Treasury proposes rules for ban on big investors buying homes

Can a company that owns thousands of rental houses still bid on the one down your street after Jan. 7? In most cases no, and the Treasury Department on Friday proposed the rules that would decide the exceptions ^[1]. The proposal defines who is a “large institutional investor” and when build-to-rent, renovation and rent-to-own deals stay legal; comments are due Nov. 23 ^[1].

Why it matters: The 21st Century ROAD to Housing Act, enacted July 11, bars any large institutional investor from buying, or contracting to buy, a single-family home unless the purchase fits a listed exception ^[2]. Congress left key terms undefined, so Treasury’s wording will set how wide those exceptions run ^[1]. Buyers are shopping with Freddie Mac’s 30-year average at 7.32% in the week to Oct. 22, against 6.19% a year earlier ^{[3, 4]}.

By the numbers

• 350: The number of single-family homes an entity must directly or indirectly control, alone or with others, to count as a large institutional investor ^[2]. Treasury’s rule cannot change that threshold ^[2].
• 25%: Owning more than this share of any class of equity in a home-owning entity counts as investment control, unless the owner is a passive investor ^[2].
• $1 million: The floor on the maximum civil penalty; the cap is $1 million or three times the purchase price of the property, whichever is greater ^{[1, 2]}.
• 18 months: How soon after a certificate of occupancy an investor would have to buy a never-owner-occupied home for it to count as build-to-rent ^[1].
• 15%: The minimum the law requires a renovate-to-rent buyer to spend on improvements, measured against the price of the home ^[2]. Treasury’s proposed safe harbor would be met with at least 10% spent on structural or core systems ^[1].

What changes for rent-to-own deals: Investors can keep buying for a “homeownership program” if renters get positive rent reporting to credit bureaus, rent no higher than on comparable homes, and “meaningful financial support” to buy ^[2]. Treasury proposes that renters also get the right to buy at no more than fair market value minus that support, and that rent reporting come at no charge ^[1]. Its safe harbor sets the support at the lesser of $5,000 or 2.5% of the price after five years of renting, rising to 3.5% at seven years, with the price capped at the county’s FHA one-unit limit ^[1].

A second path, a “program to boost homeownership,” requires a 30-day first look and a right of first refusal ^[2]. Under the proposal, an investor planning to sell an occupied home would have to give the renter written notice of the price and terms, then hold off other buyers for 30 days ^[1]. A later outside offer at or below the renter’s bid would trigger at least five business days for the renter to match it ^[1].

How does the 350-home count work for funds? Treasury proposes to treat as control any consent, approval or veto right over buying, selling, leasing, renovating or managing homes, whatever the contract calls it ^[1]. It declined to offer a safe harbor for minority-investor protective rights, saying those can give control over home purchases ^[1]. A fee-based property manager that lacks primary authority over the homes would not be a large institutional investor on that basis alone ^[1].

What it means for buyers and owners

• Existing rentals stay put. The law does not force anyone to sell homes bought before July 11, 2026 ^[2].
• New construction is mostly outside the ban. Homes built or renovated for sale, build-to-rent homes and some homes in communities for people 55 and older are excepted purchases ^[2]. Our earlier report covered FHA’s move to insure build-to-rent communities.
• Foreclosures still clear. Lenders and servicers taking homes through foreclosure or a deed-in-lieu keep an exception, as long as it is not a long-term investment strategy ^[2]. Treasury’s proposal would also cover buyers who purchase from them ^[1].
• Smaller investors are a two-year outlet. A large investor may buy from a non-covered investor for up to two years after the effective date ^[2].
• Duplexes count; manufactured homes don’t. The law’s definition reaches structures with up to two units ^[2].

What’s next: Comments close Nov. 23, and the ban takes effect Jan. 7, 2027 ^[1]. HUD must also launch a toll-free renter outreach line and website within 180 days of enactment ^[2]. The Fed’s target range stands at 3.75% to 4% after its Sept. 16 increase ^[5].

The other side: Treasury itself flags gaps. It says “reliable data are not currently available” on how many investors would be affected, and that tax-assessed land values, which its renovation formula relies on, vary by jurisdiction and can be out of date ^[1]. Its cost section expects the rule to lower total compliance costs for many entities, while conceding that investors would need records showing each condition is met ^[1]. Whether a $5,000 cap is enough to move renters into ownership is one of the questions Treasury put to commenters ^[1].