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

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Now that the federal government is signaling that its newly signed homeowner protection bill won’t be as prohibitive as its earlier incarnation, institutional real estate managers…

Now that the federal government is signaling that its newly signed homeowner protection bill won’t be as prohibitive as its earlier incarnation, institutional real estate managers active in the sector are expressing relief — particularly towards the allowances for new building and renovation projects.

The 21st Century ROAD to Housing Act, which was passed in July and goes into effect in January, prevents institutional buyers that own 350 single-family homes from buying more. In proposing standards, definitions, and safe harbors for the exceptions that Congress already wrote into the law, the federal government has recently proposed a rule clarifying exceptions for build-to-rent (BTR) and renovate-to-rent (RTR) projects, lease-to-own programs, and certain debt, servicing, and investor-to-investor transactions.

While remaining skeptical of the efficacy of the bill, managers have expressed approval that the Treasury made it explicit that build-to-rent homes are exempt. Separately, some managers are relieved that a requirement that build-to-rent homes be sold after seven years, a provision in the bill that the Senate passed in March, has been nixed.

“Treasury’s proposed exemptions preserve opportunities for institutional capital to add to and improve the housing stock, particularly with build-to-rent and renovation,” said Peter Zabierek, senior portfolio manager at Easterly Ranger. But he said the law will ultimately limit investors’ ability to acquire existing homes.

“Congress ultimately recognized that BTR adds supply and that new construction should be protected,” Peter Ciganik, head of capital markets at Brightshore Capital, wrote in an email to Institutional Investor. “March was a warning: capital froze on a provision that never became law. Policy uncertainty is itself a constraint on supply.”

The legislation was aimed at implementing President Trump’s earlier executive order to lower housing costs and expand supply by “streamlining regulations, modernizing finance…

But…

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