The U.S. Department of the Treasury issued proposed regulations to restrict large institutional investors from purchasing single-family homes.
The proposed regulations implement Section 1001 of the 21st Century ROAD to Housing Act (ROAD to Housing Act) and codify requirements of Executive Order 14376, Stopping Wall Street from Competing with Main Street Homebuyers.
Starting Jan. 7, 2027, large institutional investors generally may not purchase a single-family home unless the purchase qualifies as an “excepted purchase” under the ROAD to Housing Act. The ROAD to Housing Act defines a large institutional investor as owning, renting, managing, or holding single-family homes and has direct or indirect investment control over at least 350 such homes.
The ROAD to Housing Act does permit several categories of excepted purchases, including purchases made pursuant to build-to-rent programs, renovate-to-rent programs, homeownership programs, and programs to boost homeownership.
The Treasury’s proposed framework would:
- Establish standards for purchases made pursuant to build-to-rent programs that promote continued investment in new housing;
- Provide a safe harbor for purchases made pursuant to renovate-to-rent programs that bring neglected homes back into the housing supply and up to code;
- Clarify the requirements for homeownership programs and programs to boost homeownership, including providing safe harbors for large institutional investors that provide meaningful financial support towards their renters’ purchase of a home;
- Clarify that an entity is engaged “in the business of” investing in, owning, renting, managing, or holding single-family homes when it does so for the purpose of receiving income or financial gain, and not incidentally to a different business;
- Define when an entity may qualify as a passive investor in another entity that owns a home because it does not share directors or officers with the other entity and does not have a property control right over the underlying homes;
- Clarify certain purchases involving debts previously contracted, loss mitigation, and transfers between large institutional investors that protect the liquidity of the housing market; and
- Clarify the calculation of the maximum civil penalty where a single prohibited purchase involves more than one large institutional investor.
The proposed rule would provide safe harbors for several statutory requirements. These include standards for determining whether a home has been substantially rehabilitated under a renovate-to-rent program, whether a renter has received meaningful financial support under certain homeownership programs, and whether a renter has received a right of first refusal and 30-day first-look period.
Treasury’s proposed approach recognizes that housing-market participants use a variety of ownership, investment, construction, servicing, and property-management structures and seeks to provide clarity without unnecessary disruption to housing supply, homebuilding, rehabilitation activity, or capital formation.
Members of the public are encouraged to submit comments in response to proposal within 30 days after publication in the Federal Register.
The Mortgage Bankers Association supports the proposal.
“Our lender members welcome these latest initiatives to reduce the costs of refinancing and expand innovative manufactured housing options for potential homebuyers. We also appreciate the EO’s acknowledgment of the need to balance consumer, taxpayer, and GSE interests and will work with the Federal Housing Finance Agency and Fannie Mae and Freddie Mac on a timely and thorough implementation,” MBA’s President and CEO Bob Broeksmit said. “MBA will continue to identify and advocate for additional ways to help homebuyers navigate today’s higher interest rate environment and to work with the Administration and Congress to advance policies that deliver meaningful results for homeowners, homebuyers, and renters.”
Earlier this month, MBA released a white paper called “Affordability in Action: A Policy Roadmap to Lower the Cost of Financing a Home to Own or Rent.” It outlines near-term administrative and regulatory changes to reduce housing costs without requiring major legislative overhauls.