Key facts
- The 21st Century Road to Housing Act has become law, impacting institutional investment in the residential sector.
- The law caps institutional investors at owning 350 single-family homes, with an exception for build-to-rent (BTR) properties.
- This carve-out is expected to redirect institutional capital towards BTR development.
- Atlanta has a high concentration of institutional ownership of single-family rental homes.
- Over 100,000 BTR homes were in development in the U.S. last year.
- A previous version of the bill included a seven-year forced-sale provision for BTR homes, which was removed.
The passage of the 21st Century Road to Housing Act is set to significantly alter the landscape for institutional investors in the residential sector, particularly benefiting the build-to-rent (BTR) industry. The law, which became effective without President Donald Trump's signature, introduces a cap limiting large institutional investors to owning no more than 350 single-family homes. However, this restriction does not apply to homes constructed specifically for rental purposes, creating a clear pathway for capital to flow into BTR projects.
Experts believe this legislation will lead to a rebound in BTR construction. Brad Hunter, president of Hunter Housing Economics, stated that BTR is now the clearest remaining avenue for institutional capital seeking exposure to single-family rental demand. This shift is anticipated to be particularly impactful in markets like Atlanta, where institutional investors already hold a substantial portion of single-family rental homes.
The BTR sector saw over 100,000 homes under development in the U.S. last year, with a significant portion in Metro Atlanta. Richard Ross, CEO of Quinn Residences, noted that the industry faced a slowdown due to earlier legislative proposals, including a controversial seven-year forced-sale provision, which has now been removed from the final act. Developers like RangeWater Real Estate expect their BTR activity to return to normal or increase.
Institutional investors have historically been active in acquiring single-family homes in Sun Belt cities, including Atlanta, especially following the Global Financial Crisis. This practice has been criticized for exacerbating housing affordability issues by reducing the supply available for individual homebuyers. While the new law aims to increase competition for buyers, some experts, like Adrianne Todman of the National Rental Home Council, argue that the fundamental solution lies in building more homes overall to meet the needs of both renters and buyers.