Treasury's proposed rule clarifies terms, exceptions, and enforcement for the statutory ban on large institutional investors buying single-family homes, subject to exceptions, which takes effect January 7, 2027, under section 1001 of the 21st Century ROAD to Housing Act.
The proposal matters now because the statutory prohibition under the 21st Century ROAD to Housing Act takes effect January 7, 2027, and Treasury is using this rulemaking to define who is covered and how exceptions work before that date arrives. Treasury describes this as Phase 1 of a phased rulemaking; future rulemakings are expected to address additional excepted-purchase categories, compliance procedures, reporting and recordkeeping, and enforcement.
Treasury Secretary Scott Bessent said the department sought to give families a fair chance to buy homes in their communities, and Treasury said the proposal implements the ROAD Act's restrictions while supporting affordable homeownership and avoiding unnecessary disruption to housing supply, construction, rehabilitation, and investment.
The ROAD Act defines a large institutional investor as a for-profit entity engaged in investing in, owning, renting, managing, or holding single-family homes that, alone or in concert with others, directly or indirectly has investment control of not less than 350 single-family homes. To qualify for any of the four statutory exceptions, a large institutional investor must operate under written policies or procedures adopted before the purchase; post-hoc characterization of purchases does not qualify.
The four program-based exceptions cover build-to-rent, renovate-to-rent, homeownership, and programs to boost homeownership. Under the renovate-to-rent exception, an investor may purchase a structurally deficient home only if it makes improvements totaling at least 15 percent of the purchase price of the structure, with a safe harbor met if at least 10 percent is spent on structural or core system elements and all material deficiencies in those elements are resolved; cosmetic work such as painting, flooring, and appliance upgrades is excluded from the threshold.
Homeownership program contracts must provide positive rent reporting to credit bureaus at no charge to the renter, a right to purchase at fair market value minus the investor's meaningful financial support, and automatic transfer of all obligations to any subsequent large institutional investor purchaser, while boost-homeownership program contracts must include positive rent reporting, a right of first refusal with a 30-day first-look period, meaningful financial support, and the same transfer of obligations.
Treasury also proposed a passive-investor test to limit circumvention through layered ownership structures: an entity qualifies as passive, and thus is not counted toward the 350-home threshold through a second entity, only if none of its directors, officers, employees, or designees serve as a director or officer of the second entity, and it holds no right to make, direct, or prevent decisions related to the purchase, sale, holding, leasing, renovation, or management of a single-family home.
On enforcement, a purchase that violates the prohibition with respect to more than one large institutional investor in a single transaction is treated as one violation for purposes of the maximum civil penalty of the greater of $1 million or three times the purchase price; separate purchases of different homes remain separate violations.
Treasury says reliable data are not currently available on how many institutional investors and other entities may be affected, and estimates the recordkeeping burden at 100 to 300 respondents, one hour per response.
Comments are due November 23 and can be submitted electronically at regulations.gov under docket TREAS-DO-2026-0529.
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