The U.S. House of Representatives on Wednesday passed an amended version of the housing bill that has kept the build-to-rent industry on pins and needles for months, setting up a fresh Senate showdown.
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The newest version of the 21st Century Road to Housing Act eliminates a few carve-outs for major institutional investors but largely retains protections for the BTR industry.
Last week, the House eliminated a controversial provision in the bill that would have required BTR operators to sell properties after seven years of ownership, a key change that remained in the latest version.
The bill still prohibits large institutional investors — defined as entities with direct or indirect investment control of at least 350 single-family homes — from buying single-family homes but provides a host of exceptions. Some carve-outs include houses that are:
constructed as part of build-to-rent programs;
newly constructed, renovated or rental conversions for sale by large institutional investors;
or purchased from another large institutional investor that owned the home before the act is enacted or in compliance with the bill.
The latest version of the bill, which passed in a 396-13 vote, more narrowly defines the types of single-family homes subject to the proposed law and removes a few exempted purchases, but is largely similar to last week's bill.
“The House revisions addressed many key concerns raised by MBA and other stakeholders, strengthening the legislation while preserving important measures in the Senate’s bill to boost housing supply and expand access to affordable mortgage credit,” Mortgage Bankers Association President and CEO Bob Broeksmit said in a statement following the vote.
Investors that violate the bill face a civil penalty of no more than $1M per violation or three times the purchase price of the property involved, whichever is greater.
Outside of the closely watched BTR battle, the bill is also set to ease the path for housing development.
It increases the amount of money financial institutions are able to put into affordable housing projects backed by federal initiatives. The cap is slated to go up from 15% to 20% of banks’ risk-adjusted capital.
The Affordable Housing Tax Credit Coalition praised the House’s passage of the bill, saying the new cap will unlock “billions of dollars in new private investment” through the low-income housing tax credit.
Additionally, the bill would streamline some national zoning and permitting hurdles and incentivize municipalities to follow suit.
The bill now heads to the Senate, where it could face a steeper challenge for approval.
The Senate initially introduced the restrictions on BTR operators that CRE lobbying groups scrambled to quash. The restrictions, even without becoming law, spooked BTR investors enough to freeze transaction activity.
It is unclear if the amended bill will garner the 60 votes it needs in the Senate to head to President Donald Trump's desk to sign.
Sen. Elizabeth Warren told The Hill she believed House Republicans were aiming to stymie the bill altogether by removing restrictions on institutional investors.
“Changing a provision from what Donald Trump has specifically asked for and the language he has specifically endorsed and that has passed the Senate 89-10 is nothing more than an attempt to kill the housing bill overall,” she told the outlet.
Trump has ramped up efforts to expand housing affordability and clamp down on institutional investors buying single-family homes. He had previously backed the more restrictive Senate version of the bill but has now given his stamp of approval to the updated House edition.
Sen. Bernie Moreno, an Ohio Republican, told CNBC on Tuesday the mandate for investors to sell the homes they build is key to making homeownership more attainable.
“If we kill the build-and-rent industry, so be it,” Moreno told CNBC. “We don’t want homes to be for rent, we want them to be the way that young people, especially, build generational wealth.”
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