Senate Housing Bill Chills Build-to-Rent Development

A Senate housing bill is taking a multi-billion-dollar bite out of the build-to-rent sector.

A provision in the Senate measure, which passed last month but is yet to be enacted, has already chilled investment among developers building single-family rentals, the Wall Street Journal reported. A survey conducted by Inclusive Abundance and Up for Growth places the value of frozen investments so far at $3.4 billion.

At issue is the line in the bill that requires developers to sell their build-to-rent properties within seven years of completion, deterring potential investors from pursuing properties with a deadline to offload.

“It’s putting the industry out of business,” TerraLane Communities chief executive officer Steve La Terra told the outlet. His firm has already paused or dropped six projects and deals in the sector.

In total, investment in about 10,000 housing units appears frozen in place as build-to-rent firms reevaluate their business models. Some might not even make it to reinvention, as the financing and construction models for individual for-sale homes differ greatly from the build-to-rent sector.

“If something isn’t worked out in the next six months, we would have to completely come up with a new business strategy,” Hancock Builders chief executive officer Kelly Whiteley.

Players in the build-to-rent space say the industry provides housing options for those ready to move into local communities and bigger spaces without the burdensome costs associated with homeownership today. With the sale mandate, companies could even shift funds earmarked for build-to-rent communities to data center development.

A political solution may still appear for the industry, as the House’s February bill passage omitted a ban on single-family home investors, a Donald Trump initiative linked to the seven-year sale provision in the Senate bill.

Last week, more than 75 members of the House of Representatives signed a letter calling for the revision or elimination of the seven-year sale provision.

— Holden Walter-Warner