As discussed in our prior GT Alerts, the 21st Century ROAD to Housing Act (the Act) generally prohibits large institutional investors from purchasing single-family homes, subject to several exceptions. The restrictions take effect Jan. 7, 2027. On Oct. 23, 2026, the U.S. Department of the Treasury published proposed regulations providing additional guidance on the scope and application of the Act (the Proposed Regulations). The Proposed Regulations provide guidance regarding the Act’s requirements and exceptions.
Clarification of the “In the Business of” Element of the Large Institutional Investor Definition (Proposed Section 36.15)
The Act generally defines a “large institutional investor” as a for-profit entity that (i) is engaged, in whole or in part, in the business of investing in, owning, renting, managing, or holding single-family homes and (ii) alone or in concert with one or more other entities, has direct or indirect investment control over at least 350 single-family homes. Homes purchased through excepted purchases after July 11, 2026, the date of the Act’s enactment, are excluded from that calculation. One open question left unaddressed by the Act is which activities constitute being “in the business of” single-family homes.
The Proposed Regulations address that ambiguity by defining an entity as “in the business of” single-family homes if it directly or indirectly invests in, owns, rents, manages, or holds single-family homes for the purpose, in whole or in part, of receiving investment gains, rental income, management fees, or other income or financial gain. An entity would not be considered “in the business of” if its activities involving single-family homes are solely temporary and incidental to a different bona fide business, are reasonably necessary to that business, and are not part of a regular or continuing investment strategy or portfolio management activity.
Defining Passive Investors (Proposed Section 36.16)
The Act excludes certain passive investments when determining whether an entity has “investment control” over 350 or more single-family homes for purposes of the large institutional investor definition. The Proposed Regulations provide specific requirements for determining when an investment qualifies as passive. Under the Proposed Regulations, an investor would qualify as passive only if (i) no director, officer, employee, or designee of the investor or any entity it controls serves as a director or officer of the entity in which it invests, and (ii) the investor has no “property control right” relating to single-family homes controlled by that entity. A property control right generally includes consent, approval, veto, or other rights that control decisions regarding a single-family home.
Specific Requirements for Qualifying “Programs” (Proposed Section 36.3)
The Act permits large institutional investors to purchase single-family homes through certain qualifying programs, including build-to-rent, renovate-to-rent, homeownership, and programs to boost homeownership. Under the Proposed Regulations, large institutional investors seeking to rely on these exceptions must have written policies or procedures adopted before the applicable homes are purchased. The policies or procedures must be tailored to the applicable excepted purchase and reasonably designed and implemented to address the requirements for that exception. Treasury also expects investors relying on these exceptions to maintain documentation demonstrating that the program was implemented and that particular acquisitions qualified under it, which may include eligibility and purchase criteria, approval and compliance procedures, transaction checklists, and monitoring or audit procedures.
Elements of a Build-to-Rent Program (Proposed Section 36.5)
One exception to the Act allows large institutional investors to purchase newly constructed single-family homes through a qualifying build-to-rent program. The Proposed Regulations provide further guidance on when a purchase falls within the exception and when a home qualifies as “newly constructed.”
Under the Proposed Regulations, a home purchased pursuant to a qualifying build-to-rent program must (i) have never been occupied by an owner-occupant before the purchase, (ii) be purchased within 18 months after receiving its certificate of occupancy or equivalent, and (iii) after the purchase, be first occupied by a renter. Large institutional investors must maintain documentation demonstrating compliance with these requirements. A qualifying home may be part of either a community consisting exclusively of renter-occupied single-family homes or a mixed community consisting of both owner- and renter-occupied single-family homes. Treasury also interprets “newly constructed” to exclude homes previously occupied by an owner-occupant.
Requirements to Qualify for a Renovate-to-Rent Program (Proposed Section 36.6)
The Act provides an exception for the purchase of a single-family home through a qualifying renovate-to-rent program where the investor substantially rehabilitates the home. The Proposed Regulations clarify that large institutional investors seeking to rely on this exception must substantially rehabilitate a home that, at the time of purchase, does not meet applicable local building-code requirements for structural or core-system elements. The investor must resolve all material deficiencies and make improvements equal to at least 15% of the purchase price of the single-family home.
Additionally, the Proposed Regulations provide a non-exclusive safe harbor for determining whether rehabilitation is “substantial.” Under the safe harbor, at least 10% of the purchase price of the single-family home must be spent on structural or core-system improvements, and all material deficiencies in those systems must be resolved. However, the separate requirement that total improvements equal at least 15% of the purchase price of the single-family home would continue to apply.
Change to a Requirement for Programs to Boost Homeownership (Proposed Section 36.8)
Under the Act, a qualifying program to boost homeownership must provide renters with a right of first refusal and a 30-day first-look period before a home is marketed to third parties and “may entail” meaningful financial support. The Proposed Regulations would make meaningful financial support mandatory for programs to boost homeownership.
Subsequent Purchases from Other Large Institutional Investors (Proposed Section 36.11)
The Act permits a large institutional investor to purchase a home from another large institutional investor if the seller owned the home on July 11, 2026, which is the date of the Act’s enactment, or otherwise acquired it in compliance with the Act. The Proposed Regulations clarify that this exception is not limited to one subsequent transfer; instead, single-family homes purchased under this exception may continue to be transferred among large institutional investors, so long as each transfer satisfies an exception under the Act. If a home was purchased in violation of the Act, a subsequent purchaser that is a large institutional investor cannot rely on this exception.
Looking Ahead
The Act’s restrictions take effect on Jan. 7, 2027. Although the Proposed Regulations may not be finalized by that date, they provide guidance for investors assessing their diligence and compliance practices under the Act. The Proposed Regulations remain subject to public comment through Nov. 23, 2026.