The Senate passed a major housing bill 89-10 on Thursday that aims to strengthen housing supply and improve affordability. However, multifamily groups are sounding the alarm over a provision that they say would effectively eliminate the production of single-family homes built for rent and ultimately drive up rent and home prices.
The bipartisan Law of the road to housing of the 21st centurywhich would be the biggest housing package signed in around 30 years, contains a series of measures aimed at increasing housing supply in order to advance its goal of improving affordability. While the housing industry has widespread support, advocates warn that the newly added Section 901 would have a chilling effect on the industry.
This section restricts institutional investors, defined as those who directly or indirectly own at least 350 single-family homes, from purchasing more SFH. It exempts large investors who significantly renovate or build new single-family homes specifically for the rental market, but critically still requires those properties to be sold to an individual owner after seven years. Tenant would have first dibs on purchase.
Investors of this size own about 0.7% of the nation’s 92 million single-family homes, and have been reducing purchases in recent years, making up 1 percent of all U.S. home purchases, down from a peak of 4 percent in 2022, according to analysis by John Burns Research and Consulting.
“Because BTR developments require large-scale investment and benefit from economies of scale, most companies operate beyond this threshold. They cannot invest under the risk of forced sales and potential losses caused by arbitrary deadlines,” according to a March 5 letter from dozens of housing groups. The co-signatories want to build rental housing to be fully exempt.
The move is billed as a way to “promote homeownership opportunities for American families, not corporations,” echoing President Donald Trump’s recent push to restrict institutional investors of the purchase of single-family homes. A statement on February 9 indicated that he I would not sign the housing package no single family investor prohibition. However, Trump’s Jan. 20 executive order to that end made a clearer distinction for rental housing.
According to Greg Brown, senior vice president of government affairs for the National Apartment Association, the new seven-year disposition requirement would undermine the stated goals of the legislation.
“In practice, the disposition provision would stifle any significant investment in build-to-rent, ultimately eliminating a flexible and affordable living option for many Americans and their families, reducing rental supply, and disrupting an important part of our nation’s housing affordability solution,” Brown told Multifamily Dive in an email.
BTR ban complications
The single-family houses under construction for rent are subscribed, financed and built as multi-family housingaccording to a March 10 open letter from housing industry groups, and it is not possible to sell individual units as single-family homes as required by the provision. Also, selling BTR houses would require paying off the entire loan at once.
The provision poses a number of practical challenges, according to National Multifamily Housing Council President Sharon Wilson Géno, and “frankly, we don’t think it’s constitutional. It’s not even legal.”
“I don’t even know how you would do that, because a lot of these properties are built on large lots, you know, one, two, maybe three contiguous lots. They’re not even slated for sale. So going back to that, it’s like putting a square peg in a round hole. Utilities are structured for rent,” Wilson Géno told Multifamily Dive.
There is a huge misunderstanding of what institutional multifamily investing is or does, according to Wilson Géno.
“There is the idea that there will be this housing and after seven years, it can be sold. At this stage of the game, this housing will never be built, because no one will invest in it,” he said. “This is a very important conversation that we need to have in the multi-family space with the public, that institutional investment is… what helps build housing.”
Also, many tenants of BTR single-family homes, such as members of the military and retirees, don’t have the ability or desire to buy a home, according to Wilson Géno.
“[Build-to-rent SFHs are a] a growing source of really important housing, and cutting it off means we have less housing available, less freedom to choose housing options at different times in people’s lives to meet their needs, and less affordability,” Wilson Géno said.
what happens next
The bill, spearheaded by Senate Banking, Housing and Urban Affairs Committee Chairman Tim Scott, RS.C., and ranking member Sen. Elizabeth Warren, D-Massachusetts, now returns to the House, where the House Financial Services Committee has introduced its own package, the Housing law for the 21st century. A Thursday statement from the Committee says so 84% of the Chamber’s housing provisions they are included in the Senate version.
The bill still faces hurdles before it can be signed into law: House Majority Leader Steve Scalise, R-La., told lawmakers that The bill will have to go through new negotiationsCNBC reported.
Although the president had already supported the bill, last weekend he declared it he won’t sign any new laws unless Congress passes legislation requiring voters to show proof of citizenship and ending most mail-in ballots, The Guardian reported. House leaders indicated they are unlikely to accept the Senate version and may begin a formal conference process to negotiate a deal between the chambers, which could take months.
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