New Federal Law Rewires Housing Grants to Push Cities to Build

A newly signed federal law is reshaping how cities receive one of the country's oldest housing grant programs — and it could meaningfully shift where new homes get built over the next several years. The 21st Century Road to Housing Act, a bipartisan measure that just cleared Congress and was signed into law, amends the Community Development Block Grant program to make funding bonuses and penalties contingent on how much new housing a city actually produces.

The analysis comes from Realtor.com, which cross-referenced HUD grant data with U.S. Census Bureau budget and population figures to identify which cities face the biggest financial pressure to start building — and which sellers in those markets should be watching closely.

How the Grant Program Works and Why Congress Just Changed It

The Community Development Block Grant program, commonly called CDBG, has existed since 1974. Administered by HUD, it sends formula-based funding to cities for housing, infrastructure, and economic development priorities. Cities have historically had broad discretion over how to spend the money, covering everything from property acquisition and demolition to public infrastructure and business development grants.

Funding allocations have long been based on population, poverty rates, and housing statistics — a formula that made the biggest cities the biggest recipients. New York City pulled in $169.4 million in 2023, Chicago received $75.1 million, and Los Angeles got $50 million. For most large cities, CDBG money amounts to a fraction of total revenue — the median grant-to-revenue ratio sat at roughly one-third of one percent in 2023.

The White House had sought to cut $3.3 billion from CDBG earlier this year as part of a broader 13% reduction at HUD. HUD Secretary Scott Turner argued the program had lost its focus. The National Association of Realtors and other housing advocates pushed back hard. NAR's 2026 president, Kevin Brown, sent a letter to Congress on April 30 urging lawmakers to preserve and strengthen federal housing investment. Congress ultimately kept the program funded — but attached the new homebuilding incentive structure through the 21st Century Road to Housing Act.

Under the revised rules, cities that expand their housing inventory stand to receive larger grant allocations. Those that fall short face reductions. Joel Berner, senior economist at Realtor.com, put it plainly: the law turns CDBG from a general-purpose community development tool into a direct lever for pushing cities to streamline permitting and modernize zoning.

The Cities Where This Change Hits Hardest — and Builds the Least

The mechanics of the incentive depend heavily on how much a city relies on CDBG funding relative to its overall budget. In large cities with massive revenue bases, even a meaningful percentage penalty amounts to a rounding error. Berner notes that the median penalty under the current payout structure is approximately $84,000 — essentially irrelevant to a city operating on a multi-billion-dollar budget.

That math changes dramatically for smaller or mid-size cities where CDBG represents a significant share of revenue. Realtor.com identified Altoona, PA, Franklin, NJ, and Camden, NJ, as cities where the grant accounted for more than 3% of total revenue in 2023. In places like those, the threat of a reduction carries real weight.

Combining CDBG budget dependency with low rates of new residential construction, Realtor.com ranked the ten large cities most likely to feel the push from the new law: Milwaukee, Detroit, Toledo, Newark, Cleveland, Buffalo, Pittsburgh, Jersey City, St. Louis, and Minneapolis. Every one of them sits in the Northeast or Midwest — regions that have chronically underbuilt relative to demand and where the housing stock is among the oldest in the country.

What a Construction Surge in These Markets Means If You're Selling

For sellers in these ten metros, the policy shift is worth tracking carefully. More federal pressure to build doesn't mean homes will appear overnight — permitting reform, zoning changes, and actual construction timelines play out over years, not months. But the direction of travel matters, and sellers operating in low-inventory markets in the Midwest and Northeast should understand what happens when supply starts moving.

In markets like Cleveland, Buffalo, and Pittsburgh, where home prices have held up partly because very little new product has come to market, increased construction activity — even gradual — starts to give buyers alternatives they don't currently have. More options means less urgency, which historically softens the negotiating position of sellers who have grown accustomed to receiving multiple offers or above-list prices.

The effect won't be uniform. Realtor.com's analysis acknowledges that some of these cities may be building slowly not because of regulatory friction, but because population growth simply hasn't demanded more housing. In those cases, pressuring cities to build could lead to inventory that the local market can't absorb — a scenario that would put additional downward pressure on resale values.

Sellers in these markets who are considering listing in the next one to three years should factor in both the upside and the risk. If your city responds to the new incentive by cutting red tape and approving more projects, competition for your home may soften faster than you'd expect. The smarter move is to get a clear read on your local absorption rate and current list-to-sale dynamics before assuming the market will hold.

For sellers trying to gauge where their home stands in a shifting supply environment, understanding your current offer value is a reasonable starting point. Local Home Buyers USA's instant-offer tool can give you a baseline number to work from as these policy changes continue to unfold.