right, and thank you for listening. I hope you've enjoyed our latest episode. Please remember to leave us a review and let us know your thoughts and subscribe wherever you get your podcast to be notified when new episodes are released. And thanks to the team for helping bring this podcast to life. Producer Jessi Devenyns, editor and sound engineer Romie Aromin, our Facts Guru, Allie Barefoot, and social media duo, Sarah Buck and Makaila Brooks. Tune in next time for another conversation that illuminates the ideas that will define the future.

Allie Barefoot:

You still there? Well, thanks for sticking around. Are you curious to learn a little bit more about our guests today? Russell McIntyre is a principal housing policy analyst at Cotality where he tracks federal and state legislative shifts, zoning reform initiatives, and regulatory frameworks. His work helps lenders, developers, and municipal agencies align their business strategies with emerging housing laws. Chay Halbert is a principal housing policy analyst at Cotality. With a background on public sector analytics and housing policy, Chay focuses on the intersection of data-driven property valuation, mortgage market reforms, and community development block grants.

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