There’s nothing that unifies opposing political factions faster than seeing homeless encampments in American cities. That’s why the Housing for the 21st Century Act has cleared the U.S. House of Representatives with an overwhelming 390-9 vote and is now headed to the Senate.
Within the 200-page bill is a proposal of particular interest to real estate investors. Most significantly, it increases loan limits for small multifamily properties, thereby enabling greater purchasing power and potentially higher returns on investment.
Reps. French Hill (R-AR) and Maxine Waters (D-CA), from opposite ends of the political spectrum, are two of the bill’s main sponsors and worked to ensure it included provisions from both parties, which has been celebrated across the housing and construction industries.
“NAHB commends the House for passing the Housing for the 21st Century Act, bipartisan legislation that will reduce impediments to increasing the housing supply,” said National Association of Home Builders Chairman Buddy Hughes in a press release.
His sentiments were echoed by Shannon McGahn, National Association of Realtors executive vice president and chief advocacy officer, who stated in a press release: “With the nation facing a shortage of roughly 5 million homes and first-time buyers now entering the market at a median age of 40, bold action to expand supply and remove barriers to homeownership has never been more urgent.”
Amongst the broader initiatives that apply to investors are the following.
Modernizing Building Codes (Single-Stair Reform)
Section 103 addresses one of the most significant provisions for small multifamily development: point-access block buildings (also known as single-stairway apartments).
- National guidelines: Requires HUD to establish federal guidelines and best practices for single-stair multifamily buildings up to five stories. Currently, many jurisdictions require double staircases for safety concerns. However, this makes it difficult and expensive to build multifamily buildings on narrow urban lots. This is already under consideration in California and other states.
- Pilot programs: The Act authorizes competitive grants for pilot projects to test the safety and effectiveness of new designs, which could eventually lead to smaller, European-style apartment layouts.
Streamlining Environmental Reviews
The federal National Environmental Policy Act (NEPA) has been criticized for being prohibitively expensive and slow, especially for developers of small-scale projects. In a move similar to California Governor Gavin Newsom’s reform of the California Environmental Quality Act to speed up housing development, new measures aim to reduce the lag by bypassing some review processes.
- Categorical exclusions: The expansion of “categorical exclusions” exempts small-scale construction. Infill development and rehabilitation of residential buildings no longer require full environmental reviews.
- Faster timelines: By reducing federal administrative burdens, the bill aims to reduce construction timelines and lower the per-unit cost for modest multifamily projects.
Incentivizing “Missing Middle” Zoning
The Act uses federal guidance to push local governments toward friendlier zoning for small multifamily units (Section 102):
- By-right development: Encourages localities to fast-track duplexes, triplexes, and quadplexes “by right,” meaning they can be constructed without a lengthy permitting process.
- Pattern books: It provides grants for local governments and tribes to create “pattern books”—preapproved architectural designs for ADUs, duplexes, and townhouses. If a builder uses a preapproved design, the permitting process is accelerated.
Financial and Programmatic Support Updates
- FHA loan limits: Section 106 updates the statutory maximum loan limits for FHA (mortgage insurance) multifamily dwellings. These limits are adjusted to reflect modern construction costs, making it easier for developers of small and mid-sized buildings to secure federal financing.
- HOME program flexibility: The act reforms the HOME Investment Partnerships Program to allow funds to be used for “workforce housing” and infrastructure improvements (like water and sewer) specifically for new housing developments.
- Streamlined inspections: For properties with multiple federal funding sources like Low Income Housing Tax Credit (LIHTC) and Section 8, the bill allows a single passed inspection to automatically meet Housing Choice Voucher (HCV) inspection requirements, reducing the administrative headache for small landlords.
How These Laws Help Small Investors
Although many of these proposals are geared toward developers, some specific aspects will appeal to landlords. Increased FHA loan limits for small multifamily properties can help newbie investors leverage the power of house hacking and rental income to jump-start their investing careers.
An FHA loan, which allows a buyer to put as little as 3.5% down, mandates that a buyer live in one of the units for at least 12 months, which means after the one-year mark, they are free to move out and buy another property, renting out the initial FHA loan property in its entirety. FHA rules state that a buyer can have only one FHA loan at a time (unless the other is in another state); however, investors can refinance the first home into a conventional mortgage, allowing them to buy the second with an FHA loan.
By living in one unit and having the tenant’s rent cover most, if not all, of the mortgage, an owner-investor puts themselves in prime position to save for the down payment on their next investment property. The cash flow from the initial FHA home and the second property could also provide the down payment for a third home, and so on. Eventually, the timeline between property purchases reduces.
This often-used strategy to build wealth relies on a few basic tenets: meticulous tenant screening and living low to the ground, not splurging on a fancy personal residence until your passive income is considerable.
FHA Multifamily Loan Limits
The current 2026 FHA multifamily loan limits are as follows:
Two-unit (duplex)
- Low-Cost Area: $693,050
- High-Cost Area: $1,599,375
Three-unit (triplex)
- Low-Cost Area: $837,700
- High-Cost Area: $1,933,200
Four-unit (fourplex)
- Low-Cost Area: $1,041,125
- High-Cost Area: $2,402,625
Limits are higher in Alaska, Hawaii, Guam, and the U.S. Virgin Islands.
The Effect on Housing Inspections
For anyone who has ever had the misfortune of dealing with an officious housing inspector, you know that they can make or break your cash flow. The less time you have to interact with them, the better. Thus, the streamlined inspections proposal will come as a massive relief for landlords who are used to standing on eggshells while an inspector looks for hairline cracks in outlet plates or a faucet that drips once every 30 seconds.
For clarification, here is the 2025 Section 8 inspection checklist.
Final Thoughts
Increasing FHA loan limits means more people will be able to buy more multifamily houses, putting as little as 3.5% down and potentially qualifying for financing with lower credit scores than required for a conventional mortgage. Rinsing and repeating this formula works as long as interest rates and house prices are relatively low and rents are high. Two out of those three no longer apply, which means implementing this strategy invariably means leveraging a lot of borrowed money and hoping your tenants pay their rent on time.
So, if you’re planning to use this to boost your portfolio, be careful. It’s not a technique that will allow you to quit your day job anytime soon. In fact, if you execute correctly, you should keep your day job as a cushion in case things go askew, which they usually do.
FHA loans were invented to make it easier for owner-occupants to buy a house and, in the case of small multifamily homes, to allow homeowners to get a little help from their tenants with their payments. As real estate investors, we tend to think outside the box and have developed the concept of repeat house hacking to game the system. However, in the current high-rate, high-cost era, that’s fraught with risks. Just because the FHA loan limits will increase, allowing you to borrow more, doesn’t mean you should.
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