Dozens of industry groups take issue with housing bill provision
Housing advocates back most of the 21st Century ROAD to Housing Act but worry that its limits on institutional investors will impact the build-to-rent space.
Key points:
- A provision in the recently passed 21st Century Road to Housing Act limiting institutional investor activity has divided some industry advocates.
- Lawmakers say the restrictions will prevent first-time homebuyers, many of whom face affordability challenges, from being squeezed out of the market.
- But many industry groups believe the limits could halt the construction of single-family rental housing, “a critical part of our national housing needs.”
A controversial section of what could become Congress' biggest action on housing in years is worrying many in the real estate industry who say it could hamper — not bolster — supply.
Two weeks ago, the Senate passed the bipartisan 21st Century ROAD to Housing Act in an 89-10 vote. The package weaves together dozens of bills aimed at addressing affordability challenges, boosting supply — and limiting corporate investor activity in the space.
That investor provision has sparked debate among industry leaders and lawmakers. Some argue that restricting corporate home purchasers will enable more Americans to become homeowners, while others warn that it could stymie efforts to resolve the nation's housing shortage and hurt lower-income consumers.
What the legislation would do
The provision at the heart of the debate would block institutional investors that own at least 350 single-family homes from purchasing more. It includes exemptions for large institutional investors who buy or build single-family homes intended for the rental market — but requires those homes to be sold to individual buyers within seven years.
Fines would be levied against investors who do not comply.
What the supporters say
Democratic Sen. Raphael Warnock of Georgia drafted the provision that ultimately made it into the legislation passed by Congress' upper chamber. Warnock has said that corporate buyers are "squeezing first-time homebuyers out of the market" and "pushing the American Dream further out of reach."
Fellow Senate Democrat Elizabeth Warren of Massachusetts, who co-sponsored the housing package and urged the House of Representatives to "immediately" pass it, has also said that the legislation "makes sure that corporate landlords who don't follow the law pay up," with that money going toward building more housing and assisting first-time buyers.
What the opponents say
But many industry researchers and organizations have sounded the alarm about these restrictions, warning that large institutional investors don't account for most U.S. home purchases and that this part of the legislation could hurt consumers.
Estimates vary on how much of the nation's single-family homes are owned by large institutional investors. The AEI Housing Center, which pegs the share at under 1%, wrote in a March 27 report that the impact of these investors "tends to be localized" and is "not a primary driver of home price growth." If the legislation is signed into law with this provision intact, it would cut housing supply and "hurt low-income families," the report suggested.
Quinn Residences CEO Richard Ross, whose company owns over 5,000 single-family homes in rental communities in the Southeastern U.S., recently told The New York Times that his company "can't really grow" if the bill is signed into law as-is because it'll become harder to get early-stage investors to buy in.
A letter signed by nearly 80 industry groups that was sent to Senate leadership before the bill advanced also expressed concerns about the provision, which they suggested "would effectively eliminate the production of Build-to-Rent (BTR) housing" at a time when many Americans are priced out of homeownership.
"Rental housing remains a critical part of our national housing needs," the letter said. "BTR homes meet families where they are and play a key role in expanding supply, lowering costs, and broadening opportunity.