Where Housing Policy Heads Next

As we approach the end of 2025, major policy developments in Washington—from defense bill negotiations to the ongoing FY 2026 budget fight—will have important effects on housing policy.

What happened: One of the most momentous developments in recent weeks has been a bipartisan push to include housing-related provisions in Congress’s must-pass defense bill.

In October, the Senate included several provisions of the bipartisan “ROAD to Housing Act”, sponsored by Senate Banking Chair Tim Scott (R-S.C.) and ranking member Elizabeth Warren (D-Mass.), into its initial version of the National Defense Authorization Act (NDAA).

The package proposes several measures to boost housing supply. Among them is a proposed grant program to support municipal governments in reforming restrictive local zoning codes.

Separate provisions aim to boost construction by expanding the federal definition of manufactured housing to include modular and prefabricated units not built on a permanent chassis, and by streamlining environmental reviews for certain smaller-scale developments.

As several US metros that experienced positive net migration during the post-pandemic period contend with severe underbuilding, these supply-side reforms would help thaw construction activity in regions where margins are currently tight.

But in December, a House-Senate compromise draft removed these housing provisions.

Congressman French Hill, Chairman of the House Financial Services Committee, which has jurisdiction over housing, opposed the NDAA's inclusion but stated that his committee would advance solutions in December to address housing costs.

Why it Matters: Despite recent House pushback on the NDAA's housing provisions, the broader effort to advance housing solutions before the end of the year appears to have White House backing. According to recent Politico reporting, a White House official has stated that on the housing provisions, the administration is “open to seeing this moving forward.”

While not specific, the White House’s positioning places pressure on members of Congress to consider some of the more widely supported provisions. However, members will have some flexibility about whether to include housing in the must-pass defense bill or to compartmentalize it into its own legislative battle.

Meanwhile, the Administration has been evaluating the viability of a Fannie and Freddie IPO, with Federal Housing Finance Agency (FHFA) Director Bill Pulte suggesting that a decision from the President could come by late 2025 or early 2026.

The market effects of any potential privatization will depend heavily on how the offering is structured. Still, with both mortgage rates and market liquidity highly sensitive to the outcome, the IPO could be the most consequential federal housing-finance change in more than a decade.

Another year-end development, of course, is the ongoing FY2026 budget negotiations.

The “ROAD to Housing’ negotiations mainly surround options to expand housing supply through updated federal rules and new financial incentives, while HUD funding remains in the scope of the larger budget fight that brought forward the recent government shutdown.

The continuing resolution (CR) that Congress passed on November 13th funded key housing-related programs administered by the Department of Housing and Urban Development (HUD) through the end of January, but 2026 funding levels remain undetermined.

On average, budget proposals before the shutdown slashed rental assistance programs or left them flat. After factoring in rent inflation, some estimates suggest that fixed funding levels would reduce the number of households receiving rental assistance by up to 400,000.

The success or failure of year-end housing policy negotiations will likely sway political positions over HUD funding in January.

While fights over SNAP and ACA funding drove headlines during the government shutdown, the cost of living emerged as the most politically salient economic pain point for many Americans.

As such, today’s economic headwinds create space for policymakers to compromise on aspects of housing policy where daylight still exists between the two parties. The ‘ROAD to Housing’ provisions represent the potential policy changes that have the greatest chance of finding their way into law in 2026.