Aspirational Americans are being priced out of homes. A recent poll found that 65% of Americans believe they will not be able to purchase a home “in the foreseeable future.” Singles who want to put down roots and families who want to grow are growing discouraged about their future prospects. So when the Senate passed a bipartisan housing bill 89–10 in March, there was reason for cautious optimism. Congress seemed ready to actually legislate, for a change.
But the Senate included a harmful provision that would stymie the construction of new homes.
Buried in an otherwise constructive package that streamlines environmental reviews, modernizes manufactured housing rules, and updates multifamily financing tools is a provision bearing the unmistakable fingerprints of Sen. Elizabeth Warren (D-Mass.) and her colleagues in the Congressional Progressive Caucus. It mandates that institutional investors must sell build-to-rent (BTR) homes within seven years of construction.
This provision is a kneejerk reaction to the current moral panic over investor-owned housing. A false narrative has entered the housing discussion where the culprits are big institutional investors who have bought up all the available housing. It doesn’t matter that the facts don’t bear this out—it only matters that the narrative has gained traction.
And the moral panic over investor-owned housing threatens chaos to the rental market.
Renting is a legitimate and essential part of the housing market. Who hasn’t rented one or more apartments or houses before finally becoming a homeowner? But someone must first buy and own that rental unit, whether it’s a large or small investor, for rental to occur.
When you have a housing shortage, you need more housing. More of everything. More starter homes, more larger homes, more apartments, more rental homes. Discouraging investors from building rental units is insanely counterproductive in a housing shortage.
But that’s what the Senate bill would do.
According to the Urban Institute, if enacted, the Senate's build-to-rent sell-off mandate would result in declines of more than 7% in single-family home completions and 18% in rental completions. Consider what that means in context: institutional investors own less than 1% of the total U.S. housing stock. Congress is prepared to risk 7 to 13% of new housing construction over speculation about a negligible market share.
Build-to-rent housing is one of the few corners of the market where supply is expanding. These developments serve working families who are priced out of ownership but need stable housing in high-opportunity areas. Investors in this space aren't competing with first-time homebuyers. They are building homes that wouldn't otherwise exist.
Institutional investors are deploying private capital to renovate dilapidated housing and construct new rental homes without government subsidies. Many of these housing investors seek older properties that need repair to make them livable. In fact, these investors have been net sellers for two consecutive years, giving the lie to the narrative that investors are crowding out homebuyers. investors are adding more supply than they are buying.
Forcing investors to liquidate after seven years doesn't help renters. It punishes the sector delivering housing where it's needed most, because investors will redeploy capital into other sectors. Legislative uncertainty is also already creating ripple effects in the market. Lawmakers should treat this price signal as a warning.
This provision in the Senate bill directly counters President Trump's call to level the playing field on existing supply, not to suppress the construction of new homes. The Senate bill took that call and ran it through Elizabeth Warren and Bernie Sanders. What came out the other side undermines the Trump administration’s efforts. It is no surprise that Trump himself has signaled concerns, as have industry groups and researchers who have been closely tracking this provision.
The House could rectify the Senate’s mistake, if House lawmakers reviewing the Senate's approach remove the build-to-rent sell-off provision entirely. Such a bill would not be a comprehensive solution to America's housing shortage, but it would avoid the Senate's mistake of discouraging private investment in new construction.
Affordability is a supply problem. When supply expands, prices decline. When supply is constrained, prices rise. Any policy that chills housing investment tightens supply, raises rents, and narrows choices for the families who can afford them least. The consequences won't fall on institutional investors. They will fall on renters.
Congress has a choice. Pass the House bill and keep private capital flowing into new housing construction. Or adopt the Senate approach and hand Sen. Warren and her Democratic colleagues a political victory that throws the housing market in the wrong direction. One path advances President Trump's agenda of expanding supply and delivering real affordability. The other path makes a difficult market measurably worse by exacerbating the nation’s housing shortage.
The border is secure. The economy is growing. If President Trump wants to deliver the first major housing reform in nearly four decades, the House bill is the vehicle.