The Innovation Fund: Section 208 of the ROAD to Housing Act

Who is eligible

Eligibility is earned, not assigned: a place qualifies by showing its housing supply is growing faster, under a test HUD has yet to write.

Four kinds of government can apply: metropolitan cities and urban counties, as the Community Development Block Grant program defines them; other units of general local government; and Indian tribes. State governments are not named. Each must have “demonstrated an objective improvement in housing supply growth, as determined by the Secretary.”

The law leaves that measurement to HUD, with two constraints. HUD must publish its method in the Federal Register for public comment at least 90 days before it issues the notice of funding opportunity, and it must post the list of eligible places on its website. Until that method exists, no one can say which places qualify.

The Build Now Act, Section 213, also measures whether a place’s housing growth is improving, with a formula written into the statute. Section 208 does not borrow that formula, so the two programs could judge the same city differently.

What the money can pay for

Three categories, broad enough to cover housing, infrastructure and the local reforms themselves.

• Anything CDBG can fund. Every activity eligible under Section 105 of the Housing and Community Development Act, the Community Development Block Grant list.
• Transportation projects. Anything eligible under the Transportation Department’s Local and Regional Project Assistance Program (49 U.S.C. 6702): highway and bridge, public transit, passenger and freight rail, port and other surface transportation projects.
• Attainable-housing initiatives. Local initiatives that expand the supply of attainable housing and build on reforms the applicant has already made or is making.

“Attainable housing” has a specific meaning here: housing that serves households earning up to 120% of the area median income, where most of the units are affordable to households earning up to 60%. It is the same definition the RESIDE Act uses for the homes its conversion grants must produce.

Construction work the fund pays for is treated as a CDBG-assisted project, so CDBG’s rules for construction come with it. Among them, federal prevailing wages apply to construction CDBG finances, and to the rehabilitation of residential buildings with eight or more units.

The local reforms it rewards

The law lists twelve kinds of initiative that count, and says the list is not exhaustive.

1. Allowing more by right, including duplexes, triplexes, fourplexes and apartment buildings, in areas of opportunity.
2. Revising or eliminating off-street parking requirements to reduce the cost of building housing.
3. Revising minimum lot sizes, floor area ratios, setbacks, height limits and construction bans or caps to allow denser, more affordable development.
4. Incentives for dense development where a community needs more density.
5. Zoning overlays or other ordinances that enable mixed-income housing.
6. Streamlining regulation and shortening approvals, adding code enforcement and permitting capacity, and reforming zoning codes.
7. Removing restrictions on accessory dwelling units and allowing them by right.
8. Local tax incentives or public financing that promote attainable housing.
9. Streamlining environmental regulations.
10. Removing unnecessary restrictions on manufactured and cooperative housing.
11. Limiting the effect of overly burdensome energy and water efficiency standards on housing costs.
12. Other ways of reducing construction costs that HUD accepts.

When choosing among applicants, HUD must give priority to places that have used innovative policies, interventions or programs to increase housing supply, and to places that show a marked improvement in housing supply growth. It must also weigh geography, aiming for a relatively even spread of rural, suburban and urban communities.

What an application must show

1. Each purpose the grant will be used for, with an attestation that it will go only to eligible purposes.
2. Data on the housing added over the three years before the application, which may include whether it serves a range of incomes and has improved the quality and affordability of housing locally.
3. How each purpose meets a need or objective in the applicant’s consolidated plan, the housing and community development plan it already files with HUD.
4. The initiatives the applicant has carried out, or is carrying out, to expand its housing supply.

Where it stands

As of September 18, 2026, HUD had published nothing under Section 208.

A search of HUD’s Federal Register notices since the Act became law on July 11, 2026 found no eligibility methodology and no funding notice for the Innovation Fund. HUD has until July 11, 2027 to set up the program. Because the eligibility method must sit out for 90 days of comment before the funding notice, it will be the first public sign that the fund is moving.

The $200 million a year is an authorization, the most Congress has said it may provide. The fund has only what appropriations acts actually give it, and the law lets HUD make fewer than 25 awards if they fall short.

What it means for converting buildings into housing

The Innovation Fund does not pay for conversions directly, but it rewards the conditions that make them possible. Several items on its list are the reforms conversion projects usually need, from parking requirements and height or floor-area limits to faster approvals. The list also names local tax incentives and public financing for attainable housing, and a city incentive for office-to-housing conversions is that kind of initiative. Whether HUD would credit one depends on the eligibility method it has not yet published.

This site screens office buildings in San Jose, Denver and Philadelphia for conversion to housing, building by building, and models the separate RESIDE Act grant for each one.

Questions

Sources

1. U.S. Government Publishing Office, “Public Law 119-101, Section 208”
2. Legal Information Institute, “42 U.S.C. 5305, activities eligible for CDBG assistance”
3. Legal Information Institute, “42 U.S.C. 5310, CDBG labor standards”
4. Legal Information Institute, “49 U.S.C. 6702, local and regional project assistance”
5. Federal Register, “Documents published by the Department of Housing and Urban Development”

More on the law: The ROAD to Housing Act explained · Environmental review changes · CDBG and HOME changes · Opportunity Zones · The Build Now Act · Manufactured housing and the chassis rule · How RESIDE grants should be sized