How The Biggest Housing Bill In Decades Would Spur Development, Despite Contentious BTR Rules

When the U.S. Senate passed a landmark affordable housing bill this month, the real estate industry's top lobbying groups voiced loud opposition over the bill's restrictions on institutional investment in single-family homes — particularly a provision they say would kill build-to-rent housing development.

The contested policy wasn't in similar legislation passed by the House of Representatives, meaning the two chambers must try to hash out the differences between their bills before sending one to the president’s desk.

Industry lobbyists continue to push lawmakers to eliminate a rule forcing developers to sell their BTR housing units within seven years of building them. But behind the battle lines drawn over that section is a broad base of support from affordable housing advocates for a bill many are celebrating as the most significant federal housing legislation in a generation.

The dozens of other policy changes in the Senate bill include allowing banks to lend more to affordable housing, incentivizing localities to ease their zoning rules, and relaxing restrictions on manufactured housing.

The supply-focused 21st Century Road to Housing Act passed the Senate by an 89-10 margin, an indication that there is bipartisan agreement about the nation’s housing shortage.

“It’s exciting when the House, the Senate and the White House are all committed not just to affordable housing but housing supply everywhere,” said Enterprise Community Partners Senior Vice President of Policy Pat Cave, who supports the bill.

The National Low Income Housing Coalition last year estimated that the country was short 7.1 million homes for extremely low-income renters. 

The NLIHC is one of several affordable housing-focused groups that have voiced support for the bill, saying in a letter to lawmakers that it “will help ensure federal housing and community development programs better serve the needs of the families, people, and communities with low incomes we represent.”

University of Mississippi professor Jade Craig, who specializes in housing law, said it would be the most impactful housing legislation to come out of Congress in decades. Still, the bill could have gone further, he said. 

“It is a notable intervention by the federal government and by Congress after many years of sitting on the sidelines as Americans struggle with housing affordability,” he said. “In many respects, it targets the problem around the edges and avoids making a lot of significant interventions that would actually make a huge difference.” 

New Financing For Home Construction

The bill includes a measure that would increase the amount financial institutions can invest in affordable housing projects backed by federal initiatives.

It would raise that level, known as the public welfare investment cap, from 15% to 20% of banks’ risk-adjusted capital. 

“Imagine 5% more of Bank of America’s capital flowing to low-income housing tax credits and new market tax credits,” Cave said. “Five percent of their capital base is a very big number.”

The provision was lauded by the Affordable Housing Tax Credit Coalition, which said it would make the expansion of the low-income housing tax credit program passed in last year’s One Big Big Beautiful Bill Act even more impactful.

The 21st Century Road to Housing Act also makes changes to loan programs backed by the Federal Housing Administration.

That includes an effort to provide greater access to mortgages of less than $100K. It would also allow FHA loans to be used for the construction of accessory dwelling units. 

Zoning And Permitting Reform

Removing the zoning and permitting roadblocks that developers and advocates say are holding back housing construction is another key goal of the legislation. 

It would streamline the National Environmental Policy Act review for an array of housing projects, making it easier for developers to comply.

The bill would also incentivize municipalities to take similar measures on the local level to accelerate project timelines. Many of those sweeteners would be delivered as funds to local governments through the community development block grant program.

“If you build more housing in your community and we can measure that year-over-year, the higher performers who do more supply are going to get additional CDBG grants,” Cave said.

The bill calls for a pattern book of preapproved housing designs compiled by the Department of Housing and Urban Development in an effort to help get shovels in the ground faster, a provision Cave was particularly excited about.

But Craig said he doesn’t think the bill’s approach of offering carrots rather than sticks to encourage local zoning reforms will work everywhere.

“Incentives will capture a certain set of communities who need the incentives,” the professor said. “Many of the most exclusionary communities don’t necessarily need the incentives because of their own property tax base.”

He said the federal government has the authority to mandate more inclusionary zoning at the local level.

“Congress should view this as among its own power to regulate commerce,” Craig said.

Manufactured Housing Boost

The bill would remove regulations and open up new financing for manufactured housing — a sector that is exempted from the BTR rules. 

Manufactured housing is one of the most affordable ways for working-class rural Americans to access a single-family residence. Excluding the cost of land, the average sale price for a manufactured home came in at just under $125K in 2024, compared to $424K for a site-built home, according to the Urban Institute.

But the sector is “chronically underserved,” Latham & Watkins partner Mark Semotiuk said. 

Federal regulations have required all manufactured homes to have a steel chassis, a structural base that can be attached to a hitch and wheels for transport purposes, even though many of these structures never move from where they are originally placed.

The Senate’s bill would remove that requirement.

Pennsylvania Manufactured Housing Association Executive Vice President Mary Gaiski said this would open up new doors for the industry when it comes to cost-effective manufacturing and diverse designs.

“That could save some dollars on the construction of the home,” she said. 

Manufactured housing is also excluded from the bill’s restrictions on institutional investment in BTR properties, meaning it could become a destination for displaced investors, Coefficient Giving Housing Program Officer Alex Armlovich predicted in a social media post.

“This is essentially an industrial policy to push SFH BTR over to factories,” Armlovich said.

But Semotiuk said he doesn’t believe the BTR sector will pivot en masse.

“You may see, on the margins, capital flow more toward manufactured housing,” he said.

Getting To The Finish Line

The battle over the bill is ongoing. Senators want the lower chamber to pass their version to move it to the president’s desk, but House Republicans requested a conference with their Senate counterparts to negotiate the details of the final bill. 

The difference between the bills on restricting institutional investment in SFR and BTR will likely be a key sticking point in the negotiations. More than a dozen major real estate groups have urged lawmakers to strike the BTR section from the bill, arguing it “inexplicably takes new housing units off the table and would exacerbate our housing crisis.”

The White House pushed for the addition of the institutional investor rules after the House passed its version of the bill without them. While President Donald Trump signed an executive order in January restricting institutional investment in single-family housing, he reportedly expressed ambivalence on the issue of housing ahead of the Senate vote.

But the day after the vote, Trump signed a pair of executive orders on housing.

One order tells federal agencies to remove regulatory barriers to housing development, while the other aims to allow small lenders to underwrite more mortgages. Industry groups largely touted the executive orders while continuing to push for changes to the legislation.

But the calls aren't just coming from real estate lobbyists. 

A coalition of 128 pro-housing organizations, including many local Yes In My Backyard groups, released a statement saying that while it was “deeply disappointed” in the BTR restrictions, it still thinks the Senate-passed housing bill is “the most comprehensive response to America’s housing shortage in decades.”

“The vast majority of this bill is exactly what the country needs,” the coalition said.