Real Estate Managers Welcome Clarity on Investing in Single-Family Homes

The federal government has signaled that the newly signed homeowner protection bill will be less restrictive than its earlier version, prompting relief among institutional real estate managers active in single-family housing. The 21st Century ROAD to Housing Act, passed in July and set to take effect in January, prevents institutional buyers that own 350 single-family homes from acquiring more. Congress already wrote exceptions into the law, and the federal government has recently proposed standards, definitions, and safe harbors for them, including a rule clarifying exceptions for build-to-rent and renovate-to-rent projects, lease-to-own programs, and certain debt, servicing, and investor-to-investor transactions.

Managers have particularly welcomed the Treasury's explicit statement that build-to-rent homes are exempt. Some are also relieved that a provision requiring build-to-rent homes to be sold after seven years, included in the bill the Senate passed in March, has been dropped. Institutional Investor reports that managers remain skeptical of the bill's overall efficacy.

Peter Zabierek, senior portfolio manager at Easterly Ranger, said "Treasury's proposed exemptions preserve opportunities for institutional capital to add to and improve the housing stock, particularly with build-to-rent and renovation," but added that the law will ultimately limit investors' ability to acquire existing homes. Peter Ciganik, head of capital markets at Brightshore Capital, wrote to Institutional Investor that "Congress ultimately recognized that BTR adds supply and that new construction should be protected," adding that "March was a warning: capital froze on a provision that never became law. Policy uncertainty is itself a constraint on supply."

The legislation implements President Trump's earlier executive order aimed at lowering housing costs and expanding supply, and it bans institutions from competing with individuals in buying homes. Real estate managers dispute the premise that institutional investors have driven up prices. Drew Flahive, president of Amherst Group, said "Pensions, endowments, and other long-term investors fund housing and restricting that passive capital would shrink supply and raise costs," and added that while the Treasury's proposal is constructive, more work remains. Zabierek acknowledged that large institutional investors competed with families, particularly first-time buyers, but argued this was confined to a small number of neighborhoods and drew disproportionate media and political attention. He said, "The U.S. simply hasn't built enough housing over the past few decades," and warned against discouraging the capital that could help address the shortage.