The deregulatory de novo pony in the housing bill

Ronald Reagan once told a story about an optimistic boy placed in a room filled with “quite a quantity of what they clean out of a [horse] stable.” Instead of acting disappointed, the boy began happily digging saying, “there has got to be a pony in here somewhere.”

This story is a good way to think about the 21^st Century Road to Housing Act, which passed both houses of Congress earlier this week but is now in flux after President Trump canceled a signing ceremony and called the bill “of minor importance” on social media.

Though the most noxious provisions from the Senate version that passed in March – most notably the effective ban on “build to rent” housing that would have required builders to divest single-family rentals seven years after construction – have been shoveled out, there is still some stink left in the bill. The legislation still restricts investors from acquiring more than 350 homes. Even if relatively easy to circumvent, as some commentators argue, it still erodes the principles of free markets and property rights. There are also expansions of federal grant programs that should instead be eliminated.

But the bill does contain some significant deregulatory ponies, to return to Reagan’s parable. As my CEI colleague Steve Swedberg has written, the bill repeals the “chassis rule” – a federal requirement from the 1970s that manufactured homes be built on a permanent steel chassis. This rule serves no safety purpose and adds several thousand dollars to the cost of building manufactured homes, pricing many potential buyers out of these residences. The bill also reduces red tape for certain homebuilding projects by expanding categorical exclusions from environmental reviews and streamlining those reviews.

But the prettiest pony of all is the bill’s effort to lift the red tape blocking the formation of new, or de novo, banks. These provisions were part of a deregulation package aimed at helping smaller banks that passed the House in February, but they were removed from the destructive Senate bill in March. Now these provisions are back in the bill, and assuming Trump signs it – or his veto is overridden by Congress – they will significantly help entrepreneurs to form competitive new banks.

As I have written previously and testified before Congress:

Only 54 new banks had been approved from 2010 to mid-2025, whereas in the decades before that, more than 100 new banks were approved in a typical year. This lack of competition in the banking sector is creating harmful voids in which many small businesses and consumers can’t find banks and credit unions to meet their needs.

The bill takes meaningful steps to reverse this destructive trend. It requires financial regulatory agencies to assign a caseworker to each de novo bank or credit union application and to report regularly to Congress on the status of those applications. It also authorizes agencies to create pilot programs that would allow de novo banks and credit unions to phase in required capital over two years, giving them crucial time to grow.

Whatever happens with this bill, Congress must find a way to preserve this bipartisan deregulation, avoid faux-populist detours that harm beneficial real estate investment, and continue advancing free-market housing policy