Treasury Unveils New Rules For Big Investor Homebuyers After Congress Set Limits

The Department of the Treasury has released its long-awaited guidance on how it plans to restrict institutional investors in the housing market.

Treasury unveiled the proposed rule that establishes standards for large institutional investors in the housing market. It follows a January executive order from President Donald Trump meant to discourage investors from benefiting from federal assistance in home purchases.

That led to some large investors to pull back, Realtor.com® found in its own data. Small investors tend to have a far larger presence in the housing market, and they have been less scarce in the meantime.

“Treasury is working to ensure American families and workers have a fair shot at purchasing homes in their communities by increasing housing supply and limiting large institutional investors’ role in the market, while supporting a strong, stable housing market and avoiding unnecessary disruption,” Treasury Secretary Scott Bessent said in a statement.

The new rules help define what makes a large instututional investor and create carve-outs to the rules—in particular, for renovate-to-rent businesses. Often these companies purchase homes that require more work than an average homebuyer can afford, and then flip them.

The rules also clarify proposed penalties against real estate investors, which could reach up to $1 million, or three times the purchase price of a property. The rules are open for public comment for 30 days.

Congress codified further limitations in the 21st Century Road to Housing Act, which became law in July. That bill targets investors who own more than 350 properties. After some wrangling, it excludes the build-to-rent industry.

Large investors are concentrated in some large markets where they account for a significant share of the housing stock.

What's in the new details

As expected, the rules prevent investors who control 350 or more single-family homes from purchasing more, starting on Jan. 7, 2027. Homes bought before the bill became law on July 11 don't have to be sold.

The new material in the proposed rule is mostly in the exceptions and carve-outs, Realtor.com senior economist Hannah Jones says.

For build-to-rent properties, a home must be a new build that is bought within 18 months of its certificate of occupancy. And it must be occupied by a renter, though the bill does not specify a set period for them to live there.

Treasury indicated it has a few open questions. It's asking for comment on whether it should add a minimum time for renters to be in a property to prevent investors from building, renting out briefly, and then quickly selling homes.

So-called renovate-to-rent homes, which are purchased with an eye to fix up and rent out, must fail structural or core-system building code elements at purchase. The investor must spend at least 15% of the purchase price on improvements that fix those problems.

"We see this as sensible guardrails rather than a surprise," Jones says. "The rule steers large investors toward activity that adds supply, restores neglected homes, or helps renters become owners, and away from competing with owner-occupant buyers for existing homes.

"This goal is in line with what the housing market needs, which is more homes for buyers, more paths to ownership, and more affordable rents," Jones adds.

Impacts

In a statement, Massachusetts Sen. Elizabeth Warren, top Democratic on the Senate Committee on Banking, Housing, and Urban Affairs, said the rules are a sign of progress for the housing law. Still, she criticized Trump for failing to sign the housing bill, which automatically became law after he failed to act on it one way or the other.

While Congress debated the details of the investor ban, the bill was overwhelmingly bipartisan.

"Today’s proposed rule starts that process for reining in large institutional investors, but the work is far from done," Warren said. "Congress will be watching closely to ensure the Trump Administration finalizes strong final rules without loopholes for corporate landlords that drive up costs for renters and families trying to buy a home.”

Adds Jones, the measure might not make all that much of a difference. After all, mega-investors haven't been buying amid the scrutiny this year. Realtor.com found large investor buying activity down 31.8% this year compared to last.

"The effect could be more noticeable in local markets or neighborhoods where institutional investors are concentrated, and the exceptions may redirect some of their buying toward new construction rather than existing homes," Jones says.