Expert: Housing bill no longer threatens build-to-rent industry

The House took up the Senate’s version of the bill, modified it and passed the amended bill 396–13. The bill has headed back to the Senate for further deliberations.

House Speaker Mike Johnson, R-Shreveport, Louisiana, said the bill “is transformational legislation that will immediately address the housing affordability problem and bring the American Dream back within reach for millions of young and working American families.”

U.S. Rep. Maxine Waters, D-Inglewood, California, described the bill proposal as “the result of a broad, bipartisan and bicameral legislative process, and is a huge step towards finally addressing the affordable housing and homelessness crises in this country.”

“Americans deserve the peace of mind that comes with having a roof over their heads, the opportunity to build wealth through homeownership, and the dignity of knowing that working hard should be enough to afford a place to live,” she said.

A key change in the House’s version was the removal of a clause from the Senate’s version that restricted the build-to-rent industry, which consists of single-family residential communities intended for long-term rental rather than homeownership. These communities feature housing similar to cottages.

The House’s version no longer requires build-to-rent investors to sell their rentals within seven years if they own more than 350 units.

Adam Baugh, a partner of the Phoenix law firm Withey Morris Baugh PLC, told The Center Square that the House’s new version of the bill allows investors to build more units “without the pressure of knowing” that they would be required to sell these types of properties in seven years.

Baugh said people in Arizona's build-to-rent industry experienced a “sigh of relief” after the regulation was removed from the bill.

The House’s version does not include any provisions that would affect the build-to-rent industry in a negative way, he added.

The land-use attorney noted when investors learned they might be forced to sell inventory in seven years, they stopped investing in the industry and turned their attention to townhome communities.

Baugh said that if the provision were still in place, investors would have begun building housing with three or more units to circumvent the regulation.

“The ability to attract investors into that asset class immediately ceased,” Baugh explained.

The land-use attorney previously told The Center Square that Phoenix leads the nation in build-to-rent growth, with 30,000 units citywide and thousands more poised to enter the market.  

The House’s bill “improves the outlook for the build-to-rent [industry] in the Phoenix area,” Baugh said.

While the bill is still working its way through Congress, people in Arizona’s build-to-rent industry are in “wait-and-see” mode until it becomes law, according to Baugh.

The House and Senate’s version of the bill proposal “differ materially,” he said.

Even though the provision has been removed in the House’s version, Baugh said he remains cautious about what the Senate will do.