Build-to-Rent Investors Catch a Break in U.S. House Bill

The U.S. House of Representatives approved a revised bipartisan housing affordability bill Wednesday. The final version addressed commercial real estate concerns about restrictions to build-to-rent (BTR) projects in the initial legislation.

The amended House version of the 21st Century ROAD to Housing Act, which passed overwhelmingly 369-13, removes a provision previously passed in the U.S. Senate that would have required institutional investors to sell BTR single-family homes to individual buyers after seven years. 

“The seven-year divestment is a nonstarter, and it doesn’t make sense from a policy perspective,” David McCarthy, head of legislative affairs at the CRE Finance Council (CREFC), told Commercial Observer before the final vote. “A lot of these build-to-rent lots are one tax parcel with a bunch of homes on them and with the Senate bill it would require divestment to a consumer buyer so you’d have to subdivide, and in some states that’s illegal. So it shows how this was rushing to get something done.” 

The retooled regulations to single-family rental housing, part of President Donald Trump’s recent push clamping down on institutional homeownership, help avoid some of the “unintended consequences” that would have resulted for multifamily-style rental communities, according McCarthy. Industry trade groups like CREFC and the Mortgage Bankers Association (MBA) argued the Senate version would’ve deterred capital investments in SFR developments and hamper the nation’s housing supply.

McCarthy said the House bill helps clarify misconceptions about SFR since Trump announced plans in January to ban institutional investors from buying single-family homes that are often transformed into rental housing. McCarthy noted that the number of SFR purchases mixed in with traditional single-family housing deals not done as part of a development site only total around a half a million nationwide. 

“The House has been more deliberate about getting feedback and narrowing the scope of what this is and what the president is trying to target,” McCarthy said. “We will continue to work with lawmakers and the administration to make sure this does not disrupt or target multifamily, including BTR.” 

The ultimate House version that passed reflected much of the Senate bill minus the seven-year BTR divestment piece. The bill, which aims to boost housing affordability and supply, passed shortly after the Trump administration endorsed the House bill while also urging the Senate to approve the legislation.

The House bill will now need to pass the full Senate before it reaches the desk of President Trump for his signature. 

The Senate approved its version of the 21st Century ROAD to Housing Act in an 89-10 vote with strong backing from U.S. Sen. Elizabeth Warren (D-Mass.), ranking member of the Senate Banking, Housing and Urban Affairs Committee. Warren sought last-minute changes to the House bill aimed at bolstering restrictions on institutional investor homeownership, Politico reported Wednesday.  

Bob Broeksmit, president and CEO of the MBA, said in a statement Wednesday that the House revisions helped strengthen the legislation “while preserving important measures in the Senate’s bill” to boost housing supply and expand access to affordable mortgage credits.

“The Senate’s quick passage of this bill and President Trump’s signature will help advance meaningful housing affordability solutions for our nation’s homeowners and renters,” Broeksmit said. 

Andrew Coen can be reached at acoen@commercialobserver.com.