Summer ended and it is time to go back to school… thanks to our colleague Jeff Femrite for educating us all on the housing bill that Congress passed this summer. As Jeff explains in detail below, it is mostly a regulatory streamlining bill, not about new money, but it brings good news for simplifying some processes. See details below, followed by proposed regulations on race-based preferences.

For more learning opportunities, join us for our next webinar:

WEBINAR – Elections 2026:
How Nonprofits Can Help Protect the Voices of Democracy
[SIGN UP HERE]

Scholz Nonprofit Law and Law Forward will present a webinar on election issues.
Join us:  Tuesday, September 29th from 12 – 1pm 

We will review ways 501c3 organizations can assist in ensuring a robust, fair election —
without engaging in political activity or excessive lobbying. By sharing information and removing barriers
to voting, 501c3s can play a vital role in making sure everyone has a voice in our democracy. We also are thrilled to offer the expertise of Rachel Snyder at Law Forward, who will give us up to date information on mail in ballots and other voter protection issues in Wisconsin*. 

(*Our focus will be on Wisconsin, but the rules for 501c3s are widely applicable.)

For questions, contact Melissa Scholz.

New sweeping housing law
On July 11, 2026, the 21st Century ROAD to Housing Act became law. It is a sweeping housing law that touches nearly every corner of affordable housing practice – from LIHTC and HOME to public housing, manufactured homes and rural housing preservation. It is mostly a regulatory streamlining bill, not a new-money bill. Aside from one modest new grant program, the law does not appropriate new dollars. Its real impact is cutting duplication, delay and red tape for programs that already exist.

Limits on Institutional Investors. With the goal of keeping more homes available to individual buyers, institutional investors who own 350 or more SF homes are prevented from buying additional SF homes, but they are not required to divest existing portfolios. There’s an exemption for build-to-rent investors, and HUD will provide renter-outreach resources for tenants in institutional-investor-owned homes.

Single-Stair Buildings Get a Green Light. HUD must develop guidelines for “point-access block” buildings – a design where all units share a single central stairwell and elevator core instead of requiring two separate stairwells connected by a corridor. This paves the way for states, tribes, and municipalities to permit up to 6-story residential buildings with just one internal stairway, which can meaningfully reduce  construction costs.

HCV Inspections Get Streamlined for LIHTC/HOME/USDA Properties. This is a big improvement for LIHTC developers. LIHTC-financed properties for tenants holding Housing Choice Vouchers (HCV) require Housing Quality Standards or NSPIRE inspections before tenant occupancy – even though the property is already inspected by the state housing finance agency (like WHEDA). The duplication leaves units sitting vacant, costing owners rent and delaying tenant occupancy. Under the new law, if a unit financed through LIHTC, HOME, or USDA Rural Housing has passed a qualifying state inspection in the past year, that inspection automatically satisfies the HCV inspection requirement.

HOME Program: Reauthorized and Reformed. The HOME Investment Partnerships program is reauthorized (a significant development on its own) with reforms that (i) expand program eligibility, (ii) give jurisdictions more flexibility to use HOME funds for housing-related infrastructure and (iii) streamline NEPA environmental review by cutting duplicative requirements and expanding exemptions for small-scale infill projects.

Opportunity Zones Get a Boost in Competitive Grants. HUD can now prioritize projects located in, or primarily serving, Opportunity Zone communities when awarding competitive housing development or
preservation grants – with additional benefits carved out for rural areas.

Whole-Home Repair Pilot Program. A new HUD pilot supports state, local and tribal whole-home repair programs, providing grants and forgivable loans so homeowners and landlords can fund comprehensive repairs – rather than having to piece together several narrower single-purpose repair programs.

Broader NEPA and Regulatory Streamlining. Beyond the HCV and HOME-specific changes above, the law generally reduces duplicative federal environmental review burdens for homebuilders using existing federal financing programs. It also streamlines Section 8 inspections for small properties and environmental review for projects on previously disturbed sites. Important caveat: this doesn’t add new subsidy dollars – it cuts the cost and delay of accessing financing that already exists.

Housing Counseling Oversight. HUD gains authority to evaluate performance of housing counseling agencies and individual counselors, require additional training and revoke certifications where warranted – a consumer-protection measure to improve the quality of federally supported housing counseling.

A New (Modest) Innovation Fund. The law creates a $200 million/year competitive grant program, sunsetting after seven years, for local governments and tribes that can demonstrate measurable increases in housing supply – rewarding reforms like streamlined permitting, density bonuses and zoning changes. This is new discretionary funding, but it’s competitive and tied to a locality’s track record on supply-side reforms. Nonprofits should watch for funding notices and consider positioning as partner to a municipal applicant rather than applying solo, since HUD will be evaluating the local government’s reform history.

RAD Cap Raised by 100,000 Units. The law raises the Rental Assistance Demonstration (RAD) program cap by 100,000 units, with extended tenant protections. This lets more Public Housing Authorities (PHAs) convert aging public housing stock to project-based Section 8. PHAs previously locked out by the old cap now have room to pursue RAD conversions – a meaningful preservation tool.

CDBG Disaster Recovery Reauthorized for 3 Years. The CDBG-DR program is reauthorized for three years, with reforms targeting low- and moderate-income households after major disasters. This replaces the old ad hoc, one-off Congressional appropriation process that followed each disaster – a recurring source of delay. Three years of certainty is a win for disaster-recovery-focused housing clients.

Manufactured Housing Reforms. The law eliminates the permanent chassis requirement for manufactured homes, directs HUD to set minimum energy-efficiency standards, raises FHA-insured manufactured housing loan limits and reauthorizes PRICE Act grants for seven years to preserve manufactured home communities. This lowers longstanding cost and design barriers to manufactured housing – often the fastest, cheapest path to new affordable units – and gives resident-owned community strategies a continued federal preservation funding source.

Bank Investment Cap Raised: Community Investment and Prosperity Act. The cap on bank public  welfare investments – including affordable housing and community development projects – rises from 15% to 20% of capital and surplus. This frees up real additional bank capital for community development and PRI-adjacent deals. Banks previously bumping against the 15% ceiling can now do more affordable housing and CDFI investment without seeking a special regulatory exception – a potential source of expanded deal flow.

Rural Housing Service Reform. The law decouples rental assistance from maturing USDA mortgages (so affordability restrictions don’t disappear the moment a mortgage matures), permanently establishes the Housing Preservation and Revitalization program for rural multifamily housing, and authorizes increased USDA staffing and technology upgrades. This closes a long-standing gap where rural tenants lost rental assistance the instant a property’s USDA mortgage matured – a real preservation win. Making the Preservation and Revitalization program permanent also removes periodic reauthorization risk that has complicated long-term rural rehab planning. A new Moving to Work cohort – “Economic Opportunity and  Pathways to Independence” – lets additional public housing authorities test alternative rent and work-incentive structures. This expands the pool of PHAs that can experiment with alternative rent structures and self-sufficiency incentives outside standard HUD rules – relevant for clients working with PHAs on supportive housing or family self-sufficiency programming.

The Big Caveat: No New Appropriations. Aside from the Innovation Fund, the Law authorizes no additional implementation funding. Its impact is overwhelmingly regulatory streamlining and program reform — faster inspections, less duplicative review, more program flexibility — not a new source of grant money.

Bottom Line. For nonprofits, PHAs, and affordable housing developers, the new housing law itself is best understood as a cost-and-delay reduction bill rather than a funding bill. The HCV inspection streamlining, RAD cap increase, HOME reauthorization, and rural housing reforms are likely to have the most immediate practical impact on day-to-day project work. The Innovation Fund is worth watching, but it’s competitive and modest relative to the scope of the reforms overall.

To learn more, contact Jeff Femrite.

For your awareness related to race-based programming ….
 

Proposed Regulations on Race-Based Preferences

Following the Trump administration’s early direction on ending discrimination and restoring merit-based opportunity via executive order, the Department of the Treasury and the IRS released a proposed regulation addressing how that policy intersects with tax-exempt status.
 
The proposed regulation targets private schools specifically. It provides that a school’s 501(c)(3) status is contingent on not practicing any race- or national-origin-based preference in admissions, scholarships, financial aid, athletics, or other school-administered programs, regardless of the purpose behind the preference (including remedial or diversity rationales).

While narrow on its face, many experts argue this opens the door to a broader “public policy” position that race-based preferences of any kind are incompatible with 501(c)(3) status generally, not just private schools.

As a reminder, charitable organizations must not engage in activities contrary to “fundamental public policy” to retain tax-exempt status, a doctrine rooted in Bob Jones University v. United States (1983). Under that doctrine’s origins, an asserted “fundamental public policy” generally needs to reflect a longstanding, consistent position across all three branches of the federal government. Treasury’s proposed rule is essentially an attempt to formally establish that such a policy exists here.

The rule is currently just a proposal, nothing is final yet. Comments are open through regulations.gov  (docket IRS-2026-1189) through November 3, 2026. If finalized, the rule would apply to taxable years beginning after May 31, 2027. We are actively tracking the issue.

For specific advice or guidance, please reach out to Haley Swanson.

Please reach out with any questions by emailing Jessica, Melissa, Jeff, West, Haley, Laurie, Nicole or Tracy.

The Scholz Nonprofit Law team:
Melissa, Jessica, Jeff, West, Haley, Laurie, Nicole, Tracy, and Brynlei

Note: The guidance provided by Scholz Nonprofit Law is intended as general guidance and providing such advice does not establish a lawyer-client relationship.