Road To Housing Act Sparks Debate Over Investor Limits, Housing Supply

When the Senate overwhelmingly passed the 21st Century ROAD to Housing Act on Thursday, longtime real estate analyst Steve Murray zeroed in on a number at the center of the legislation: 350.

That figure, under the bill, defines a “large institutional investor” — a category that triggers strict limits on single-family home purchases and imposes a seven-year requirement to sell certain properties to individual buyers.

Murray — senior adviser for HousingWire and founder of RealTrends and RTC Consulting — says the 350-property threshold appears arbitrary and unlikely to meaningfully change the nation’s housing supply.

“I think they made it up,” Murray said. “I think what they probably did is had some guy look at the publicly held or publicly known investment funds and how many homes they own, that they can track, and they settled on a number that’s supposed to hurt the deep-pocketed investors.”

The Senate approved the bipartisan package in an 89–10 vote. It now heads to the House of Representatives before it can be sent to President Donald Trump for his signature.

While the bill includes provisions aimed at boosting supply and expanding access to affordable mortgages, several parts — particularly those targeting institutional investors — have sparked debate across the housing industry.

Investor restrictions and the seven-year clock

During the seven-year period, renters would receive a right of first refusal if the property is put up for sale, as well as lease renewal options.

But under the bill, leasing cannot extend more than 36 months past the original lease term. Investors who fail to comply could face steep penalties of up to $1 million or three times the purchase price of the property.

Supporters argue the provision is designed to gradually move homes from corporate ownership into the hands of individual homeowners.

While acknowledging benefits for first-time buyers, Murray said the measure does not address the country’s lack of housing supply.

“This bill is not going to create one more house for a family,” he said. “It’ll just shift from homeownership to a rental-to-homeownership [model]. Those of us in the industry think homeownership is a good thing. Of course, there’s a lot of information out there showing that homeownership is a positive thing. So, I guess from that point of view, it’s a positive.”

Debate over build-to-rent homes

The provision that affects build-to-rent homes — properties constructed specifically to be rented rather than sold — has become a flashpoint.

Industry groups — including the National Association of Home Builders (NAHB) — have raised concerns about the requirement that such homes ultimately be sold to individuals within seven years.

“NAHB believes this requirement would severely curtail investment in single-family rental housing, potentially leading to a decrease in new construction by as much as 40,000 units per year,” the association wrote Wednesday in a letter to Senate leaders. “Reducing the supply of new rental housing will have an overall negative impact on housing affordability.

“Single family rentals play an important role in the housing supply ecosystem, allowing families an opportunity to live in homes and neighborhoods that meet their financial and family needs.”

But consumer advocates say the rule is necessary to prevent large investors from dominating entire neighborhoods with rental homes.

“It is ironic — and telling — that the same voices who downplayed build-to-rent and institutional investors generally as a tiny slice of the housing industry are now willing to tank the most promising comprehensive legislation to tackle America’s housing crisis in a generation over a targeted provision that does not even fully ban that business model,” said Laurel Kilgour, research manager at the American Economic Liberties Project.

Kilgour warned that allowing a broad exemption for build-to-rent developments could make it harder for families to purchase homes in certain communities.

“Creating a gaping loophole for build-to-rent would make homeownership off limits in entire neighborhoods, while exposing more renters to powerful landlords with a track record of price-gouging and deceptive practices,” she said.

Supporters of the legislation also argue that the rapid growth of institutional investor activity in the single-family housing market is a legitimate concern.

The share of home purchases made by institutional investors surged 900% between 2012 and 2022 — increasing from roughly 40,000 purchases per year to about 415,000, the American Economic Liberties Project said.

Large investor ownership still high in select pockets

Although institutional investors still own only a small share of single-family homes nationally, their presence is far more concentrated in certain markets, such as Atlanta, Indianapolis, Raleigh and Tampa, where they control double-digit percentages of home purchases in some neighborhoods, Kilgour said.

She also disputed the claim that build-to-rent homes would not exist without large institutional buyers.

“Moreover, the notion that houses built for rent would never otherwise be built is simply lobbyist propaganda,” she said. “In fact, this category of construction barely existed before the pandemic, and the ROAD to Housing Act unlocks many other avenues to increase housing supply.”

Kilgour added that large homebuilders have increasingly targeted institutional investors as customers — sometimes prioritizing higher margins over broader housing production.

“Big builders and their proxies are just upset they would not be able to cash in as handsomely on the massive land hoarding that enabled them to pace production and cater to single-family rental landlords at scale instead of selling quickly to ordinary families,” she said.

Potential large investor workarounds, alternative solution

Sophisticated investors, Murray said, could easily restructure ownership across multiple entities to stay below the 350-property threshold.

“I’ve been a capitalist and entrepreneur my almost 40 years at least,” Murray said. “There’s one rule about owning your own company, which is, you’re going to run into rules and regulations and obstacles. Then the main thought process is, ‘How do I legally get around this?’

“They’ll figure out a way around it. These are very smart guys.”

Rather than targeting large institutional investors, Murray believes policymakers should focus on the millions of smaller mom-and-pop landlords who collectively own a much larger share of rental homes.

His preferred approach would offer a temporary tax incentive encouraging those landlords to sell properties to first-time buyers.

“It would give them 12 to 18 months of capital gains exclusion if they sold to a first-time homebuyer, period,” Murray said. “I own two (investment properties) and they were both in the $300,000 to $400,000 price range, which is — at least where I live — a first-time homebuyer house. You want to have an effect on the market? Drop 2 million investor-owned homes on this marketplace — that’ll bring prices down, not this bill.

“This bill is a political stunt. But, you know, the good news is, I don’t get cynical about it, because nothing surprises me anymore.”