The Senate Housing Bill Still Isn't Law, But It Has Already Paralyzed The Build-To-Rent Market

The biggest investors and lenders in the housing market have essentially stopped buying and financing build-to-rent communities due to legislation that remains stalled in Congress.

When the Senate passed the 21st Century Road to Housing Act on March 12, it included restrictions on investment in single-family housing that sparked a panic from real estate industry groups. They say a provision forcing large developers of new BTR communities to sell to homeowners after seven years would effectively kill that market, stifling much-needed housing supply and pushing up rents.  

While industry lobbyists have continued to push for the rule's removal before the bill heads to the president’s desk, its ultimate fate hasn't become any clearer over the past month.

In the meantime, the market for financing and selling BTR projects is at a standstill. 

“Everybody is on the sidelines,” said Bruce McNeilage, CEO of Kinloch Homes, a build-to-rent developer that has completed nearly 1,000 units. “People can’t buy, and they can’t sell because of the uncertainty.”

The firm had been trying to sell a 70-unit BTR community that is 100% leased, and it had garnered institutional interest before the Senate passed its bill, McNeilage said. Now, Kinloch isn’t talking with any prospective buyers.

The lack of investors looking to buy BTR communities makes it harder for developers to finance new ones as they can’t project a clear exit. 

“That has driven the market to basically paralysis,” McNeilage said. “Everything is up in the air, we don’t know what’s going to happen, and therefore investors can't fund deals.” 

Development of new single-family rental homes rose in the years following the 2008 financial crisis as more families were unable to buy homes, and then it soared in the years after the pandemic. 

Last year, 68,000 single-family, build-to-rent housing units began construction across the U.S., according to a National Association of Home Builders analysis of U.S. Census Bureau data. That was below the 84,000 units that broke ground in the peak of 2024 but still well above most other years over the last three decades. 

The seven-year sale requirement in the Senate bill would threaten the potential construction of 40,000 BTR units per year, NAHB estimates. A letter from a dozen industry groups to Senate leadership the day before they voted on the bill said the requirement would "effectively shut down BTR development.”

Aside from the BTR restrictions, the wide-ranging bill has many other provisions that would help spur housing development, such as accelerating environmental reviews, loosening rules on manufactured housing, incentivizing localities to ease zoning and allowing banks to increase their lending to affordable housing.

Industry groups had been supportive of a House version of the bill that exempted the BTR industry from a broader ban on institutional single-family residential investment. 

The forced-sale provision was inserted into the Senate bill less than two weeks before it was passed by the full chamber. With such a big potential impact, it quickly froze the BTR market.

“The fallout has been remarkably fast since the Senate vote,” rental housing economist Jay Parsons wrote in an April 2 social media post, stating that lenders had halted new deals to BTR projects and equity remained on the sidelines. 

Residential financing giants Fannie Mae and Freddie Mac paused BTR deals in the week after the Senate vote, according to a March 24 report from John Burns Research & Consulting. 

The research firm said it met with 146 BTR industry participants, and its top takeaway was that the seven-year disposal requirement “has already frozen BTR capital and halted new development before it has even passed.”

JBREC Vice President of Rental Research Chris Nebenzahl said he has continued meeting with industry participants over the past few weeks and has learned lenders are still “pretty much pencils down.”

The researcher said Fannie and Freddie are continuing to look at BTR deals, but he hasn’t heard of any going through. Spokespeople for Fannie and Freddie didn’t respond to Bisnow’s requests for comment on their BTR activity. 

“They’re huge lenders in the space,” Nebenzahl said. “If it’s them or any other lender that’s not active and is pausing because of the uncertainty, that limits the new supply that can be built.”

The pause goes well beyond the government-sponsored enterprises, Mortgage Bankers Association Senior Vice President Jamie Woodwell said.

“What you hear from some of the lenders is that while they are pausing, there’s actually less to pause on because it’s affecting the equity side even more,” he said. “Equity isn’t moving forward on deals. They’re stopping before they even get to the lenders.”

Kinloch isn't moving forward with new projects because of the legislation, even though it has seen some opportunities it would otherwise pursue, McNeilage said, adding that he knows other developers in the same situation.

“We’re on the sidelines, too,” he said.

In addition to disappearing capital for new BTR projects and buyers for existing assets, developers are also finding it more difficult to refinance construction loans that are approaching maturity. 

Wolfson BTR CEO Adam Wolfson said his firm has been in talks with institutional lenders to refinance a newly developed BTR project, on which he declined to provide specifics, but they pulled back after the Senate passed its bill. 

He has since found another financing option and is working to close the deal, but he said it would add 100 basis points to its interest rate compared to what it would have gotten from an institutional lender, increasing its borrowing costs by 15%.  

“This happened at the worst possible time,” Wolfson said. “You have these friction moments in real estate when you’ve got to refinance or sell. And if these hiccups happen, whether through actual or threatened impacts, what winds up happening is it can kill your returns.”

Wolfson owns another new community totaling over 200 units in the Orlando market, which it was previously in the market to sell, but due to the lack of buyers, it is now looking to refinance — likely at higher rates again. 

“A lot of the bigger guys who had cheaper capital are on the sidelines,” he said. “They’re literally just not doing anything until this gets resolved.”

Unfortunately for those trying to finance BTR deals, it’s not clear when Congress will reach a final decision. 

President Donald Trump — who pushed for a ban on institutional investors in the single-family residential market before expressing ambivalence on tackling housing affordability — has said he won’t sign any other bills before Congress passes a bill to overhaul voting laws. 

Many House members, including Republicans and Democrats, are calling for a conference committee to negotiate details of the bill. Lawmakers were out on recess for the last two weeks, stalling progress on these talks, but they returned to Capitol Hill on Tuesday. 

However, they have other contentious issues in front of them, from the U.S. and Israel's war with Iran to the Department of Homeland Security's partial shutdown, that could delay a deal on the housing bill. And Sen. Elizabeth Warren, the Massachusetts Democrat who co-sponsored the bill, has pushed behind closed doors to block a conference or negotiation, NOTUS reports.

“The bill could get delayed [further], and that would only keep the industry frozen,” Nebenzahl said. “Without any clear understanding of what the future of BTR will be, I think capital will remain pretty frozen.”

The loss of supply from this freeze will lead to an increase in rents in the BTR market, Nebenzahl said. 

This means that before the bill has become law, the rules introduced in the Senate version are already undermining the stated purpose of the legislation: to increase the supply of housing and bring down costs. 

National Multifamily Housing Council CEO Sharon Wilson Géno said she is “very hopeful” that Congress will take up the bill soon after returning from recess. If lawmakers remove the BTR restrictions, she said it could take some time for development to ramp back up after this freeze, but leaving the rules in place would be “really devastating.”

“These projects are sitting in limbo, and time is money,” Wilson Géno said. “The longer we wait to put more housing units in the ground — we already have a housing shortage — the longer Americans are going to wait to see the housing affordability they’re looking for.”