The House of Representatives is gearing up for a pivotal vote on a bipartisan housing affordability bill, the 21st Century ROAD to Housing Act, which recently gained Senate approval. This legislation, if passed, could mark the first significant housing policy reform in decades, addressing the escalating housing affordability crisis through several strategies. These include reducing construction costs for manufactured homes, easing regulatory burdens that inhibit development, modernising financing options, and encouraging local governments to relax zoning restrictions.
While these measures have garnered extensive bipartisan backing, key disagreements linger, particularly regarding the build-to-rent sector, a rapidly evolving segment of the housing market. The Senate version of the bill includes a controversial requirement that large investors must sell their rental properties to individual buyers within seven years. This stipulation has drawn criticism from builders and affordable housing advocates, fearing it may undermine construction efforts and exacerbate the rental supply crisis. As a result, this clause has been omitted from the House bill.
Supporters argue that the build-to-rent model contributes positively to housing affordability by increasing market supply. Chris Nebenzahl, a vice president at John Burns Research & Consulting, noted that rentals from build-to-rent homes enhance affordability for tenants.
The popularity of single-family rental homes has surged as home prices rise, with many prospective buyers choosing to rent longer and opting for suburban living rather than urban apartments. Following the financial crisis, many large corporations capitalised on low property prices, purchasing homes to convert into rentals. This strategy has faced scrutiny from some politicians, including President Trump, leading to proposed restrictions against institutional landlords acquiring more than 350 homes. However, due to rising prices and interest rates, many institutional landlords have shifted focus from buying existing homes to constructing new properties.
In 2022, around 68,000 build-to-rent homes commenced construction; this figure marks a decrease from a record 84,000 in the previous year. Currently, build-to-rent homes comprise approximately 7% of new construction, a significant rise from 2.7% between 1992 to 2012. Notably, areas where these developments are most concentrated, such as Dallas and Phoenix, have experienced falling rents, giving renters more options.
Nevertheless, the Senate’s construction-related provisions have led to apprehensions among builders, prompting concerns that the stringent seven-year selling rule may deter investment in the build-to-rent market. Richard Ross, CEO of Quinn Residences, which manages over 5,000 rental homes, stated that financial backing for these projects dried up soon after the new bill was proposed due to uncertainty surrounding forced sales. The industry typically secures funding on ten-year terms, complicating potential sales during economic downturns, and potential buyers among the current renters may struggle to afford these properties.
The resolution of the discrepancies between the House and Senate versions of the bill remains uncertain, particularly concerning the contentious build-to-rent provisions. Additionally, lawmakers will need to resolve whether a measure prohibiting central bank digital currencies will be permanent—another point of contention.
Trump’s fluctuating support for the bill adds another layer of complexity. He recently urged House members to endorse the Senate’s version and suggested that Republicans could leverage the housing bill to advance the SAVE America Act, which seeks to establish voter identification requirements but lacks sufficient Senate support.
As the situation evolves, stakeholders in the housing market are keenly observing the developments, hoping for a solution that genuinely addresses affordability while promoting sustainable growth in the sector.
