Banking and Finance Law Daily Wrap Up, COMMUNITY DEVELOPMENT—Treasury proposes single-family home purchase rules for large institutional investors, (Oct 22, 2026)
Beginning Jan. 7, 2027, large institutional investors are generally prohibited from purchasing single-family homes under the ROAD to Housing Act.
The Treasury Department has issued a notice of proposed rulemaking (NPR) that would clarify which large institutional investors and single-family home purchases fall under Section 1001 of the 21st Century ROAD to Housing Act, including rules for exceptions, passive-investor status, and maximum penalties. The Act’s requirements and prohibitions, which codify key requirements of President Trump’s Executive Order 14376, Stopping Wall Street from Competing with Main Street Homebuyers (see Banking and Finance Law Daily, Jan. 21, 2026), take effect Jan. 7, 2027, and generally cover for-profit entities in the single-family home business that, alone or in concert with others, directly or indirectly control at least 350 homes, excluding homes acquired through qualifying excepted purchases. Comments on the NPR are due Nov. 23, 2026.
Scope and timing. Section 1001 authorizes Treasury, in consultation with the Secretary of Housing and Urban Development, the FHFA director, and the SEC chair, to issue implementing regulations. Treasury described the proposal as a first phase and expects to consider later rulemakings on other exceptions, compliance procedures, reporting, recordkeeping, and enforcement.
For four program-based exceptions, proposed Section 36.3 would require written policies or procedures adopted before a purchase and reasonably designed and implemented to ensure that every program purchase complies with the Act, Part 36, and the program. Treasury expects investors relying on program exceptions to maintain enough records to demonstrate implementation and eligibility, although the proposal generally would not prescribe particular records or a retention period and describes the information collection as voluntary.
Purchase exceptions. Build-to-rent programs would cover homes that had not been occupied by an owner-occupant before purchase, were bought within 18 months after receiving a certificate of occupancy or equivalent, and were first occupied by renters after purchase. Renovate-to-rent programs would require correction of all material structural or core-system code deficiencies and improvements totaling at least 15 percent of the single-family home’s purchase price. The proposal would calculate that price as total property price, including land, minus the contemporaneous tax-assessed land value. Structural or core-system work equal to at least 10 percent of the same denominator could satisfy a substantial-rehabilitation safe harbor, but not the separate 15-percent total-improvement requirement.
Homeownership-program contracts would have to cap rent and fees at amounts charged on similarly situated homes outside the program, receive treatment as consumer credit transactions secured by a dwelling or real property, and offer free opt-in positive rental-payment reporting. They also would have to provide meaningful financial support and a right to purchase the rented home no later than contract termination at no more than fair market value minus that support. A nonexclusive support safe harbor would set the minimum at the lesser of $5,000 or 2.5 percent after at least five years of rental, rising to 3.5 percent after at least seven years. The percentage would apply to the lesser of the property’s pre-support purchase price or the applicable Federal Housing Administration one-unit county mortgage limit, and the investor could not recover the support from the renter.
A program to boost homeownership would have to provide free opt-in rental-payment reporting, meaningful purchase support, a right of first refusal, and a 30-day first-look period. Under a proposed safe harbor, the investor would provide written notice before marketing the home and refrain from marketing or negotiating with others during the 30-day period. If it later received a qualifying third-party offer at or below the renter’s first-look offer, the renter would have at least five business days to match the material economic terms before support is applied. Those rights would continue until the earlier of 90 days after the rental contract ends or the home is rented to another person.
Other proposed exceptions address debt, foreclosure, and investor-to-investor acquisitions. A debt-satisfaction purchase would qualify when the investor—or a seller from which it acquires directly or indirectly—purchased the home in connection with a good-faith debt and held a contractual repossession right. A loss-mitigation or servicing-compliance purchase would have to result solely from foreclosure, a deed in lieu, security-interest enforcement, or operation of law after default, rather than serve as a long-term investment strategy. Treasury also would permit an acquisition from another large institutional investor when the seller owned the home on enactment or acquired it in compliance with the Act; an earlier unlawful acquisition would not qualify through the transfer.
Investor and penalty tests. The proposal would treat an entity as engaged in the relevant business when it directly or indirectly invests in, owns, rents, manages, or holds single-family homes to receive investment gains, rental income, management fees, or other financial gain. The activity would be outside that test only if it is temporary and incidental to a different bona fide business, reasonably necessary for that business, and not a regular or continuing investment or portfolio-management activity.
Investment control includes owning or controlling more than 25 percent of any class of equity interests in the home-owning entity unless the investor is passive. The proposal would require both that no director, officer, employee, or designee of the potential passive investor or its controlled entities serve as a director or officer of the second entity and that the investor have no property control right over the relevant homes. Excepted-purchase activity could still count when determining whether an entity is in the relevant business, although qualifying post-enactment excepted homes are excluded from the statutory 350-home control count.
The Act authorizes Treasury, or DOJ at Treasury’s request, to sue for a civil penalty of up to the greater of $1 million per violation or three times the property purchase price. The proposal would treat a single prohibited purchase involving multiple large institutional investors as one violation only when calculating that maximum. It would not combine different homes or separate transactions, determine whether a violation occurred, allocate responsibility, or prevent Treasury from proceeding against all entities whose conduct violates the Act.
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