The US House of Representatives is poised to vote on its version of a bipartisan housing affordability bill, which has already gained Senate approval. However, key disagreements may impede the bill’s journey to President Trump’s desk.
Titled the 21st Century ROAD to Housing Act, this proposed legislation, if passed, would represent the most significant update to housing policy in decades. Its primary objective is to address the ongoing housing affordability crisis through various measures, such as reducing production costs for manufactured homes, easing excessive regulations, updating financing options, and urging local governments to alleviate zoning restrictions. While these initiatives enjoy widespread bipartisan support, contention persists concerning the treatment of the emerging build-to-rent sector within the housing market.
The Senate’s version of the bill stipulates that large entities constructing and renting homes must sell these properties to individuals within a seven-year timeframe. This rule has faced criticism from various industry stakeholders, including builders and affordable housing advocates, who argue that such a restriction would lead to shorter investment horizons for builders, potentially curtailing construction and exacerbating rental shortages. As a result, this provision was omitted from the House bill.
Chris Nebenzahl, the Vice President for Rental Research at John Burns Research & Consulting, noted, “If we’re focused on housing affordability, then you have to look at the protection of build-to-rent as a win, because those houses coming onto the market make rentals more affordable.”
### The Rise of Build-to-Rent
The popularity of single-family rental homes has surged in recent years, fuelled by rising home prices that have compelled prospective buyers to rent for extended periods and focus on suburban residences instead of urban apartments. In the wake of the financial crisis, corporations acquired existing homes at low prices, converting them into rental properties. This model has drawn the ire of politicians, including President Trump, prompting measures to prevent landlords owning over 350 homes from acquiring more. Nonetheless, rising prices and interest rates have deterred most institutional landlords from purchasing homes, prompting a shift towards new constructions.
Current builders and investors are now primarily focused on developing rental properties, particularly in regions like the Sun Belt, where positive zoning laws, population growth, and strong job markets abound. According to recent statistics, while the number of build-to-rent homes started last year hit 68,000—down from a record 84,000 in the previous year—these projects account for approximately 7% of new home construction, a rise from just 2.7% between 1992 and 2012.
Despite these developments, experts indicate that the availability of these rental properties has positively impacted the housing supply, alleviating rental prices in cities where build-to-rent firms are most active, including Dallas, Phoenix, Denver, and Charlotte. Nebenzahl points out that these markets have observed rent reductions in recent years.
### Industry Concerns
The Senate’s proposed seven-year sale requirement has caused significant concern among builders, raising the prospect of a funding drought for build-to-rent developments. Richard Ross, CEO of Quinn Residences, which manages over 5,000 single-family rentals in the Southeast, remarked, “Not two weeks after that bill came out, all capital dried up for build-to-rent… No one’s willing to finance a project with this sort of gun to their head in seven years.”
Ross highlighted that the seven-year requirement complicates project funding, typically structured around ten-year terms, risking forced sales into a declining market. Furthermore, the reality is that many renters occupying these homes would face difficulties in purchasing them.
The prospects for a consensus between the House and Senate regarding the build-to-rent provisions remain uncertain. Additionally, lawmakers will have to resolve the matter of a central bank digital currency ban, with the House advocating for a permanent prohibition, contrasting with the Senate’s temporary stance.
Trump’s stance on the bill has fluctuated, as he recently called on the House to approve the Senate’s version and suggested leveraging the housing bill to promote other legislative measures lacking sufficient bipartisan endorsement.
In conclusion, while the 21st Century ROAD to Housing Act aims to address the pressing issue of housing affordability, navigating the intricate landscape of stakeholder interests and legislative challenges will be critical in determining its eventual success.
