The Strengthening Housing Supply Act of 2025 amends the Housing and Community Development Act of 1974 to allow the Community Development Block Grant (CDBG) program to fund the new construction of affordable housing. The bill adds explicit authorization for construction activity and updates the statute’s low- and moderate-income (LMI) language so new construction can meet CDBG’s national objective.
That change would let entitlement communities and other CDBG grantees apply their existing CDBG allocations to build affordable units, rather than confining funds primarily to acquisition, rehabilitation, infrastructure, or public services. For compliance officers, developers, and local housing officials this creates a new use of a flexible federal grant that has been widely used for non-capital activities for decades.
At a Glance
What It Does
The bill amends Section 105 of the Housing and Community Development Act to add new construction of affordable housing as an eligible CDBG activity and alters the statute’s LMI language so construction can qualify for the LMI national objective.
Who It Affects
CDBG entitlement jurisdictions, non-entitlement grantees, nonprofit and for-profit affordable housing developers who partner with grantees, and HUD as the program administrator are directly affected. Local service providers that currently compete for CDBG funds may see different funding priorities.
Why It Matters
CDBG is a large, flexible federal funding stream; allowing new construction changes what communities can accomplish with those dollars and creates potential trade-offs between building units and supporting other local needs that CDBG has traditionally funded.
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What This Bill Actually Does
The bill inserts a new eligible-activity category into the CDBG statute: the ‘‘new construction of affordable housing.’' Rather than creating a separate program or earmark, the change simply broadens the range of activities that existing CDBG grants may fund. Because the bill cross-references the Cranston-Gonzalez National Affordable Housing Act for the meaning of ‘‘affordable housing,’' grantees and counsel will need to consult that definition when designing projects.
In parallel, the bill modifies the statute that defines the LMI national objective to explicitly include new construction alongside acquisition and rehabilitation. Practically, that means a community proposing to use CDBG dollars to build units must structure the project so it meets the LMI targeting tests CDBG already requires (for example, beneficiary income tests, area benefit tests, or limited clientele tests) and document compliance in the usual HUD reporting channels.Because the legislation applies to CDBG program authority rather than to a new appropriation line, implementation depends on how Congress appropriates and how local grantees decide to allocate funds.
HUD will need to update guidance, program forms, and perhaps regulation or notices to incorporate construction-specific compliance steps (project timelines, underwriting standards, environmental reviews, procurement and contracting rules, and closeout procedures). Local grantees will need to weigh whether to shift discretionary dollars from familiar uses—public services, code enforcement, infrastructure—into capital-intensive housing projects that may span multiple fiscal years.Finally, the bill does not alter other statutory CDBG constraints: it does not create a mandatory set-aside for construction, it does not change national objective requirements beyond allowing construction to meet them, and it does not modify separate affordable housing programs that provide capital subsidies.
The net effect is to give communities an additional option for meeting local housing needs using an existing federal grant vehicle.
The Five Things You Need to Know
The bill amends Section 105(a) of the Housing and Community Development Act of 1974 to add a new paragraph making ‘‘the new construction of affordable housing’’ an eligible CDBG activity.
It defines ‘‘affordable housing’’ by cross-reference to section 215 of the Cranston-Gonzalez National Affordable Housing Act (42 U.S.C. 12745), rather than creating a new statutory definition in the CDBG law.
The amendment to Section 105(c)(3) expands the statutory low- and moderate-income national objective language so that new construction can be treated the same as acquisition and rehabilitation for LMI targeting.
The change applies only to CDBG amounts appropriated after enactment; it does not retroactively authorize prior appropriations for construction.
The bill does not create a dedicated appropriation, set-aside, or new grant program—rather it simply broadens allowable uses under existing CDBG authority.
Section-by-Section Breakdown
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Short title
Designates the statute’s public name as the "Strengthening Housing Supply Act of 2025." This is administrative, but useful when agencies issue guidance or rulemaking to reference the enabling law.
Adds new construction of affordable housing to the list of CDBG-eligible activities
This is the operative change to Section 105(a): the bill inserts a new paragraph (numbered as paragraph 27) that explicitly lists ‘‘the new construction of affordable housing’’ as an eligible activity. Because it is an addition to the existing list rather than a carve-out, grantees may choose to use CDBG funds for construction where it fits local priorities and meets applicable national objectives. The provision ties the meaning of ‘‘affordable housing’’ to the Cranston-Gonzalez Act, so the precise eligibility contours — income targeting, rent/purchase standards, or affordability periods — depend on that cross-referenced statute.
Allows new construction to meet the LMI national objective
The bill amends the text in Section 105(c)(3) so the statutory LMI language explicitly covers new construction in addition to acquisition and rehabilitation. Practically, this requires grantees to document how a construction project satisfies LMI tests (for example, by serving low-income households or being located in an LMI area). It does not change the range of tests themselves; it clarifies that construction projects are not excluded from those tests.
Applicability limited to future appropriations
The statute states the amendments apply only to amounts appropriated after the Act’s enactment. That creates a clear transition rule: funding already obligated under prior appropriations remains governed by the rules in effect at the time of appropriation, and only subsequently appropriated CDBG dollars can be used for new construction under the amended authority.
This bill is one of many.
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Explore Housing in Codify Search →Who Benefits and Who Bears the Cost
Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- CDBG entitlement grantees (cities and urban counties): They gain an additional capital tool to meet local affordable housing targets and can directly sponsor or partner on construction projects using existing allocations.
- Nonprofit and affordable housing developers: Organizations that build affordable units will find a new source of local federal subsidy when partnering with CDBG grantees, potentially improving project feasibility for smaller developments.
- Low- and moderate-income households: Expanding allowable uses increases the pool of funds deployable to produce new affordable units, which can translate into greater unit supply in tight markets.
- Local construction industry and contractors: More CDBG-eligible construction activity can create new contracting opportunities tied to federally assisted housing projects.
Who Bears the Cost
- CDBG-funded public service providers and infrastructure projects: Because CDBG funding is finite, shifting allocations toward construction may reduce dollars available for public services, economic development, or neighborhood improvements.
- CDBG entitlement grantees (administrative side): Grantees must develop capacity for managing capital construction—underwriting, longer project timelines, environmental review, procurement and closeout—which creates staffing and compliance costs.
- HUD Office of Community Planning and Development: HUD will face added oversight and guidance requirements to assimilate construction activities into existing CDBG monitoring, environmental, and financial controls.
- Smaller municipalities with limited bond or capital capacity: Jurisdictions that lack access to other capital sources may struggle to use construction authority effectively without new financing partners, increasing the risk that flexible funds are underutilized or diverted.
Key Issues
The Core Tension
The central dilemma is between leveraging CDBG’s flexibility to produce long-term affordable housing stock and preserving CDBG’s historic role funding a mix of local priorities (services, small-scale infrastructure, economic development). Enabling construction increases housing production options but risks siphoning limited flexible funds away from immediate non-capital needs and imposes administrative burdens that not all grantees can absorb.
The bill expands statutory permissibility but does not supply new money or procedural guidance. That creates a practical gap: CDBG is an annual, formula-driven entitlement with relatively modest per-jurisdiction allocations compared with capital needs for housing construction.
Communities will have to blend CDBG with other subsidies, tax credits, or local financing to complete projects; absent those mixes, CDBG alone is unlikely to finance many multi-unit developments.
The cross-reference to the Cranston-Gonzalez Act resolves definitional risk by pointing to an existing statutory standard, but it also imports complexity. How HUD and courts interpret that cross-reference (for example, whether affordability periods, rent ceilings, or underwriting expectations apply) will shape what kinds of projects are feasible.
There are also operational frictions: construction triggers environmental review timelines, procurement and Davis-Bacon or prevailing-wage considerations, and longer drawdown and closeout periods—processes CDBG entitlement staff may not currently manage at scale.
Finally, the statute’s applicability clause (future appropriations only) creates a staggered implementation landscape. Some grantees may immediately pivot programs, while others need time to build capacity or secure complementary financing.
That transition could produce uneven geographic impacts and create short-term competition within cramped local budgets between capital projects and traditional non-capital CDBG uses.
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