A group of housing experts and researchers is pressing Congress to change a provision in bipartisan housing legislation that they argue will decrease the housing stock.
In an open letter released on Tuesday, the group, which includes a number of prominent housing economists, took issue with a part of the bill that would require investors in build-to-rent homes to sell those houses within seven years.
That provision is part of a section of the bill that bans institutional investors from purchasing single-family homes, a measure included at the behest of President Donald Trump.
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The provision’s inclusion in the 21st Century ROAD to Housing Act, which passed the Senate, has rankled homebuilders, who argue it would make investing in housing uneconomical and amount to a soft ban. The researchers said it would directly lead to fewer homes being built.
“While the 21st Century ROAD to Housing Act includes many important and worthwhile provisions, its provision on BTR would greatly disrupt this successful housing production model and significantly decrease the nation’s housing stock,” the group wrote.
The group, citing research, added that if the bill resulted in a 60% reduction in build-to-rent activity — which some say is a conservative estimate — that would mean 72,000 fewer rental units would be built each year, marking a more than 7% decline in single-family home completions.
“The Act’s provisions disrupt the BTR business model by mandating BTR communities to be sold to individual homeowners within 7 years,” the letter continues. “This substantially reduces the time period during which rental income is available to help justify the initial investment.”
“We urge all parties to focus on steps to increase the nation’s housing supply and avoid steps that make it harder for new housing to be built,” the group added.
Among the signatories are Caitlin Sugrue Walter, senior vice president of research at the National Multifamily Housing Council, Robert Dietz, chief economist at the National Association of Home Builders, John Burns, CEO of John Burns Real Estate Consulting, and Wilfred N. Cooper, Jr., co-founder and president of the Cooper Housing Institute.
NAHB, long a supporter of the bipartisan legislation, threatened to withdraw its support over the language and is now urging a conference between the House and the Senate on the bill.
In a recent interview with the Washington Examiner, Senate banking committee Chairman Tim Scott (R-SC) defended the seven-year provision, noting that it comes with major caveats. He said that, for instance, if the large institutional investor is unable to sell the property within the first 60 days it is on the market, the seven-year provision no longer applies.
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He also said it doesn’t apply to real estate investment trusts and “a number of other programs that are designed for home ownership as an outcome.”
“Additionally, it gives the Treasury more discretion that if any of these provisions seems to slow down the actual sale of houses, or to achieve the goal of more homeownership, the Treasury has within the discretion to eliminate and or use their discretion to [reduce the effect of] that provision,” the chairman said.
