Investor Restrictions on Single-Family Homes Become Law

The 21st Century ROAD to Housing Act, a bipartisan housing package including a provision by Senator Raphael Warnock (D-Ga.), officially became law on July 11, 2024, without President Donald Trump's signature. This legislation imposes restrictions on large private equity firms and institutional investors seeking to expand their portfolios of single-family homes. Warnock's office characterized the act as the most significant federal housing legislation in decades, intended to increase housing supply and reduce costs for families.

The core provision of the new law prohibits institutional investors that currently own or control a minimum of 350 single-family homes from acquiring additional properties. This restriction covers various acquisition methods, including direct purchases, transfers, mergers, and bulk acquisitions. However, the law does not mandate the divestment of homes already owned by these entities prior to its enactment.

The legislation carves out several exceptions to the prohibition. Institutional investors are permitted to continue acquiring newly constructed homes through build-to-rent initiatives and substantially rehabilitated homes via renovate-to-rent programs. Other exceptions include homes purchased through qualifying lease-to-own and homeownership programs, properties obtained through foreclosure or loss-mitigation processes, certain age-restricted housing communities, and specific transactions involving homes already owned by other institutional investors under defined conditions.

This new law aligns with and builds upon a January executive order issued by President Trump, which directed federal agencies to limit the involvement of large institutional investors in the single-family housing market. The ROAD Act aims to foster a more accessible housing market by curbing the dominance of large-scale investors in single-family home acquisitions.