The House of Representatives has passed a bipartisan housing affordability bill, known as the 21st Century ROAD to Housing Act, with a significant vote of 396-13. This marks a significant step in addressing the ongoing housing crisis facing the nation. The legislative package, which has drawn bipartisan support, aims to reduce the costs associated with building homes, amend financing options, simplify regulations that impede construction, and encourage local governments to relax zoning laws.
Despite a shared objective, tensions have emerged over the treatment of the build-to-rent (BTR) segment of the housing market. The Senate version of the bill includes a provision stipulating that large-scale investors must sell rental properties to individuals within seven years of their construction. This requirement has faced pushback from various stakeholders, including builders and affordable housing advocates, who argue that such a rule could deter investment in new builds and ultimately reduce rental availability. As a result, this stipulation was removed from the House’s iteration of the legislation.
Chris Nebenzahl, vice president for rental research at John Burns Research & Consulting, noted the importance of protecting the BTR market in the context of affordability, as the influx of BTR properties can help lower rental prices.
In recent years, the demand for single-family rental homes has surged, driven by soaring home prices that have led many potential homebuyers to extend their renting periods, particularly in suburban areas rather than urban apartments. In the wake of the 2008 financial crisis, large corporations began acquiring homes at low prices to offer as rentals. This practice has drawn criticism, including from President Trump, and both legislative proposals aim to curb the acquisition of new properties by landlords owning over 350 homes. However, institutional landlords are progressively refocusing their efforts on constructing new rental homes, notably in areas with advantageous zoning laws and robust job growth.
Data from the Census Bureau and the National Association of Home Builders indicates that while the number of BTR homes began construction in 2022 stood at 68,000—down from a record high of 84,000 the previous year—these homes now represent approximately 7% of new constructions, a significant increase from 2.7% before 2012. Even though these properties are not for sale, the additional housing supply has been beneficial to renters, contributing to reduced rental prices in several markets, including Dallas, Phoenix, Denver, and Charlotte.
However, the Senate’s proposed restrictions have made some builders reluctant to continue BTR projects. According to Richard Ross, CEO of Quinn Residences, which manages over 5,000 single-family rentals, potential investors are hesitant to engage with projects that impose a seven-year timeline for selling properties. Such a timeframe clashes with typical construction funding arrangements, often ten years, complicating the financial viability of these projects and raising concerns about market fluctuations.
The future of the bill hinges on whether the House and Senate can reconcile their differences, specifically regarding the build-to-rent provisions. Additionally, they need to clarify the status of a proposal regarding central bank digital currencies, with the House favouring a permanent ban and the Senate proposing a temporary one.
Senators Tim Scott and Elizabeth Warren, who co-sponsored the Senate version of the bill, have expressed their commitment to collaborating with White House officials and House representatives to pass a comprehensive housing bill. Meanwhile, ongoing support from the White House was reaffirmed, urging both chambers to resolve discrepancies swiftly.
Trump’s stance on the legislation has fluctuated as well. Recently, he encouraged the House to support the Senate’s version while also suggesting using the housing bill to advance separate legislative priorities that lack sufficient backing in the Senate.
In conclusion, various sectors are watching this legislation closely, as its successful passage could significantly impact housing affordability and availability across the United States while balancing the needs of existing property owners and potential renters.
