The Road to Housing Act by Senators Scott (R) and Warren (D) is seriously bad policy.
21st Century ROAD to Housing Act
Please note the Senate Passes Bipartisan Housing Bill Targeting Large Investors
The Senate has passed the largest housing bill in decades — bipartisan legislation designed to improve housing affordability and availability through deregulation, expanding old programs and banning institutional investors from buying single-family homes, with few exceptions.
The bill passed 89 to 10.
“It’s Democrats. It’s Republicans. It’s pieces they built out together,” said Sen. Elizabeth Warren, D-Mass., a co-sponsor of the bill, in an interview with NPR. “That is the strength of this bill.”
“It’s not a Republican issue or a Democrat Issue,” said Sen. Tim Scott, R-S.C., the bill’s other sponsor, speaking in advance of the vote on the Senate floor. “It’s an issue about helping moms like the one who raised me, the amazing woman that she was, become homeowners.”
“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.”
Much of the bill mirrors one passed by the House last month, with 84% of the provisions from the latter making their way into the Senate version.
The major difference between the two bills is the Senate’s introduction of a ban that would prevent any investor that owns at least 350 homes from buying more.
Senators Warren and Scott Toot Affordability
Please consider the US Senate Committee press release Scott, Warren Release 21st Century ROAD to Housing Act Legislative Package to Boost Housing Supply and Bring Down Costs
“The 21st Century ROAD to Housing Act will boost housing supply and bring down costs,” said Ranking Member Elizabeth Warren. “The package includes the vast majority of the Senate’s unanimously supported ROAD to Housing Act, incorporates bipartisan housing ideas from the House, and takes a good first step to rein in corporate landlords that are squeezing families out of homeownership. Congress should pass this package and continue working on further legislation to combat our nation’s housing crisis.”
“2026 is the year of affordability. This week, the Senate is set to vote on housing affordability legislation, the 21st Century ROAD to Housing Act, and my colleagues and I stand ready to deliver it to President Trump’s desk, fulfilling the promise he made to Americans at the State of the Union. Not only is this bill about cutting regulatory red tape, lowering costs, and expanding housing supply while generating no new spending, but it’s about making sure people like the single mom who raised me in North Charleston, South Carolina, have even greater access to economic opportunity and the American dream of homeownership,” said Chairman Tim Scott.
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.
While the proposed bill loosens some of the restrictions expected under the January executive order, it introduces greater risk to the BTR sector. The administration’s stated goal is to increase affordability, and adding punitive regulations to the BTR industry will only increase the cost of housing. Developers will be less inclined to take on construction risk; supply will be limited; affordability will suffer, as will the families you are trying to help.
Rent Inflation Bill
The moral of the story is whenever Republicans get into bed with Democrats disaster ensues.
The bill will reduce supply. The key problem, as pointed out by Burns, is the act makes build-to-rent largely unbuildable and uninvestable.
Families living in BTR will be on 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.
How in the hell does this spur investment in building homes.
Question of the Day
Q: Do Republicans know better?
A: It’s really hard to say, but given the 89-10 margin, it’s doubtful.
Perhaps some of them do.
But it’s easy to hop on a bandwagon against those evil landlords buying up 2 percent or whatever of supply.
As is frequently the case, the name of the bill, Road to Housing Act, is ass backward.
So now the bipartisan solution is to stop all build-to-rent so nobody will build anything.
In isolation, over the long haul, the bill will put upward pressure on rent.
The issue, as always, is simple. Congress would rather look like it’s doing something than actually do something that works.
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A Bloomberg article comments on something I have been discussing for months.
To add:
Building homes for sale is inherently risky. It is very common for builders to start construction on groups of homes (“releases” of 8-15-ish homes) before they have buyers lined up. “Standing inventory” and slow sales are builder nightmares. While they sell homes, they have sales staff to pay, property taxes, insurance, and interest. Extra time is expensive.
Their objective is to build and steadily sell through their communities to minimize these costs. It is misguided to believe that builders are focused entirely on pushing prices higher…they want to make sure that their underwriting supports a steady sales process.
Today (before this law is enacted), if a builder starts too many homes, and are unable to sell them all, they can sell the excess to any number of institutional owners who will then rent them out. The second order effect of this new law is that it takes away a potential buyer of unsold inventory.
After the law is passed, homebuilders will have fewer buyers for their finished product. In other words, building the same number of homes speculatively will carry greater risk. And so, for-sale homebuilders will build fewer homes speculatively.
This law will not only kill the development of dedicated for-rent housing, it will reduce the number of new for-sale homes that are built.
We truly live in the stupidest timeline.
Housing has become a vehicle for government to force up inflation at this point. It’s just a government racket to screw over anyone in the USA who would have preferred living a comfortable and secure life, done just so government can window dress national “wealth”, like a Potemkin village. Housing didn’t used to be solely an investment vehicle, like it is now. Houses used to cost about 3x yearly local median income, nationwide.
Vast amounts are invested in inflated housing of all types. Continued inflation is how they keep winning. Politicians that support this are truly bipartisan and in the game too. Just like the 70s-80s, and the medical inflation of the 90s that crippled the prospects of the majority of workers then, the game has been on again at full blast. The establishment of a ‘permanent’ new, improved, hi tech, socialized medieval feudalism is their goal. They mostly don’t realize how fraught with peril that actually is.
Just build Build To Own for fucks sake.
Over the past couple of years, we’ve lost something like 1 million single-family rentals to home ownership. There are fewer and fewer options for people who would like to live in a single family home, but for whatever reason, cannot, or do not want to buy.
In some cases, it’s a simple as a family being unable to buy in the best school district, but they wish to rent in that school district while their kids are school age. Are we really denying those families (who cannot afford to buy a home) the opportunity to send their kids to a better public school? What purpose does this serve?
We should be building BOTH for-rent, and for-sale housing. Let the developers take the risk on what to build and where. Government should not be dictating what gets built–that is a path to simply less being built (and we need more housing built of all kinds, not less).
I dunno Mish.
How much of a share of the total housing market is BTR? My gut tells me it small, comparatively.
There are many other pats of the bill that deregulate and lower the costs with new home construction.
I think the as-yet-to-be-built houses the bills kills by putting more strenuous regulations on BTR (which flies in the face of the cultural values of home ownership that persist in the working class despite generations of institutional pressure against it), are outweighed by the currently-unbuilt houses that smaller builders without the access to cheap capital that giant firms have, and the housing supply taken off the market due to those same firms via land hoarding, and colluding for rent-fixing.
Great piece, Mish. The bill sounds like a disaster.
90% of bills are misguided, this country is a clown show flipping from one set of freaks and geeks to a different kind every election cycle. Meanwhile $40+ trillion in debt piles up, demographic death spiral continues, and war, war, war!
The Great American Condo CrisisThe Collapse of the American Condo – The Atlantic
That article sounds like it was written by MPO45v2. 😉
No surprise here.
All that liquidity leaks into financing and drives up prices.
None of it leaks into wage income to pay for housing.
We’re just now feeling the bite of the trillions for Iraq and Afghanistan. The people that will pay for this one can’t even talk yet.
I worked in planning for many years in big cities, zoning policies and suburb subsidies are why the US has a massive shortage in housing supply, you want to try to fix it, good luck with that
Why do the names of the acts have the opposite effect of what they say? Perversity was bad enough, and we get inversity to go along with it. Confirms my theory that we’re really close to a geomagnetic pole reversal.
Sen Warren is a very wealthy woman who knows how to enrich herself. She has claimed the “I’m for the people” niche and thus is socialist/marxist gorp as long as it doesn’t impact her. Working with her is rarely a good idea if you have any concept of fiscal responsibility. I heard them talking about reducing restrictions … would be interesting to see that netted out. I can tell you as one of those evil landlords (Mom and Pop level) … if they were to work out an incentive program where tenant could buy house and provide down payment assistance and reduce federal capital gains by 80% (for the landlord selling 5% or 10% below market to tenant) … they could move some tenants into affordable housing.
Scott Wiener Just Proposed The Most Straightforward Pro-Housing Idea EverJust pay cities to build housing. Seriously.
https://inpractice.yimbyaction.org/p/scott-wiener-just-proposed-the-most?triedRedirect=true
Buh but… that’s socialism!
Interesting:
Charlotte offers the Queen City ADU Program, providing up to $80,000 in forgivable, interest-free financing to homeowners building accessory dwelling units (ADUs). To qualify, owners must rent the unit to tenants earning 80% or less of the Area Median Income (AMI). The program requires a 50% match for construction costs
As long as there isn’t some stupid conditions placed upon the funds (certain % are “BMRs”, minimum unit sizes, union labor requirements, etc.), it could work quite well.
Perfect example of government fixing a problem by creating at least two more problems to “fix”.
Why so skeptical. Look at how good the affordable care act turned out. My premium doubled and coverage went to zero. Awesome.
You should really address your Obama Trauma.
Prob still better than the open market
Just maybe without the ACA your premiums would have tripled. And coverages did not go to zero. That is simply false. And, you failed to mentioned how many times the Republican party purposefully damaged the ACA because Obama is black, and that their intransigence was the only reason the ACA, Romney’s idea, came to be in the first place. And here we are with universal coverage being the only solution, just as it was decades and decades ago.
Maybe we could rent out a few fully staffed aircraft carriers instead of providing them for free.
Actually, a Senator from Montana named Max Baucus provided the final vote for removing a government option from the ACA.
It was that close! One vote.
He was a Democrat.
“Coverage go to zero” likely means that you pay 100% out of pocket until you hit the deductible threshold which is over $9000 per person covered in a lot of plans.
I know several people who have bought through the Obamacare ACA website, and it’s a good deal for each of them at a reasonable cost. And one of them has a pre-existing condition, which would have disqualified her in the past. We would now be paying for her to be on Medicare through our taxes.
Because the insurance industry bought the congress and stopped any form of single payer.