Congress is putting housing money on the line. Here’s where it could matter most.

The 21st Century ROAD to Housing Act, signed into law by President Trump last month, aims to simplify the process of constructing affordable homes in the United States. Realtor.com analyzed the bill's potential impact on local housing policies across the country. The legislation offers several solutions, such as streamlining the permitting process for pre-approved home designs, bolstering community and rural banking, and updating Department of Housing and Urban Development programs.

A notable change involves updating a HUD program that distributes federal block grants to cities, states, and counties to foster affordable housing and economic opportunities for low and moderate-income Americans.

Key among these changes is the ability to allocate these grants directly toward building new affordable housing. Communities that expand their housing stock could receive larger allocations, while those failing to do so would see their awards diminish. Traditionally, CDBG funding has been used for infrastructure, economic development, and public service projects, rather than constructing new homes.

However, Realtor.com Senior Economist Joel Berner highlighted the program's potential: "Community Development Block Grant funding can be a meaningful tool for local governments, particularly because communities have flexibility in how they put those dollars to work."

The impact of these grants varies significantly by city size. While major cities like New York City, Chicago, and Los Angeles receive substantial awards, the impact is more pronounced in smaller cities like Camden, New Jersey, and Saginaw, Michigan. In these smaller cities, CDBG funds constitute a larger proportion of the local budget, making them more susceptible to changes spurred by the new incentives.

According to Berner, "The current payout structure is unlikely to change housing policy in most large cities when the potential penalty is a tiny fraction of their overall budgets."

Examining cities with populations over 250,000, Realtor.com identified those that could benefit most from the updated incentives. Cities like Milwaukee, Detroit, Toledo, Newark, Cleveland, Buffalo, Pittsburgh, Jersey City, and St. Louis, where newly-built homes make up a smaller share of the housing market, could see significant improvements due to the additional CDBG funding.

These cities, where the share of newly-built homes is less than 18% of the national average, could be well-positioned to take advantage of the new housing incentives. Berner emphasized, "Targeting incentives at places where homebuilding is least active could help unlock development where it is needed most." However, the ultimate success of this program hinges on whether cities can reduce regulatory barriers and make it easier to construct new homes.