Senate Passes Housing Bill That Threatens To 'Shut Down' Build-To-Rent Industry

The Senate passed its version of a historic housing reform bill Thursday, but it added new rules for developers of build-to-rent single-family homes that drew sharp backlash from the previously supportive real estate industry. 

The bipartisan 21st Century Road to Housing Act, sponsored by Democratic Sen. Elizabeth Warren of Massachusetts and Republican Sen. Tim Scott of South Carolina, passed by an 89-10 margin in the Senate on Thursday afternoon. 

The bill faces steep hurdles before it can become law. The House of Representatives would need to pass the Senate’s version or convene with the upper chamber to combine the bills into one legislation before it heads to the president’s desk.  

The Road to Housing Act includes dozens of new policies aimed at increasing the supply of housing — such as simplifying the environmental review process — but it also includes new restrictions on developers of build-to-rent communities that have been widely criticized as stifling housing construction. 

The provision would require institutional developers of BTR housing to sell new homes to individuals within seven years. It is part of a larger section the Senate added to the bill aimed at reducing the influence of large investors in the single-family housing sector. 

The bill defines an institutional investor as an entity that owns 350 or more homes. In addition to the forced-sale provision, the bill would bar institutional investors from buying existing single-family homes.

“The 7-year disposition requirement will effectively shut down BTR development, leading to less supply and fewer options for renters," the Mortgage Bankers Association and 11 other groups wrote in a letter Wednesday. 

“Even if it were possible to build these units, which it is not, it would lead to the forced displacement of thousands of renters each year as their housing providers are forced to sell," the letter said. “It also threatens to negate the other pro-supply elements of the larger bipartisan housing package.” 

Immediately following the bill’s passage, the MBA released a statement saying it has “significant concerns with several parts of the bill” — including the BTR restrictions — and urged lawmakers and the president to amend it before it becomes law. 

The National Multifamily Housing Council and National Apartment Association released a joint statement after the vote also calling for changes and expressing dismay that the legislation they supported for the past year was altered by the “harmful” BTR provision. 

“Unfortunately, the promise of this overwhelmingly pro-housing legislation is now undermined by the eleventh-hour addition of a provision that will have an immediate chilling effect on housing supply, affordability and investment,” the statement said. 

The effort to reduce institutional investment in the housing market, long pushed by progressive Democrats like Warren, became a pillar of the Trump administration’s housing agenda this year. President Donald Trump signed an executive order in January aimed at limiting Wall Street’s influence in the single-family housing sector, and then he mentioned it in his State of the Union address.

And after the House passed its own version of the housing reform bill in early February without the single-family restrictions, the White House released a statement calling for them to be added. 

The issue has become a flashpoint in the debate over the past week after the Senate added the provisions to its bill and advanced it with procedural votes March 3 and Tuesday — both times with overwhelming majorities. 

More than three dozen groups signed a letter after the first procedural vote calling on senators to cut the seven-year sale provision from the bill. The letter included industry organizations such as Real Estate Roundtable, NAA, NMHC and MBA, plus 32 groups affiliated with the YIMBY action network. 

A coalition of 12 industry groups sent another letter Wednesday saying the seven-year requirement would “effectively eliminate the production of build-to-rent (BTR) housing.” 

Sen. Brian Schatz, a Democrat from Hawaii, joined the chorus Wednesday. He said on the Senate floor that the BTR provision would “essentially ban a specific kind of housing.” He speculated that the provision was a drafting error and said it could be solved with a two-line fix.

“This is the first time we’ve done anything major on housing; let’s get it right,” he said. “I don’t think people are clocking how bad this is going to be on the supply side.”

Schatz was the only Democrat to vote against the bill, while Republicans including Ted Cruz, Rick Scott, Rand Paul and Thom Tillis also voted nay.

Warren pushed back on the idea the provision was added to the bill erroneously. 

“The policy is to block private equity from taking over the single family home, and that is quite deliberate,” the Massachusetts senator told HuffPost.

Members of the Freedom Caucus of House Republicans have said they won’t support the Senate version, likening provisions of the bill to socialism, Politico reported. Trump, meanwhile, has reportedly expressed ambivalence to the issue. 

He has been focused legislatively on the SAVE America Act that would create new voter identification requirements, and Punchbowl reported Wednesday that Trump told House Speaker Mike Johnson that “no one gives a [bleep] about housing.”