The build-to-rent (BTR) industry, in limbo over the past two months due to legislative uncertainty, could be on the cusp of notching a major legislative win last night. However, the fight on Capitol Hill is far from over.\u00a0<\/p>\n
The U.S. House of Representatives <\/strong>late Wednesday night released <\/strong>an amended version<\/strong><\/a> <\/strong>of the U.S. Senate\u2019s <\/strong>21st Century ROAD to Housing Act<\/strong><\/a> <\/strong>that includes significant carve-outs for build-to-rent and renovate-to-rent developments. It also removed a proposed seven-year sell-off rule for new BTR communities and renovate-to-rent projects.\u00a0<\/p>\n Just like the Senate\u2019s version, the House bill would enact a ban on institutional investors that own more than 350 single-family homes from purchasing additional single-family properties.\u00a0<\/p>\n However, the House provided noteworthy exemptions to the institutional investor ban that were not included in the Senate version, including:<\/p>\n any home that \u201cwill be newly constructed, renovated for sale or a rental conversion for sale by an owner and not as a residence rented pending sale.\u201d<\/p>\n any home that is \u201cpursuant to a build-to-rent program where an owner purchases, constructs, or constructs and retains a newly constructed covered single-family home to be managed as a rental property, whether as part of a community made up exclusively of renter-occupied single-family homes or as part of a community made up of single-family homes that are both owner- and renter-occupied.\u201d<\/p>\n any home that is \u201cpursuant to a renovate-to-rent program that substantially rehabilitates a covered single-family home that does not meet structural or core system elements of local building codes or minimum property standards required for conventional mortgage financing.\u201d<\/p>\n How those new exemptions would play out among build-to-rent developers and investors is spotlighted in a LinkedIn post<\/a> by rental economist Jay Parsons, whose high-level take is that \u201cBuild-to-rent housing would be fully protected under the House\u2019s answer to the Senate\u2019s ROAD to [Less] Housing Act.\u201d A couple of the eight \u201chighlights\u201d Parsons details:<\/p>\n 1) \u201cInvestors can build or buy any type of new single-family rental housing \u2013 including build-to-rent homes in traditional for-sale subdivisions, as well as BTR communities. This would allow homebuilders to continue to do pre-sale agreements with SFR operators, thereby maximizing total supply creation.<\/p>\n 2) Investors can buy and rent out homes needing substantial structural repairs, protecting homes that traditional homebuyers are unlikely to buy. Specifically, the bill exempts homes that do not meet local building codes for structural \/ core systems OR that do not meet standards to qualify for a conventional mortgage. This is critical, as Urban Institute<\/strong> research has documented challenges for individual homebuyers to buy such homes.\u201d<\/p>\n Politico reports<\/a> that the amended version of the bill is set for a vote on the floor next week before representatives leave Capitol Hill for a Memorial Day recess.\u00a0<\/p>\n The House passed its version<\/a> of the legislation on February 9 by an overwhelming 390-9 margin. The U.S. Senate then, by an 89-10 margin on March 12, passed its version<\/a> of the bill, which included Section 90. The controversial provision included the institutional investor ban, but didn\u2019t provide any carve-outs for BTR communities, and only limited exemptions for renovate-to-rent projects.\u00a0<\/p>\n Section 901 would require new BTR communities\u2014particularly single-family homes and duplexes\u2014to be sold to individual homeowners within seven years of completion. This provision has already frozen capital flow<\/a> into the BTR sector and significantly constrained new development, industry stakeholders say.\u00a0<\/p>\n These provisions targeting BTR received significant pushback in the House, therefore stalling the legislation. In April, 76 representatives, including 38 democrats and 38 republicans, signed a letter urging House leadership to remove Section 901 or make significant changes. With the amended legislation, House leadership seems to have met those members\u2019 demands. <\/p>\n Housing advocates are already signaling their support.\u00a0<\/p>\n \u201cThe revised House bill makes significant improvements to provisions affecting the build-to-rent sector and institutional investment in single-family housing. The updated language more appropriately targets large-scale acquisition practices while avoiding unintended consequences that could have undermined much-needed housing production and rental supply,\u201d David M. Dworkin, President and CEO of the National Housing Conference<\/strong>, said in a statement.\u00a0<\/p>\n \u201cWe are pleased that the House is seeking to address the restrictions placed on build-to-rent homes; as we have said before, we need more housing, not less,\u201d the National Rental Home Council<\/strong> said in a statement shared with HousingWire<\/strong>\u2018s The Builder\u2019s Daily. <\/em><\/p>\n The House still needs to bring the bill to the floor for a vote. If the House passes the bill, it would then head to the Senate for a vote before heading to the Oval Office. While some Senators have publicly indicated that they support exemptions for BTR projects, the amended legislation\u2019s fate in the upper chamber is not yet clear.\u00a0<\/p>\nLegislation in limbo<\/h2>\n
What comes next<\/h2>\n