Groups representing homebuilders are opposing a provision in the bipartisan housing legislation that would ban large institutional investors from purchasing single-family homes.
The provision is controversial, but a priority for President Donald Trump and the White House. Still, critics in the housing industry and some free-market conservatives argue that the ban addresses a problem that doesn’t exist and could hurt consumers. Their opposition threatens the passage of the bill, which is meant to address affordability woes that have contributed to terrible household perceptions of the economy and have dragged down Trump’s approval ratings.
WHAT’S IN AND OUT OF THE COMBINED MAJOR BIPARTISAN HOUSING BILL
Sharon Wilson Geno, president of the National Multifamily Housing Association, told the Washington Examiner that to build more housing stock, there needs to be investment, which the government is not going to provide.
“Where does most of that resource come from? It comes from institutional capital,” she said. “So this whole idea that somehow institutional investment is the problem in housing just doesn’t make a lot of sense.”
The ban was added to the now-renamed 21st Century ROAD to Housing Act — a combination of the Senate’s ROAD to Housing Act and the House’s Housing for the 21st Century Act. The newest iteration is the Senate’s attempt to reconcile the differences between the bills before sending the combined legislation back to the House.
Industry groups are specifically worried about language in the bill relating to build-to-rent homes. The Trump administration initially pitched to Congress that such homes would be exempted to avoid discouraging housing construction.
But, while build-to-rent homes are exempted in the new combined Senate legislation, there is a requirement that investors sell those homes within seven years — something that has the National Association of Home Builders, long a supporter of the bipartisan legislation, threatening to pull its support for the bill.
“As the Senate takes up debate on the housing package, we wanted to alert you that absent efforts to improve the institution investor provisions … to truly exempt built to rent construction, we plan to oppose the overall legislation and will consider designating a key vote in opposition,” the group told congressional offices this week.
Likewise, the Real Estate Roundtable has pushed back on the institutional investor ban, with Jeffrey DeBoer, the group’s president and CEO, calling it “counterproductive” in a statement this week.
DeBoer said that the provisions would discourage capital investments needed to develop and modernize the country’s owner-occupied and rental housing stock. The group also took specific aim at the build-to-rent sections of the updated housing legislation.
“In particular, the provision to force institutional owners of rental housing to sell the homes that they build within a specified 7-year timeframe would discourage investment in home construction, could actually result in rent increases in many markets, and would no doubt face substantial constitutional challenges,” DeBoer said.
A spokesperson for the roundtable told the Washington Examiner that the group supported the legislation before the institutional investor section was added and confirmed that it will not support the bill if the institutional investor ban remains — even if Congress changes the seven-year buy-to-rent provision.
Wilson Geno, at the National Multifamily Housing Association, also dinged the language surrounding build-to-rent.
“That really makes no sense, because … [the] build-to-rent space was supposed to be exempted from this bill, I think everybody understood that in some way, and they’re not built for sale,” Wilson Geno said. “They are only built as multifamily, and if we don’t treat them like multifamily, they’ll never be built.”
There are also critics of the institutional investor ban on Capitol Hill.
Sen. Thom Tillis (R-NC), a member of the banking committee who has not shied away from breaking with the president, pointed out that liberal Democrats have supported the policy in the past.
“To me, I think it’s masking the underlying problem of not enough housing starts,” Tillis told the Washington Examiner. “So if we view that as a solution to that problem, I don’t see how it fits. I’ve been against it when [Sen. Bernie Sanders (I-VT)] first proposed it, or Sen. Elizabeth Warren (D-MA)], I’m still against it.”
Still, the measure may have to be included in the legislative package in some form if Congress wants the president’s signature on the bill. It is particularly noteworthy that Trump highlighted that provision during the State of the Union.
A senior GOP aide told the Washington Examiner on Thursday that the 21st Century ROAD to Housing Act “will cut red tape and make housing more affordable.”
“In his SOTU speech the president urged Congress to pass legislation to ban institutional investors from buying homes and the Senate is delivering on that mandate,” the aide added via text message.
Proponents of banning firms from buying single-family homes argue that such investors are crowding out homebuyers. But critics of the proposal point out that not only do these institutional investors purchase a very tiny percentage of the country’s total housing stock, but they might also make it easier for people to rent homes they might not have been able to buy with a mortgage.
TRUMP-LED GOP LACKS CLEAR MIDTERM LEGISLATIVE AGENDA AFTER STATE OF THE UNION
Wilson Geno pointed out that the housing stock owned by institutional investors accounts for a “really small percentage” of the total housing stock in the United States.
Institutional investors, those who own 100 or more homes, have purchased less than 2% of all homes.
