The Senate's 21st Century ROAD to Housing Act: Key Implications for Commercial Real Estate

The Senate passed on March 12, 2026 the 21st Century ROAD to Housing Act (the “Senate Bill”). The Senate Bill, passed by an overwhelming bipartisan margin, was co-sponsored by Democrat Elizabeth Warren and Republican Tim Scott. The Senate Bill proposes a number of supply-side reforms that are intended to spur housing production and affordable housing, the impact of which may be muted by local zoning codes and land use restrictions, which the Senate Bill explicitly does not preempt. However, Section 901 – a late addition to the Senate Bill – restricting institutional investment in single-family homes – poses significant challenges for the commercial real estate industry and the build-to-rent development sector in particular.

Senate Bill Overview; Next Steps

• Hurdles to passage. In addition to required reconciliation of the differences between the Senate Bill and the housing bill passed by the House in February, some commentators believe that Republican demands for community bank deregulation and a permanent CBDC ban as a condition to the House passage of a bi-Chamber housing bill, along with President Trump's statement conditioning his signature on passage of a separate voting bill, create uncertainty around final passage. 

Primary Impacts on Commercial Real Estate

The prohibition on “large institutional investors” acquiring single-family homes

Prohibition on large institutional investors acquiring single-family homes.  Subject to limited exceptions, Section 901(b)(1) of the Senate Bill establishes a blanket prohibition: no “large institutional investor” may purchase any single-family home after Act enactment.

Large institutional investor. A “large institutional investor” is any for-profit entity that is engaged, in whole or in part, in the business of investing in, owning, renting, managing, or holding single-family homes” and beginning after Act enactment, alone or in concert with others, have or acquire “investment control” of 350 or more single-family homes. Single-family homes include duplexes where both units are intended for residential occupancy by a single family. “Investment Control” is also defined broadly to include entities that directly or indirectly control the owning entity (e.g., general partner, managing member, investment manager) or that own or control more than 25% of the equity class (unless a passive investor). “Purchase” is defined broadly to include acquisition through mergers, acquisitions, construction, foreclosures, or bulk purchases.

No divestment requirement.  The Senate Bill does not require large institutional investors to divest any single-family homes acquired prior to the Act's enactment.

Potential major effect on development of build-to-rent single-family communities

Build-to-rent exception. The most important exception to the prohibition of large institutional investors acquiring single-family homes are “excepted purchases”. A key “excepted purchase” is build-to-rent communities. Build-to-rent communities are a stated class of excepted purchase in Section 901(a)(2)(B) of the Senate Bill, permitting large institutional investors to purchase newly constructed single-family homes to be managed as rental properties.

7-Year divestiture requirement.However, the build-to-rent exception subjects those single-family homes to a requirement that the large institutional investor dispose the single-family homes acquired to an individual home buyer not later than 7 years from “the date of purchase.” The date of purchase runs from the initial large institutional investor purchase. If the large institutional investor sells the single-family community or individual homes to another large institutional investor, the 7-year period runs from the date of the initial large institutional investor purchase. At the time of sale to an individual homeowner, the sale of the home must be widely advertised and made broadly accessible to potential buyers.

Existing renter rights. At the time of sale to an individual home buyer, an existing renter of a single-family home in the build-to-rent community has both a 30-day “first look” period to purchase the single-family home, which is otherwise undefined. The renter also has a “right of first refusal” on sale, which is also otherwise undefined. Before disposing of a home subject to a lease, the renter must be given the right of first refusal and the 30-day “first look” period to purchase. If the renter declines, the home must be widely advertised and made broadly accessible to individual homebuyers for 60 days. If no offer is received, the investor is deemed in compliance. These renter rights further complicate the liquidity and potentially lower price realization for the large institutional holder of the build-to-rent community. The 7-year disposition period is extended for the term of leases entered into not later than the 7-year disposition deadline, provided that renewals cannot exceed 36 months.

Significant penalties for violations.  Violations of Section 901 carry civil penalties of up to $1 million per violation or 3 times the purchase price, whichever is greater.

Impact on BTR market. The 7-year disposal requirement has a very significant adverse effect on build-to-rent development and value. A developer building a build-to-rent community intends to sell the community to an institutional buyer investing in that product type. The buyer may have a long-term investment horizon and, in any event, in the current market, almost certainly intends in turn to sell the build-to-rent community to another institutional investor for continued rental occupancy as its means of liquidity. Being required to sell the homes in the community to individual buyers raises disposition costs and effort, and likely reduces aggregate realization. The 30-day “first look” and right of first refusal rights of renters provides further liquidity burdens. The 7-year disposal requirement likely reduces the pool of institutional investors willing to buy new BTR communities. A reduced buyer pool and potentially lower prices in turn reduces the availability and increases the cost of equity and debt financing for the initial build-to-rent community developer. Fewer projects will be built. Many commentators foresee a significant reduction in new build-to-rent community developments, which in turn reduces the housing supply, contrary to the Senate Bill's goals. Many commentators also fear renters being displaced, as they will be either unable or unwilling to purchase the home, and they will face fewer single-family options being available to them when their leases expire.

Impact on existing BTR projects in development or not yet sold to institutional buyers.  The 7-year disposal requirement also impacts build-to-rent communities that are in development or under construction have been built and are being held by the developer for future sale. A sale to a large institutional investor that is made after the Act enactment will be subject to the 7-year disposal requirement even if the commencement of development of the build-to-rent community predated the Act's enactment.

Prohibitions take effect 6 months from enactment. Section 901 takes effect 180 days after enactment and is repealed 15 years after the effective date.

Criticism of 7-Year disposal period. Criticism of the 7-year disposal requirement has come from many commentators, including the commercial real estate industry, with many noting that this disposal requirement will reduce the stock of newly built single-family homes. Even if the general prohibition on future sales of existing single-family homes has bipartisan support, the 7-year disposal requirement for new BTR homes could be removed without undermining the prohibition on existing homes.

Manufactured and Modular Housing

Section 301 of the Senate Bill expands the definition of manufactured housing to remove the chassis requirement to promote the use of manufactured housing to reduce new home prices, including in in-fill and urban areas.

Removal of chassis requirement.  Section 301 of the Senate Bill modifies 42 U.S.C. 5402(6) to remove the chassis requirement from the definition of “manufactured home”. Redefining “manufactured home” to include those manufactured without a chassis eliminates unnecessary cost, removes the single-story design limit on manufactured homes, increases their potential use (such as over an existing basement) and by prohibiting local governments from distinguishing manufactured home on the basis of whether or not it has a chassis, potentially widens the use of manufactured housing under existing zoning codes.

Importantly, the bill mandates that each state submit to HUD an initial certification within 1 year of enactment (2 years for States with biennial legislatures) that its laws and regulations treat chassis and non-chassis manufactured homes in parity, including with respect to financing, title, insurance, manufacture, sale, taxes, transportation, and installation.

Impact on use of manufactured homes. The practical impact could be significant. Removing the chassis requirement would allow manufactured homes to be placed in urban infill locations on vacant or underutilized lots, open the door to larger sizes, multi-story designs and slab-on-grade construction, and make manufactured housing more cost-competitive in markets farther from production facilities. However, while States cannot distinguish between chassis and non-chassis manufactured homes, communities can still regulate where manufactured housing is permitted through local zoning, creating a significant limitation given that the bill does not preempt local land-use authority. However, many States have recently adopted legislation allowing manufactured homes to be built in a wider range of residential zoned areas.

Section 302 of the Senate Bill seeks to increase housing supply by modernizing and standardizing production of modular housing.

Section 302 of the Senate Bill addresses FHA construction financing barriers that have historically restricted modular home developers, including restrictive draw schedules that do not align with factory-built production timelines. The bill directs HUD to review these programs, publish a report within 1 year identifying recommended policy changes, and initiate rulemaking on alternative draw schedules for modular and manufactured home construction financing. Section 302 also authorizes a grant to study the feasibility of a standardized uniform commercial code for modular homes, including standardized coding for serializing and securing modules, streamlining design and construction, and coordinating such standards with financing incentives. If implemented, uniform standards could reduce costs by enabling economies of scale across state lines and providing lenders and insurers with a consistent regulatory framework, supporting broader adoption of factory-built housing as a supply tool.

Section 303 of the Senate Bill modernizes Title I manufactured housing loan limits under the National Housing Act, increasing dollar thresholds for single-section, multi-section, and lot-and-home combination loans to better reflect current market costs. Section 303 also requires HUD to conduct a study on the cost effectiveness of off-site construction housing (encompassing both manufactured and modular homes), analyzing factory centralization advantages on cost, precision, and materials waste; comparing off-site construction quality standards to site-built homes; evaluating expected replacement and maintenance costs over a 40-year period; and identifying opportunities for use beyond single-family housing, including accessory dwelling units, two- to four-unit housing, and large multifamily developments.

Reduced Federal Regulatory Burdens and Financial Incentives

Sections 207 and 208 of the Senate Bill streamline federal environmental review for smaller projects by reducing redundancy in environmental review.

Section 207 of the Senate Bill streamlines environmental review designation for HUD-assisted projects by allowing HUD to defer to state and local environmental reviews where they largely satisfy federal requirements. Section 208 of the Senate Bill expands NEPA categorical exclusions for infill projects and smaller-scale residential construction (up to 15 units on a single site), including conversions of existing office buildings into residential development. Importantly, no NEPA streamlining is available through the bill for larger projects, which potentially would have a bigger impact on housing availability.

Sections 205 and 210 of the Senate Bill provide financial incentives for communities that increase housing stock.

The Senate Bill includes several provisions designed to incentivize local housing production, though these are modest in scale. Section 205 conditions a portion of CDBG funding on housing growth, adjusting grants by 10% based on whether a grantee is above or below the median rate of housing improvement. Section 206 adds new affordable housing construction as an eligible CDBG activity, expanding current eligibility beyond repairs, rehabilitation, and reconstruction.

Section 210 of the Senate Bill creates an Innovation Fund offering flexible funding for communities that have demonstrably increased their local housing supply. However, individual grants under the Innovation Fund are capped at $10 million per community, and the program's total authorization is $200 million per year for fiscal years 2027 through 2031 – a relatively limited budget given the scale of the housing supply shortfall.

Conclusion

The 21st Century ROAD to Housing Act represents one of the most significant proposed federal interventions into the single-family housing market in recent years, and its implications for build-to-rent developers and institutional investors are substantial. While the Senate Bill's supply-side reforms reflect a bipartisan commitment to addressing the national housing shortage, Section 901's restrictions on institutional investment in single-family homes removes existing single-family homes as an investment class for institutional investors, and the 7-year disposal requirement provides a substantial challenge to the BTR community development market, threatening to shrink the institutional buyer pool, depress asset valuations, and constrain financing for new BTR communities - including pipeline projects already under development or not yet sold.

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