ROAD wins House nod, carving BTR out from institutional investor ban

The build-to-rent (BTR) industry, which has been under siege from legislative uncertainty since March, just got a modicum of welcome news. 

On Wednesday, the U.S. House of Representatives passed an amended version of the U.S. Senate’s 21st Century ROAD to Housing Act by a margin of 396 to 13 that removed the proposed seven-year selloff rule for new build-to-rent communities. 

The legislation does, however, ban institutional investors that already own 350 or more single-family homes from purchasing additional single-family properties.

Still, the House’s bill – which now volleys back to the Senate for reconciliation and another vote – includes significant carve-outs for build-to-rent and renovate-to-rent projects and other exemptions that were not included in the Senate’s version. 

How the House legislation differs from the Senate’s

The House overwhelmingly approved its original version of the legislation, which included no institutional investor ban, on February 9 in a 390-9 vote. The Senate followed on March 12, passing its version 89-10. However, the Senate’s bill included a last-minute provision, Section 901, which has significantly reduced the amount of build-to-rent supply under construction. 

The controversial provision banned institutional investors from purchasing single-family homes. While it included narrow carve-outs for renovate-to-rent projects, it didn’t provide exemptions for build-to-rent communities. It also mandated that new BTR communities be sold to individual homeowners within seven years of completion. 

The House unveiled an updated version of the 21st Century ROAD to Housing Act that overhauled that section last week and released the final draft of the bill on Tuesday. 

Section 1001 of the updated House legislation similarly defines single-family homes as duplexes, as well as traditional detached and attached single-family properties. Manufactured housing isn’t included in the definition.  

The section further states that “no large institutional investor may purchase, or enter into a contract to directly or indirectly purchase, any single-family home.” 

To discourage those firms from buying more properties, the legislation would institute a” civil penalty in an amount that is not more than $1,000,000 per violation, or 3 times the purchase price of the property involved, whichever is greater.”

However, there are exemptions to this penalty for any single-family property that is:

• “newly constructed, renovated, or a rental conversion for sale by a large institutional investor and not as a residence rented pending sale.” 
• “pursuant to a build-to-rent program where the large institutional investor purchases, constructs, or constructs and retains a newly constructed single-family home to be managed as a rental property, whether as part of a community made up exclusively of renter-occupied single-family homes or as part of a community made up of single-family homes that are both owner- and renter-occupied.”
• “pursuant to a renovate-to-rent program” that “makes improvements in an aggregate dollar amount of not less than 15 percent of the purchase price of the single-family home”. 
• part of an eligible homeownership program or an eligible program aimed at converting renters into homeowners. 
• purchased from “another large institutional investor that either owned the single-family home on the date of enactment of this Act or purchased the single-family home in compliance with this section.” 
• “newly constructed, renovated, or a rental conversion that is intended and operated for occupancy as part of a community for households with 1 or more members aged 55.”

Additionally, there is an exemption for any purchase of a single-family home that happens as part of changing or reorganizing the ownership structure of homes that an institutional investor already owned or bought before this law took effect.

How the bill would incentivize local reform

Another major change made by the House was removing the Senate’s Build Act Now provision, which sought to encourage pro-housing zoning and land-use reforms by linking community development block grant (CDBG) funding to municipalities and states that adopted positive housing reforms. 

However, the House added in the Housing Supply Frameworks Act, which instructs HUD to establish voluntary land-use and zoning recommendations to help communities expand and streamline housing development on a local level.

What comes next

The bill must now get a nod of approval from the Senate, which has so far been reluctant to make changes to its original bill. Politico reported on Tuesday that Speaker Mike Johnson reached an agreement with President Donald Trump on the updated legislation, indicating that Trump would sign the bill into law if Congress sends it to the Oval Office. 

However, how the Senate will respond to the housing package is an open question. On Wednesday, Senators Tim Scott (R-S.C.) and Elizabeth Warren (D-Mass.) issued a joint statement indicating that they may make further changes to the legislation. 

“We worked closely with the White House and our colleagues in both chambers on a bill that puts families first and addresses the housing crisis. There’s still work to be done, and we are committed to continuing to work with the White House and our colleagues in the House on a housing bill that can pass the Senate and get to the President’s desk,” the statement read.

Strong housing industry support

The housing industry, with broad support, has rallied behind efforts in Congress to pass the 21st Century ROAD to Housing Act. Among other changes, the legislation would tackle the housing affordability crisis by doing the following:

• Modernizing legacy federal housing programs
• Streamlining regulations across HUD, USDA and related agencies
• Expanding affordable housing financing

Organizations that advocate on behalf of the housing industry have almost unanimously backed the House’s legislation. 

“The amended bill includes a number of meaningful reforms that will help modernize federal housing programs, reduce barriers to development, and encourage the production and preservation of a wide range of rental properties and single-family homes for homebuyers,” David M. Dworkin, President and CEO of the National Housing Conference, said in a statement. 

“This amended bill provides communities with new resources and best practices to modernize zoning and boost supply, streamlines federal permitting, and expands financing options for manufactured and rural housing,” Shannon McGahn, the National Association of Realtors’ executive vice president and chief advocacy officer, said. “The bill also modernizes key programs like CDBG and HOME to strengthen local housing investment, improves credit access for homebuyers, and helps ensure veterans take full advantage of their VA home loan benefits.

Bill Owens, chairman of the National Association of Home Builders (NAHB), also spoke in support of the House measure, noting, “the package eliminates a forced-sale provision on rental housing that would have reduced supply, raises and indexes multifamily loan limits to help spur new apartment development, and provides meaningful relief to community banks.”

The Community Home Lenders of America (CHLA), in a statement, praised a provision that would eliminate the permanent chassis requirement for manufactured homes.

“Another noteworthy focus of the bill is Sections 105, 401, and 402 – all designed to promote small-dollar mortgage loans, which are more difficult to originate,” CHLA said. 

Bob Broeksmit, President and CEO of the Mortgage Bankers Association (MBA), also praised the legislation. 

“The House revisions addressed many key concerns raised by MBA and other stakeholders, strengthening the legislation while preserving important measures in the Senate’s bill to boost housing supply and expand access to affordable mortgage credit,” Broeksmit said.