Housing bill to promote more home building is having the opposite effect.
Home Building Projects Dry Up
The Wall Street Journal reports A Bill Aimed at Creating Homes Is Leaving Plots Empty Instead
Developer TerraLane Communities was about to start construction on two new housing communities in Arizona and Texas, projects that would create around 300 new single-family homes to rent out.
But before any shovels got in the ground, the Senate passed a bill that severely restricts the build-to-rent business. Uncertain about the industry’s legislative future, investors demanded that TerraLane pause the project. The firm had five other potential build-to-rent deals that it is no longer pursuing.
“These projects are designed specifically for families that can’t afford housing in the community,” said Chief Executive Steve La Terra. “This bill, which is designed to provide more housing, is doing the exact opposite.”
The U.S. Senate passed milestone housing legislation in March by the landslide vote of 89 to 10. The bill includes dozens of different proposals to make it faster and easier to build homes, such as streamlining environmental reviews and cutting regulations for factory-built homes.
But one of the bill’s provisions stopped home builders in their tracks. It would force developers to sell, within seven years of completion, newly constructed homes that they built solely for the purpose of renting.
Developers say that investors won’t put money into new rentals that they can own for only a few years before having to sell them off. Even though the bill isn’t yet law, investors and lenders are scurrying away from simply the threat of this legislation.
Already, at least $3.4 billion of investment for these so-called build-to-rent projects is frozen in place, according to an early survey of 14 build-to-rent firms by Inclusive Abundance and Up for Growth, both housing-policy lobby groups.
That translates to about 10,000 units of housing.
If the Senate’s bill passes in its current form, build-to-rent owners say they will either have to reinvent their businesses or shut down entirely. Many of these firms say they can’t seamlessly pivot to building individual for-sale homes, which are financed, built and sold differently from their current models.
“It’s putting the industry out of business,” La Terra said.
Misguided Housing Bill to Boost Supply and Lower Costs Will Do Neither
The bill sponsors are Republican Sen. Tim Scott of South Carolina and Democratic Sen. Elizabeth Warren of Massachusetts.
They declined to comment on the mess they have made.
I discissed this outcome a month ago.
Please recall my March 16, 2026 post Misguided Housing Bill to Boost Supply and Lower Costs Will Do Neither
The Road to Housing Act by Senators Scott (R) and Warren (D) is seriously bad policy.
“If we want to bring down the cost of housing, we’ve got to build a lot more,” said Warren. “And what I love about this bill is that it has more than 40 different provisions in it, all of which aim in the same direction, which is to give a push toward building more housing.”
21st Century ROAD to Housing Act Will Backfire
John Burns Consulting comments on The housing bill that will make affordability worse, not better
We might as well call this the “Rental Inflation Bill.” We are not policy experts, but we do understand how demand, supply, and new development underwriting work in the housing market.
The proposed “21st Century ROAD to Housing Act,” which aims to make housing more affordable, includes provisions that will make housing more expensive. The bill:
- Decreases new construction by requiring rental home developers to sell the homes to homeowners within 7 years. These companies rent homes to people who don’t want to buy at this time, including many who are saving for a down payment or simply want to live in an expensive area with great schools. The capital devoted to rental development will have to look for opportunities elsewhere. Some of these parcels of land may be developed as for-sale homes instead, but overall, we believe the number of new homes constructed in America will be less.
- Increases rents, which is what happens when new supply is reduced. Rental home tenants will have fewer homes to choose from and rents will increase, making it more difficult for renters to save for a down payment.
- Increases home prices by reducing overall supply, not just from build-to-rent developers, but also from for-sale homebuilders who partner with single-family rental companies to deliver for-sale and for-rent housing supply.
The supply risk: build-to-rent in the crosshairs
BTR is technically an “excepted purchase,” meaning institutions are not outright banned from developing new rental communities. However, the new language calls for a 7-year disposal requirement for single-family/duplex BTR product types layered on top of that exception, which fundamentally undermines the product’s financial viability.
- The bill requires that BTR homes be sold to individual homebuyers within 7 years of purchase, a forced-sale horizon that is incompatible with how BTR communities are planned, designed, financed, and managed as integrated rental assets.
- The analogy to apartments is apt: no one would finance a multifamily building if it were required by law to be broken up and sold as individual condominiums within seven years.
- Imposing that same logic on BTR doesn’t convert communities into homeownership; it makes BTR largely unbuildable and uninvestable, while also putting future BTR renters (most of whom are families) on a countdown clock for when they would be forced out of their homes. Renters are allowed to renew for up to 36 months after the 7-year forced-sale trigger.
- Some of these parcels of land may be built as for-sale housing instead, which may be the intent of the bill, but the bill will still have a net negative impact on new housing supply.
- We track approximately 500,000 units in our BTR database, including 160,000 coming soon. If a disposal requirement remains in the final bill for any product type, we would expect fewer to be built. We have already seen a significant pullback in BTR starts, and the 7-year disposal requirement would only accelerate this reduction in supply.
The bill is not even signed yet and it is already clobbering construction.
Do you think either Warren or Scott will back off this nonsense?
I don’t.
My impression is that governments have learned to avoid trying to exercise price control over food because that inevitably leads to famine. When will they learn that interfering in the housing market has the same sort of effect?
never.
Good observation. Yes. The govts manipulation of the housing market has been a disaster for the economy, the middle class and the American dream. The voters have to say no. Midterms coming up. Voting libertarian is the only choice for free markets.
My experience in Florida. Inland communities were developed over cattle ranches. Back in the day (through the 90’s), developers would buy a few hundred acres from ranchers, get them zoned for SFR, put in the infrastructure and sell off lots. As a buyer, you could buy a lot, sit on it for as long as you want, or find a builder and build whatever you wanted. That has ended. The big national developers now own all the buildable land. And you have to buy one of a few models they specify. And they completely control pricing. So it really has become a monopoly with monopoly pricing. If you want to cut prices, IMHO, create regulations to go back to the old system where you’d have dozens of builders competing for your business. Go back to capitalism.
BTR getting cancelled is a good thing though. This isn’t feudalism, but we sure seem to be getting close. Let me own my God damn home I worked hard for, anything less is feudalism in drag.
Remember the saying: “You will own nothing and be happy.” It applies here.
BTR? Who cares?
bipartisan – that’s French for DOA.
Nobody on Team R or Team D cares, unless there is a way to make a buck off of it or a way to score political points at the other team’s expense.
Otherwise, why bother?
Playing the market this morning….
Trump: Iran has just informed us that they are in a ‘State of Collapse.’ They want us to ‘Open the Hormuz Strait,’ as soon as possible, as they try to figure out their leadership situation (Which I believe they will be able to do!)
We supply materials to subcontractors, several of which construct BTR housing in the PHX metro area. The fact that these houses are being billed as “affordable” is complete bullshit. Link below to American homes for rent. 1600ft house is $2450. AHR builds full tracts of homes to rent. The business model is to keep them for 12 years then will sell all of the houses in the subdivision. At 12 years the homes are considered end of life to AHR. After 12 years they will most likely need new appliances, plumbing fixtures, AC units, water heater etc so they don’t want to fix any of that. At this point they can flip them for a tidy profit without investing much to the next schmuck who is on the hook for all of this because of the American dream!
https://communities.amh.com/communities/cactus-glenn#available-homes
At the end of the day, the whole BTR model is to keep rents high therefore keeping the market at profitable levels. It also helps keep the Wallstreet national builders prices high by constraining the resale market.
Let’s remember a very easy things to comprehend:
Thus, it should come as no surprise that Warren did NO homework on her bill’s Thrusts and net effects. Mish made that case a while back.
Look at the Mess that we suffer Fiscally in this Country. ALL A SHAMBLES due to the people in Government being of very low IQ’s and have had ZERO results in their lives.
They are Scum, stupid, corrupt and useless to us.
All that they do is GLEAN MONEY from a Corrupted mismanage mess called “Government.”
You just earned your first Mishelin star for best comment of the thread.
June Brent $111 this morning, WTI $100. UAE leaving OPEC.
20 & 30 year almost at 5% – https://www.cnbc.com/markets/bonds/
Prepare for Armageddon!
What a mess.
And a mess of profits. Always be profiting.
It was always obvious that the United States was using any ceasefire, not to negotiate, but to reload and take another shot.
The real problem with housing now isn’t the mortgage, down payment or even capital cost of the home although prices remain elevated. The real issue is going to be the insurance, property taxes, maintenance and utilities to keep the house running.
I’ve been warning about rising insurance and utilities for years now here on this blog and here we are and it’s only going to get worse not better. With a depleting labor force maintenance costs will explode (plumbing, electrical, carpentry, etc) and with higher maintenance/repair you can be your a$$ that insurance will go up as well.
Governments looking for new revenue will continue to raise property taxes and if the Fed lowers rates and causes assets to inflate your $300k home will become a $600k home and who’s going to afford the property taxes on a 600k home?
Who will be hurt the most? Seniors on fixed income, MAGA morons who only think and reminisce about the past and can’t think about the future, and anyone who doesn’t have serious bank to pay for it all.
Only one way to deal with the issue because politicians won’t fix a damn thing….
Got exit strategy?
Do worry, Trump will find a way to make things even worse.™
Not all Seniors are mush-brained MAGA’s.
I never equivocated that so not sure why you posted that comment. There are three groups of people that will be hurt the most
That doesn’t mean others won’t be hurt either, these are the cannon fodder that will go down first then everyone else.
I’ve been meaning to ask, how much are those flights from Portugal back to US now? Still doing it with these prices?
That’s not what he said though
Like everything in housing, the issues are different for different areas and demographics. For older individuals who already have a home, it may be correct that mortgage and down payment aren’t the issues. But that’s not where the biggest housing shortage is. The biggest shortage is for the millenial amd GenZ population, where I have seen estimates that there are an estimated 1.8 million “missing” households. If you look at this population, the problem is exactly the downpayment and mortgage. Buying a median price house now requires an income of about $86,000 and a typical down payment is $30,000 (note that this now is not even 20% of the purchase price which used to be a standard). The data reflect this–first time home buyers now account for only 21% of purchases, and the average age of a first time home buyer is 40 years old!
In regard to BTR, the issue seems to be what you define as the problem. If you define the problem as being that millenials and GenZ are stuck living at home or with roommates and want to move into a rental property of their own, then BTR is a beneficial thing. But that’s not actually what millenials and GenZ want. When surveyed, the vast majority of them want to own a home rather than rent. In which case the provision in the 21st Century ROAD to Housing Act is what you want i.e (the problem is lack of homes for ownership, not lack of homes for rental). I don’t know what is the correct way of defining the problem. When in that situation, I think it is best to just let the market decide–let them build BTR with no ownership requirements, and if it is not what people want, then the developers will lose money and they will stop building BTR.
“The data reflect this–first time home buyers now account for only 21% of purchases, and the average age of a first time home buyer is 40 years old!”
I’ve seen this stat touted around a lot and I don’t dispute it but it does match the reality that America is aging. I frequently comment on the demographic death spiral in the US and this is all part in parcel to that issue.
If you look at the full stats, home ownership amongst Gen Z and Millenials actually isn’t that bad.
https://ipropertymanagement.com/research/homeownership-rate-by-age
In another decade, that first time buyer will age up because there aren’t enough people having kids anymore, it will only go up despite the fact that 70 million boomers will die and vacate their homes.
Within 10 years the housing crisis will be too many empty homes.
Demographic factors are definitely in play here. There well may be too many vacant homes at some point in the future. There will be other demographic crises too like funding of social security. It depends on three factors–death rate, birth rate, and net immigration rate. Barring any pandemics, there is not much that will change on death rate; longevity continues to increase, but slowly. The fertility rate for US women is now down to about 1.6, not enough to sustain the current population. (Interestingly, social security projections use a value of 1.9. I don’t know why, but this then underestimates the magnitude of the problem and when the crisis hits.) It is possible that new policies might increase the fertiliy rate, but even if implemented now, this wouldn’t show up as new workers / homeowners for 20-30 years. So really the only thing that can change is the net immigration rate. The US needs to decide–do we want to go down the path of countries like Japan or Italy and have multiple crises in the future (like the too many empty homes you mentioned)? Or do we want to have more immigration to try to maintain a growing, younger population that addresses these issues?
This Is Why America Is Short Four Million Homes
| This Is Why America Is Short Four Million Homes – The New York Times
We’re from the government and we’re here to help.
Or, if you prefer: the government never found a problem it couldn’t make worse.
We have wars on many social ills working with great success./s We need a war on housing cost too.
Actually, we’ve had one for years but never called it that. You’ll know it’s serious when the lawyers and prison companies are involved.
for your entertainment…this is why the US is effed
a truth social post repurposed to a court filing signed by Todd Blanche, Attorney General of the United States
in service of the above-ground Trump ballroom
https://storage.courtlistener.com/recap/gov.uscourts.dcd.287645/gov.uscourts.dcd.287645.79.0.pdf
– Housing bill to promote more home building is having the opposite effect. > Why would we wish to build more empty homes? Most people are having a hard enough time, keeping the homes they have. Not to leave out the fact that recent reports show that “Foreclosure Filings” have risen 32% from the previous year.
>> I get it, that home builders must build homes to make a living, but building homes to sit empty is only going to exacerbate the issues. Next, Builder’s will be going belly up. By the time we actually will need homes, there won’t be many builders left at this rate. Drop the existing inventory prices, and at a loss if necessary, way before you start to build more homes to sit uninhabited.
– Developer TerraLane Communities was about to start construction on two new housing communities that would create around 300 new single-family homes to rent out. > We don’t need homes to rent, but rather apartments and condos and the like, that are affordable and needed far more right now. College attendees will live with others to save money, and for socializing as well. They can have there parties cheaper at home too, which is an affordable apt. And not an unaffordable House to rent.
– The U.S. Senate passed milestone housing legislation in March by the landslide vote of 89 to 10. The bill includes dozens of different proposals to make it faster and easier to build homes, such as streamlining environmental reviews and cutting regulations for factory-built homes. > So laws passed to make homes “Cheaper” to build for the builders, is what I am hearing here. No breaks on cost to rent, unless accomplished by skimping, lower quality, less regulations, etc. All things meant for the buyer, but takes away too much profit from the builders/developers it sounds like to me.
– But one of the bill’s provisions stopped home builders in their tracks. It would force developers to sell, within seven years of completion, newly constructed homes that they built solely for the purpose of renting. > Like builders are going to fall for that scam! They create the scams, and don’t get bullied by them. Non-starter for the builders, so kiss it goodbye in theory for now anyway… “It’s putting the industry out of business,” La Terra said.
– Misguided Housing Bill to Boost Supply and Lower Costs Will Do Neither > Exactly!
– TheThe Road to Housing Act by S.C. Senators Scott (R) and Mass. Warren (D) is seriously bad policy. > Does anyone expect different from Warren? Scott has been slowly morphing into someone he wasn’t. I think the Dems got to him, and are giving him false hope and promise, by siding with them on some key legislation that will be horrible for the Country and Suckers who fall for it. Just another Dem scam is all, and one that may snatch up an unwitting Republican in Scott… Boy the Republicans can be stupid, naive, and just as greedy as the Democrats… WTF happened to our Politicians besides “Greed”?
This is what they are talking about stream lining in terms of regulations. Yes, this is Canada but it gives you an idea of how much extra costs are. 200K in regulation fees in Toronto on new builds. Means the house costs 200K to build before you do anything. Wonder why prices are insane in Toronto.
https://ca.finance.yahoo.com/news/municipal-fees-home-toronto-average-180941416.html?guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAAAB5Hiv-_6A1Mr2XeNockJnvXcacDXbldor61C0LQEelrcHOPyrnbBmmzWDacW5IB0mjrKWN3G7YLpeI2Oq0JvGVipM0QavvjiFNFX35kS9-mxidveihC3s5sBdJRlOg9uhSK02p-5dttqzdsbU-BUJGHZsJAw6gCfUPBwgUd3_m
TY for that! Just heading out to play golf, but I will read it for sure! Canada is doing some strange things of late, but then again, they have always been a tad different perhaps…
– A $200,000 difference in municipal fees separate the cost of building a single-family home in Toronto from one in Atlantic Canada. The average level of municipal fees embedded in a single-family home in Toronto is roughly $200,000. In comparison, fees in Moncton and Charlottetown are less than $10,000. > > That is insane, and why anybody would ever decide to build one in Toronto, is beyond my comprehension.
– The committee argues that wide variations in municipal charges, combined with lengthy approval timelines and outdated federal tax policy, are inflating home prices and constraining supply in many of Canada’s largest markets. > Well then do there Job and settle the variations, Shorten the approval times, update the federal tax policy, and work to open the supply up, by lower prices, via lower cost, via incentive based programs, earmarked for a a specific purpose, and with no exceptions.
– The raising costs do more than raise sticker prices, but also determine whether projects move ahead at all. > So who gets bought and paid for? What’s the cost, %, vig if you will? > Then! – “Those costs end up getting passed along to home buyers and renters,” and – “If people are not able to afford that price, the home doesn’t get built.” > So again, who gets bought and paid for? What’s the cost, %, vig if you will?
>> The result is “idiotic” and lowers housing supply.
– At the centre of the issue are development charges, levies imposed by municipalities to pay for growth, related infrastructure and services. > Stop it! Where are the taxes going while all this is happening?
– builders have limited ability to absorb them without jeopardizing project financing. > Common sense!
I couldn’t go on any further. This is hard to comprehend, and I had no reason to read this until now, but it’s eye opening how bad things can get. A whole bunch of money is going someplace it’s not supposed to by the looks of it. The Citizens need to speak up louder obviously…
Thanks again!!
Building homes for rent is no different than building apartments. “For Rent” is the problem, not housing.
It’s more of the modern capitalist model. you don’t purchase movies anymore but rent them from a streamer until they decide to remove it. Leasing cars is more profitable. Renting music over physical CD.
The goal is to keep everything in your revenue stream rather than sell it outright. This is the part were customer extraction wins over customer satisfaction. Welcome to the enshittification of housing in America
Off but on topic too. I just went through this exercise with my wife, for streaming TV. You can easily hit buttons and shows appear, but those easily hit buttons can tie you into keep on paying for it unless you go in and change it yourself.
They are meeting their goal in this arena from what I can tell. Even being diligent about it, some sneak on by! I have to go in every couple months and make sure it’s all clean, as they happily won’t do it for you. I still catch some here and there, and that with diligence!!
Why is “for rent” the problem? The greater the supply of housing, the lower the rents – in aggregate – and the lower the purchase prices nearby.
How many movies were you actually buying in the old days of DVDs?
Kids movies (Disney) made sense because my kids watched them hundreds of times. But as an adult, how many movies did you buy that you watched multiple times?
If a DVD cost $20 (most did) and streaming rental cost $2 (most are unless new release) you need to rewatch that movie 10 times. Sure there are always a few classics you’ve undoubtedly watched that many times but I bet 95% of all movies you’ve seen you watched 1-2 times tops.
Streaming is such a better deal given the cost and how many hundreds of movies you get access to and they constantly rotate in new ones.
Had a yard sale recently, and no CD’s or DVD’s sold (I gave them away to restore as thy get $1) but what did sell was every album I put out, and asked if I had more. I have a record player , but we only use it for X-Mass, so I sold all the rest of them.
Not surprised on DVD’s at all. Older ones won’t be in Hi-Definition and Blu-Ray ones require a Blu-Ray player which hardly anyone bought because streaming was already taking over (the silly battle between Blu-Ray and HD DvD killed DVDs).
It’s a shame about CDs. I still have a huge collection (several hundred) but once cars stopped including players (around 2019) it meant no one wanted them anymore. My teenage daughter is getting her first car and specifically wanted a 2019 or earlier for the CD player so she can listen to my collection (she and her friends are into the 70s and 80s Rock music thanks to me endlessly listening to that on Sirius Satellite radio).
Too funny that you mentioned the car factor. I recently sold my 2 older vehicles, that had CD players in them (2012 & 2014). I will miss the convertible more than the CD player, but it was the reason I sold all my CD’s, and like you I had 100+.
Cute story about the kids, as I have those same 70’s & 80’s music lovers thanks to me and my wife!! Unfortunately they have newer vehicles, so no presents for them…
No tyranny greater than the tyranny of good intentions.
Do-gooders often produce more mayhem than evil-doers.
Unfortunately, this is true. It feels good to “help” someone but what do you know of the circumstances? Doing good usually masks the problem and does nothing to lessen the cause.
– Do-gooders often produce more mayhem than evil-doers. > Evil doers know what they want to take, and devise a well thought out plan to do so. Mostly the bad ones at it get caught, but the more sophisticated ones use the laws and hidden innuendos and hidden moves you can make, and get away cleanly. Obviously why they keep up at it, as it’s a worthy and rewarding, but an illegal thing to do in many cases.
– The Do-gooders, are all caught up in Emotions, and make silly decisions based on such. Only then it can only reach those alike thinkers of sadness for them, and what can they give away to make them feel better about themselves. Not help them out mind you, but just to “Feel Better” is the goal. It works for all of 5 minutes however, and then you’re back where you were… but now owe for your attempts at a feel good strategy, and they now feel even worse and more broke!!!
Trying to make sense of US politics here… “Bipartisan” generally means:
Right?
Also means lines the pockets of both sides indefinitely to keep it going forever which is why its called the Gravy Train.