Some 6,000 single-family Build-to-Rent (BTR) or Fix-to-Rent units in the U.S. have been delayed or canceled as some of the country's biggest developers wait to see how proposed rules to regulate institutional investment play out, according to respondents to a recent survey.
The survey was conducted between April and May this year by ResiClub, an analytics platform that provides housing data and insights. It was distributed to 14 institutional or large operators that own at least 100 single-family rentals (SFRs) and to BTR developers.
The proposed rules are intended to help address the nation's acute housing shortage amid concerns that competition from institutional investors prevents ordinary, less well-heeled households from buying their own homes. As proposed in the 21st Century Road to Housing Act, adopted by the U.S. Senate, the bill would bar entities that control 350 or more SFRs from acquiring additional SFRs and would require divestiture after 7 years under certain circumstances.
The Senate bill is fiercely opposed by developers and organizations like the National Association of Home Builders and the National Apartment Association. They are fighting back, with help from a bipartisan group of 76 legislators who argued that, if adopted, the legislation would deter future BTR development.
Responses to ResiClub's survey appeared to bear this out as capital threatened to dry up. Some 80% of firms said the outlook had worsened over the past six months, attributing this to the planned changes in the law. Seven out of 10 said the current level of regulatory risk for institutional SFR investment was high – including 60% who said it was very high.
As a result, 90% said the changes would reduce housing supply, either slightly or significantly.
The impact is already being felt, as 70% of firms said the uncertainty had either disrupted or completely halted acquisition or development plans and was influencing their investment decisions. Only 30% said they were likely to increase their exposure to SFR in the next year, given the current policy environment.
The survey also revealed a risk that developers will shift their activities to other real estate sectors; 80% said they would redirect capital to office, data centers, student housing, multifamily, or even to sectors outside real estate if SFR investment is restricted or banned.
Meanwhile, a rival bill passed by the House would allow institutional investors to build SFRs or buy newly constructed homes for rent and hold them indefinitely, with no forced-disposition provisions. The Senate and House have yet to resolve their differences.
BTR peaked in 2Q 2022, comprising 3.1% of home purchases at a time when yields were attractive due to low borrowing costs, rising home prices, and rapidly rising rents. However, high mortgage rates and changing capital markets have reduced that share to around 1% of transactions, the report said, citing outside studies.
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