The U.S. Senate recently passed the 21st Century ROAD to Housing Act by an overwhelming 89-10 margin, targeting the single-family home rental industry as a key driver of America’s housing shortage. The legislation, spearheaded by Sen. Elizabeth Warren (D-Mass.), intends to curb institutional investors from purchasing or building homes for the rental market, potentially reducing the number of homes available for sale. However, critics argue the bill could inadvertently shrink housing supply by discouraging investment in new developments.
Unintended Consequences Threaten Housing Supply
Ed Pinto, director of the American Enterprise Institute’s Housing Center, warns that the ROAD Act may undermine its own goals. 'The Senate bill makes it clear that the rental-home industry is an unwanted sector in America,' Pinto stated. 'It’s a textbook example of the law of unintended consequences.' He emphasizes that the single-family rental market addresses critical needs for Americans unable to qualify for homeownership due to financial constraints or transient lifestyles.
People rent single-family homes for three good reasons: they can’t qualify to buy, plan to move soon, or want the benefits of a house without ownership responsibilities.
Investment in Renovations and New Construction at Risk
Companies like Amherst have invested billions in renovating distressed properties, bringing them back into the housing market. Contrary to the ROAD Act’s assumptions, Pinto notes that these investors often sell renovated homes when market conditions favor it, boosting the for-sale inventory. Additionally, the build-to-rent sector has spurred new construction, expanding housing supply overall.
The ROAD Act’s provisions, particularly its measures to restrict institutional investment, could chill both renovation and new construction efforts. Critics argue that this would worsen America’s housing shortage, leaving American workers and families with fewer affordable options.