How Section 901 of the 21st Century ROAD to Housing Act Reduces Housing Supply

In a rare example of bipartisan cooperation, Congress is poised to pass the most significant federal housing package in a generation. The Senate’s latest 21st Century ROAD to Housing Act, which combines elements of the House’s housing bill and the Senate’s initial ROAD package, includes dozens of valuable housing provisions. But while the initial ROAD bill would unambiguously boost housing supply, the effect of the 21st Century ROAD bill passed by the Senate in March is less certain.

At President Trump’s request, the Senate acted to prohibit institutional investors from buying up single-family homes. This provision is captured in Section 901 of 21st Century ROAD, “Homes are for people, not corporations.” But while the White House’s Executive Order and proposed legislative text would ban institutional investors from purchasing existing single-family homes, they explicitly protected investor financing of new rental homes. The Senate’s Section 901 goes further: it establishes a disposition requirement for investors to sell their newly built one- and two-family homes within a fixed period, discouraging investment in new rental homes and decreasing housing supply. The last-minute inclusion of Section 901 with this disposition requirement has jeopardized the overall package and fueled calls for a fix in the House. The housing industry, the pro-housing advocacy community, and both Democrats and Republicans in the House and Senate, as well as members of the administration, have voiced opposition to the section as written.

Even with Section 901’s negative effects, it’s plausible that the 21st Century ROAD to Housing Act will still increase housing supply and affordability over the long term, at least in the highest-demand metros where zoning barriers and housing costs are the most severe. Many of ROAD’s provisions will help address the national housing shortage: the bill includes major cost savings for manufactured housing, both carrots and sticks to support housing growth, permitting reform for infill housing, federal program improvements, and many other valuable provisions. But Section 901 has introduced significant uncertainty to the supply calculation.¹

As the House and Senate consider negotiations on the package, Section 901’s restrictions on new homes are a central site of conflict. The following FAQ breaks down how Section 901 could worsen the housing shortage by discouraging build-to-rent homebuilding, explains how Section 901’s exceptions could mitigate its negative housing supply impacts (though to an uncertain degree), and presents targeted fixes to preserve build-to-rent housing supply.

Breaking down Section 901

What does “build-to-rent” mean?

“Build-to-rent” (BTR) refers to homes built to be operated as rentals, rather than homes built for owner-occupiers. Almost all homes in multifamily buildings are built-to-rent (95%), while roughly 90% of single-family homes are built either for sale or by future occupants.²

While single-family rentals are a small share of all single-family homes, they are important to renters: roughly 40% of renters live in single-family homes across the country. The BTR industry has grown over the past five years to provide more options for individuals and families without the means, credit, or desire to purchase a home. These homes give families access to more space, suburban school districts, and other amenities not typically available to urban apartment residents, and serve a variety of circumstances: military families living off-base, young families or seniors who can’t afford a down payment, workers relocating to a new area, and others who value flexibility or are priced out of homeownership.

Because BTR developments are often planned by a single builder, BTR communities can be better planned and more walkable than scattered single-family homes. Most importantly, they face fewer zoning and permitting hurdles than vertical multifamily development, which is banned outright in many suburbs. This makes BTR the only option for renters that is legal to build in much of the US.

Who finances new BTR homes?

BTR homes are financed by investors including real estate investment trusts (REITs), pension funds, private equity firms, public employee retirement systems, life insurance companies, homebuilders with dedicated rental businesses, and others.³ These entities can play different roles in partnership with one another: for example, a pension fund might finance a homebuilder to build homes and a property manager to operate them. Homebuilders have become increasingly involved in BTR, including by selling part of a subdivision for rental and part for sale to meet demand for both types of homes.

Different types of financing operate on different time horizons: REITs are trusts that hold real estate portfolios indefinitely, returning operating income to shareholders; in contrast, private equity firms and their affiliated property managers use pooled private capital (from pension funds, insurance companies, foundations, and other sources) to both operate and sell properties on fixed timelines.

Under Section 901, most of these entities, if they are large enough, would fall under the definition of “large institutional investors” (LIIs). Section 901 broadly defines an LII as any “investment fund, corporation, general or limited partnership, LLC, joint venture, association, or other for-profit entity” that directly or indirectly controls 350 or more single-family homes. According to a Pew estimate, LIIs may finance more than 62% of annual single-family BTR construction.

What does Section 901 do?

Section 901 puts two restrictions on LII activity relating to “single-family homes,” which the provision defines as both one- and two-family homes.

The first is a general prohibition on LIIs purchasing existing single-family homes, in line with President Trump’s Executive Order.

The second is a limitation, but not a full prohibition, on LIIs financing new homes. Section 901’s broad definition of “purchase” includes “any purchase, transfer, or other acquisition of a single-family home, including through mergers, acquisitions, construction, foreclosures, or bulk purchases.” This means that investors will be subject to the provision if they are building new homes, and not just if they are buying older ones.

The bill allows LIIs to “purchase” homes under a list of exceptions. However, it subjects homes using some of these exceptions — including new construction, BTR, and renovate-to-rent — to a seven-year disposition requirement to list the property for sale to an individual homebuyer. That sale can be delayed until the end of a tenant’s lease, or by an additional three years if a tenant wishes to renew.⁴

Supply impacts

Will Section 901 reduce housing supply?

Yes. The section requires new construction to comply with the disposition requirement within seven to ten years, discouraging long-term investment. Some LIIs may not be burdened enough by the disposition requirement to divert their investment — some sell homes on shorter time frames anyway. But many BTR funders aim to recoup investment after decades of operation, or would balk at the costs of disposition: realtors, staging, and other expenses will eat into their margins. Even if they intend to eventually sell, the disposition requirement could force investors to exit in a bad market. The possibility of bad future market conditions at the point when investors are required to dispose could stop investment today.

Building new single-family homes that have a restriction requiring affordable rent would be particularly hard hit by this requirement. Low-Income Housing Tax Credit (LIHTC) properties are required to operate as deed-restricted affordable rental homes for 30 years, or more in some states. While most LIHTC housing is in denser multifamily development, the disposition requirement could block construction of some LIHTC homes entirely.⁵

How many fewer homes will be built as a result of Section 901?

Section 901 will block some amount of investment in new housing supply, but its precise impacts are uncertain because of the bill’s exceptions and their interaction with investor expectations and state and local laws.

We can, however, estimate the overall number of new homes the section would regulate. Approximately 130,000 of the one million single-family homes started in 2024 were built-to-rent (13%, or 10% of all new homes including multifamily); that number has fallen, in part due to rising interest rates, but BTR still totaled approximately 95,000 of 941,000 single-family home starts in 2025 (10%, or 7% of all new homes).⁶ If Pew’s analysis is correct, and about 60% of these new homes are financed by LIIs, then large investors provide new homes for roughly 180,000 American renters every year.

If current construction rates hold or grow, the industry could build millions of homes over the next 15 years (the period in which Section 901 would be active if passed). A construction pipeline that could build new homes for millions of Americans will be subject to the uncertain effects of the disposition requirement.⁷

How much do Section 901’s exceptions mitigate its negative supply impacts?

Section 901’s disposition requirement does not apply to all LII-financed single-family BTR homes. The section’s exceptions partially protect BTR housing supply:

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• The REIT “Prohibited Transaction” exception
  REITs receive tax benefits as long as they follow certain rules set out in tax law. The disposition requirement could force a sale that would be in violation of those rules, but Section 901 exempts REITs from having to dispose of their properties if selling would make them lose their tax benefits.⁸ However, this may be a narrow exception: the BTR properties that might be protected are typically only a small share of a REIT portfolio.
  
• The manufactured housing and triplex exceptions
  Section 901 does not apply to manufactured homes that are built in a factory and residential structures that include three homes or more (three-unit buildings are known as triplexes or triple/three-deckers). LIIs could avoid the section’s disposition requirement by switching to financing manufactured housing or triplexes.
  
  There are reasons to think manufactured homes could be an appealing substitute. Manufactured homes are cheaper — factory-built homes that are comparable to typical single-family homes and exceed the minimum HUD code requirements can cost as little as $200,000, 27% less than a site-built home. The ROAD bill’s elimination of the HUD code’s outdated chassis requirement, plus recent HUD updates, would make manufactured homes even more cost-effective and easier to build at scale. Moreover, the manufactured housing industry could plausibly scale up to serve increased demand. As recently as the 1990s, it provided nearly 400,000 new homes per year; that figure has declined to around 100,000 homes annually, but could likely rebound over time. Triplexes are not novel either, and can also be more affordable per unit than single-family homes.
  
  However, the fact that manufactured housing and triplexes account for a negligible share of the BTR market (and a small share of the broader housing market) suggests that these alternatives are not a realistic off-ramp for investors to continue building rental homes at the same rate.⁹ Based on current market patterns, most consumers prefer site-built housing, despite the affordability of manufactured or denser housing. More importantly, local zoning and land use rules often prohibit both. Most neighborhoods ban any residential construction beyond single-family homes, and many ban manufactured housing.
  
  Preferences for site-built and single-unit homes might diminish over time, especially if the removal of the chassis requirement makes manufactured housing cheaper and easier to build.¹⁰ But this does not mean that triplexes and manufactured homes would replace existing BTR construction one-for-one, even though they might mitigate some of Section 901’s negative supply impact.
  
• Purchases related to a “program to boost homeownership” (exception E)
  Section 901 exempts several types of purchases from both the purchase prohibition and the disposition requirement. Of these, LIIs are most likely to use exception (E), which allows them to build or buy homes if they (1) report their tenants’ rental payments to credit bureaus, and (2) offer a right of first refusal (ROFR) to the tenant if they sell the property at any point. Exception (E) also lists a third condition, that LIIs provide financial assistance for tenants looking to buy a home, but phrases it as optional. If LIIs comply with conditions (1) and (2), they can build and buy homes without having to comply with the disposition requirement, meaning there is presumably no negative supply impact.
  
  The first condition of exception (E) is easy to meet. Many investors already report rental payments to credit bureaus. But the ROFR condition is less straightforward. While some BTR communities are built with each home on its own legal parcel, making it easy to offer a ROFR to the tenant living there, most are built on a shared legal parcel of land. In these areas, splitting the lot or turning the homes into condos to facilitate the sale of individual properties could require a lengthy and difficult land-use change.¹¹ Without approval from the local government (which is not always guaranteed), it would be impossible for an investor to comply with exception (E).
  
  Failing to meet exception (E) would subject LIIs to the disposition requirement, which arrives at the same lot-splitting problem: an investor cannot dispose of a single home to an individual homebuyer if they cannot sell the individual home separate from the larger property. Thus, it is plausible that investors who currently build BTR on a shared parcel would not build new BTR homes at all under Section 901.
  
  Section 901 gives the Secretary of the Treasury significant interpretive leeway through rulemaking, offering one avenue to address this issue. A sympathetic Secretary might waive the ROFR requirement for properties where land use precludes it, or interpret single-parcel developments as “multifamily” and therefore exempt from Section 901. But because the section leaves this up to interpretation, a hostile Secretary could also exclude shared-parcel (also known as “single-platted”) communities from qualifying for (E), creating uncertainty. This makes executive action an imperfect solution, as discussed below.
  
  Perversely, though exception (E) is not robust enough to protect all new construction, it might actually encourage investors to purchase existing homes, the very behavior Section 901 was intended to prevent. Investors seeking exemption from the disposition requirement may purchase more old homes on individual parcels, rather than risk building new homes on a shared parcel and then being unable to comply with a ROFR or disposal. Overall, exception (E) is likely to preserve BTR homes that are built on individual parcels, but not homes built on shared parcels.
  
• Protection by the Treasury Secretary
  Some parts of Section 901 are ambiguous, and the Secretary of the Treasury is delegated significant latitude to interpret and enforce the bill by rulemaking. In addition to interpreting exception (E) to make future BTR investment easier, a BTR-sympathetic Secretary might allow loopholes to the disposition requirement: for example, the bill does not specify the price at which large investors must offer homes for disposal, and exempts them from the disposition requirement if their properties do not sell, so the Secretary might minimize the disposition requirement by allowing LIIs to list at a price no buyer would be willing to pay. Alternatively, the Secretary could interpret the single-family home definition covered by the bill narrowly to exclude common BTR types, like townhomes.
  
  Yet there is no guarantee that future Secretaries will be friendly to BTR investors. Since investors can have multi-decade horizons, any possibility of a hostile Secretary in a future administration could chill the construction of new homes today.¹²

Section 901 will divert investment away from new homes for renters. LIIs invest in housing if it provides a safe, consistent return, but they have no shortage of alternative investment options. Some BTR investors would likely shift into multifamily residential property (though limited by zoning rules), while others might move into commercial property, private credit, data centers, or alternative assets, none of which would add to the housing supply.

As mentioned above, the impacts of Section 901 are hard to quantify: the National Association of Home Builders estimates that it could prevent the construction of 40,000 homes per year, while the Urban Institute suggests 72,000. This may be an overestimate, given the BTR supply protected by the exceptions discussed above and the fact that some number of homes will still be built as smaller investors repurpose existing labor, land, and materials. Alternatively, it could be an underestimate if the industry would otherwise continue to grow and provide more homes for renters over the next 15 years. But while the magnitude is uncertain, the direction is not. Section 901 undermines the otherwise positive supply effects of the ROAD package.

How to fix Section 901

Does Section 901 match President Trump’s approach?

In January, President Trump issued an executive order to prevent large institutional investors from buying existing single-family homes.¹³ His order targeted investors “acquir[ing] single-family homes that could otherwise be purchased by families,” not investors financing new homes that would otherwise not exist.¹⁴ It specifically allowed BTR construction, as did the White House’s proposed legislative text to Congress.¹⁵ The Senate’s final legislative text departed from the White House proposal: Section 901 expanded LII “purchases” to include new construction, and added the seven-year disposition requirement, discouraging investment in BTR construction.

What’s next for the bill?

There are three paths forward for the 21st Century ROAD to Housing Act:

1. The Senate and White House convince the House to accept the package without changes. Section 901 would become law as written, reducing housing supply, although the many pro-housing provisions in ROAD would also be enacted alongside it.
2. The House and Senate negotiate to reach an amended bill. A targeted amendment (provided below) could remove the negative supply impacts of Section 901, but ROAD’s key pro-supply provisions, such as the Build Now Act and Innovation Fund, could also be stripped.
3. Negotiations between the House and Senate could result in no compromise, killing the bill this session.

A compromise between the two chambers that protects all of the bill’s pro-supply measures while eliminating the threat to BTR supply would maximize the number of new homes built and the bill’s positive impact on America’s housing shortage.

How could Section 901 be amended to support ROAD’s goal of boosting housing supply?

The easiest fix would be to cut Section 901 entirely. But given the White House’s request to codify a ban on institutional investors buying up existing single-family homes, it’s likely that some form of a ban on institutional investor purchases will be included in a final bill. Narrower amendment options to preserve BTR housing supply include:

1. Exempt new construction from Section 901’s disposition requirement, and exempt BTR communities and LIHTC development from the purchase prohibition. Cutting the disposition requirement would protect most new housing supply while preserving the section’s intent to prevent investors from competing with individuals for existing homes. To fully protect build-to-rent investor expectations, LIIs should be able to purchase BTR communities from small investors, giving investors more flexibility to invest and exit the BTR market.¹⁶ Finally, an exception for LIHTC development would protect the construction of subsidized affordable homes. This set of solutions was endorsed by a broad coalition of housing industry associations and pro-housing advocacy groups.
2. In addition to amendment 1, exempt renovate-to-rent from the disposition requirement. To protect housing supply resulting from investment in housing preservation as well (in addition to amendment 1’s protection of new construction), the seven-year disposition requirement could be further limited so it no longer applies to investments in rehabilitating a home and renting it out.
3. Strike the disposition requirement entirely. This is the simplest way to protect new housing supply and differentiate between prohibiting investors buying up homes while protecting new supply, but it would not protect investor expectations as comprehensively.
4. Narrow the definition of single-family homes. An amended definition clarifying that “single-family home” refers only to detached structures on their own lots would ensure that attached townhouses, horizontal apartments, and other homes built on shared legal parcels are exempted from the disposition requirement.

What legislative language would these amendments require?

Congress could consider the following amendments:

1. Limit the seven-year disposition requirement and exempt BTR communities and LIHTC from the purchase prohibition: This amendment was written to be surgical while protecting new supply and is endorsed by a coalition of industry associations and pro-housing advocacy groups.
   • On page 288, insert before line 1:
     • “(L) Purchased as a community of five or more contiguous rental units.”
     • “(M) Purchased with support from the programs described in Section 42 of the Internal Revenue Code.”
   • On page 293, line 18, strike the following: “(A), (B), or”; 
   • On page 294, lines 5–6, strike the following: “(A), (B),”.
2. The above exemptions, plus exempting renovate-to-rent from the disposition requirement.
   • On page 288, insert before line 1:
     • “(L) Purchased as a community of five or more contiguous rental units.”
     • “(M) Purchased with support from the programs described in Section 42 of the Internal Revenue Code.”
   • On page 293, line 18, lines 18-20, strike the following: “(A), (B), or (C) of subsection (a)(2), or with respect to the purchase by a large institutional investor of a single-family home”
   • On page 294, lines 5-6, strike the following: “(A), (B), (C), or”
3. Strike the disposition requirement entirely.
   • On page 293-297, strike subsection (c) and on other pages strike all references to that subsection
4. Narrow the definition of single-family homes.
   • On page 288, line 3, insert before “structure” the following: “detached”
   • On page 288, line 5, insert after “household” the following: “on its own legal parcel”

How could amendments address the concerns that prompted Section 901?

1. Enact tenant protections. The bill could address concerns about LII landlord behavior directly rather than discouraging rental construction. This could take the form of incorporating and expanding Rep. Pressley’s Eviction Helpline section of the Housing for the 21st Century Act to include a helpline for tenants of LIIs. Other options could include a requirement that LIIs participate in a national rental and eviction registry. If paired with the removal of the disposition requirement, these reforms would directly and immediately benefit tenants without imposing substantial costs on new supply; any compliance costs for landlords would pale in comparison to the burdens of Section 901 on housing supply.
2. Condition the purchase prohibition on economic indicators. The primary concern that sparked Section 901 was high prices for homebuyers, but some areas of the country have depressed home values and would prefer more investment. Section 901’s purchase prohibition could be conditioned on factors such as an area’s low vacancy rate, sustained increases in housing costs, and high median home values. During recessions and in economically struggling areas, this condition would allow investors to purchase homes from sellers with few options while still preventing LIIs from outbidding buyers in more expensive markets.
3. Limit the disposition requirement to metros with LII market concentration. The disposition requirement could be applied only when LII ownership of single-family homes hits a certain percentage of all single-family homes in a metro area. This would address the concerns of legislators from metros like Atlanta, where there is relatively high LII market concentration, but it has downsides compared to striking the requirement entirely. First, homebuilders would not know when a region would reach the set percentage, causing them to stop building new homes in anticipation of reaching the level at which the disposition requirement would kick in. Second, it would punish pro-growth areas for facilitating new supply. Third, there is no evidence that LIIs building new homes causes negative market concentration effects.

Evaluating the effects of large institutional investors

How much of the housing stock do LIIs own?

Very little. Though LIIs contribute a significant share of the flow of new housing, because the country’s overall housing stock was built up over many years, they currently own less than 0.6% of the single-family homes in the United States. Even in the Atlanta metro area, the market in which LIIs are most concentrated, only approximately 5% of single-family homes are owned by LIIs.¹⁷ An Urban Institute review found that approximately one-quarter of single-family rentals in Atlanta were owned by all investors with over 100 properties (a lower threshold than the bill’s LII definition).

Do LIIs drive up housing prices?

One paper suggests that large investor purchases of existing single-family homes decrease rents slightly and increase home prices slightly. In the majority of regions where institutional investors have purchased homes, they have had little impact on home values, though investors buying up existing homes have increased prices in areas with the highest concentration of LII purchases.¹⁸

But this model only considers purchases of existing homes. LIIs financing construction that would not otherwise have taken place is a different story, reducing pressure on both rental and owner-occupied housing markets by adding new supply.

What are the distributional effects of discouraging BTR?

Discouraging BTR harms lower-income Americans, a different population than those who can afford to buy a home. Renters tend to have lower incomes than new homebuyers, and even if they did have the means, a large share would be shut out of the mortgage market under current lending standards. The typical household living in a BTR home makes $10,000 less than the median American household, and $30,000 less than the median first-time homebuyer.¹⁹

While there is a tradeoff between renters and homebuyers for Section 901’s prohibition on LIIs buying up existing homes, the section’s disposition requirement on new construction would hurt renters at the bottom of the housing ladder, with unclear benefit to those already climbing up.²⁰

Are large landlords worse than small landlords?

Large landlords are more bureaucratic than smaller landlords, which has both advantages and drawbacks. There’s evidence that large landlords are more aggressive than small landlords in filing and pursuing evictions for smaller debts.²¹ Large landlords are also less likely to discriminate than small landlords, and more likely to accept housing vouchers.²² Contrary to the “asset-sweating” that private equity firms are notorious for — including in their purchases of mobile home parks, where tenants that own a mobile home but not the underlying land can be trapped by high moving costs — a recent study found no significant difference in code violations between large and small landlords.

Section 901 does not affect LIIs that operate buildings that are triplexes or denser multifamily, creating an arbitrary division between institutional ownership of single- and multifamily rental property.

Does Section 901 address LIIs using algorithms to flip houses for profit or algorithmic price fixing to maximize rents?

iBuyers (“instant buyers”) like RedFin and OpenDoor buy homes, invest in repairs, and flip the restored homes for higher prices. They use algorithmic targeting to find willing sellers and offer them quick turnarounds and cash up front in exchange for relatively low offers. Although these firms often hold more than 350 properties in their portfolios and therefore qualify as LIIs, as long as they renovate before sale and dispose of their inventory within seven years (as they typically do), they could be exempt from Section 901’s purchase prohibition.

Both small and large landlords have increasingly relied on algorithmic pricing software, such as RealPage and Yardi, to minimize vacancies and maximize revenue, raising antitrust concerns. Section 901 does not address this behavior.

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