21st Century ROAD to Housing Act: What Institutional Investors Need to Know

A central provision of the recently enacted 21st Century ROAD to Housing Act (P.L. 119-101) restricts purchases of single-family homes (SFH) by certain investors. During the legislative process, the U.S. House of Representatives and Senate engaged in what is known as a process involving "amendments between the houses," with each chamber amending the other chamber's latest version of the bill before sending the bill back to the other chamber. After several rounds of this spanning five months, the House and Senate were finally able to work out their differences, and the bill was transmitted to the White House on June 29, 2026. The bill became law on July 11, 2026, after President Donald Trump declined to take action.

Executive Summary

Included in the bill is Section 1001, which contains a general prohibition to prevent large institutional investors (LIIs) from purchasing SFH. Under the bill, the prohibition takes effect 180 days after the date of enactment (the date that is 180 days after enactment is hereafter referred to as the "effective date," which is January 7, 2027). Notwithstanding the general prohibition, the bill also provides for a series of "excepted purchases," which permit the LII to purchase an SFH if it qualifies under of the excepted purchase categories. This Holland & Knight alert will explain generally how the excepted purchase categories operate.

Legislative Summary

General Prohibition

Section 1001(b) provides that no LII may purchase, or enter into any contract either directly or indirectly, to purchase any SFH. The prohibition does not apply to excepted purchases or purchases in connection with a restructuring or other reorganization of ownership of SFHs owned or purchased on or before the date of enactment.¹ Similarly, Section 1001(b)(2) provides that the prohibition is forward-looking. The bill also contains a sunset to the prohibition and enforcement subsections that are 15 years after the effective date.

Covered Investors: The Definition of "LII"

The term "LLI" means a for-profit legal entity – including an investment fund, corporation, general or limited partnership, limited liability company, joint venture, association or similar entity – that is engaged, in whole or in part, in the business of investing in, owning, renting, managing or holding SFHs. That alone or in concert with one or more other entities directly or indirectly has "investment control" of not fewer than 350 SFHs in the aggregate, not including any SFHs in an excepted purchase made after the date of enactment. The term expressly excludes any local, state, Tribal, or federal government entity or instrumentality.

The term "investment control" is defined broadly. An entity has direct or indirect investment control over a SFH if it 1) owns the SFH or has primary authority or fiduciary responsibility to make material investment or management decisions relating to the SFH, 2) is or directly or indirectly controls the general partner or managing member of the entity that owns the SFH, 3) is or controls the investment manager, management company or investment advisor of the entity that owns the SFH, 4) owns or controls more than 25 percent of any class of equity interests of the entity that owns the SFH, unless the holder is a passive investor, or 5) otherwise controls the entity that owns the SFH.

Properties Covered: The Definition of "SFH"

An SFH is a structure that contains two or fewer dwelling units, each intended for residential occupancy by a single household but does not include a manufactured home as defined in the National Manufactured Housing Construction and Safety Standards Act of 1974. The scope of coverage is broad, encompassing the full range of one- or two-unit residential structures without categorical carve-outs.

Transactions Affected: Definition of "Purchase"

"Purchase" includes any purchase, transfer or other acquisition of an SFH, including through mergers, acquisitions, construction, foreclosures or bulk purchases, regardless of whether for cash consideration. Ground-up development on vacant land is a "purchase" for purposes of the prohibition and requires qualification under an excepted purchase category. Build-to-rent and ground-up development activities are subject to the prohibition under the bill and must qualify under an excepted purchase category.

Excepted Purchases: Category-by-Category Analysis of Exceptions

There are 11 categories of purchases – known as "excepted purchases" – that are exempt from the general prohibition, allowing LIIs to purchase those SFHs that qualify. These are:

New Construction/Renovation/Rental Conversion for Sale. This exception covers properties that are newly constructed, renovated or a rental conversion for sale by a LII and not as a residence rented pending sale.

Build-to-Rent. This exception applies to a build-to-rent program where an LII "purchases, constructs, or constructs and retains" a "newly constructed" SFH "to be managed as a rental property, whether as part of a community made up exclusively of renter-occupied single-family homes or as part of a community made up of single-family homes that are both owner- and renter-occupied." The language confirms that certain ground-up development, followed by long-term rental management, qualifies for the exception even without a transfer event, resolving ambiguity from the original Senate text.²

Renovate-to-Rent. LIIs may purchase homes as part of a renovate-to-rent program. This program requires both 1) substantial rehabilitation of SFHs that do not meet structural or core system elements of local building codes and 2) improvements in an aggregate dollar amount of not less than 15 percent of the purchase price. Notably, the bill does not define and, therefore, does not provide clarity in terms of what constitutes "substantial rehabilitation."

Homeownership Program. Another excepted purchase relates to purchases conducted as part of a homeownership program with four requirements. Notably, one such requirement is that the rental arrangement must be subject to a contract between the LII and renter such that it constitutes a consumer credit transaction secured by a dwelling or real property.

Boost Homeownership Program. Another excepted purchase relates to LII-sponsored programs that 1) provide for positive reporting of rental payments to consumer reporting agencies for any renter who opts in, 2) provide a right of first refusal and a 30-day first-look period, and 3) may, but are not required to, provide meaningful financial support towards a renter's purchase of an SFH, whether it is the home the renter occupies or another home. This exception is notably more flexible than others. Financial support is discretionary rather than mandatory, there is no consumer credit transaction requirement and, thus, no Truth in Lending Act exposure, and support is portable to any home.

Debt Satisfaction/Repossession. This exception covers acquisitions in connection with the satisfaction of debts previously contracted in good faith, in which the LII has the right to repossess the SFH under such contract.

Mortgage Servicing/Loss Mitigation. This exception covers acquisitions by a mortgage servicer, lender or other entity with a legal right to the property for loss mitigation or compliance with servicing or investor obligations and not as a long-term investment strategy, solely as a result of foreclosure, deed-in-lieu of foreclosure, enforcement of a mortgage, deed of trust or other security interest, or operation of law following borrower default.

Purchases from Other LIIs. This exception covers purchases from another LII that either owned the SFH on the date of enactment or purchased it in compliance with Section 1001.

Purchases from Non-Covered Investors (Two-Year Window). This exception covers homes purchased from an investor not covered under the section as long as the purchase occurred not more than two years after the effective date. This provision permits LIIs to purchase homes within the 180-day Exempt Period and the subsequent two-year period that follows.

Senior Living Communities. This exception covers properties that are newly constructed, renovated or a rental conversion intended and operated for occupancy as part of a community for households with one or more members aged 55 years or older. These properties should satisfy visitability standards established by the Secretary of the U.S. Department of Housing and Urban Development (HUD).

Combination Purchases. This exception covers any single purchase or combination of purchases previously described and should allow LIIs the flexibility to purchase homes that are planned, permitted, financed and structured as part of a single unified rental community.

Implications of Purchases in Violation of the Section: Civil Penalties

Subsection 1001(d) provides for discretionary civil penalties, specifically that "The Secretary of the Treasury, or the Attorney General at the request of the Secretary of the Treasury, may bring an action against a large institutional investor that violates subsection (b) for a civil penalty in an amount not more than $1,000,000 per violation or 3 times the purchase price of the property involved, whichever is greater." Upon first read, the language of "not more than" might initially appear to create a potential ceiling for potential penalties; however the "whichever is greater" language establishes a baseline minimum penalty so that the $1 million reference establishes a floor to penalize violations that involve low-value properties.

Original 7-Year Disposal Requirement in Section 901

During the legislative process, stakeholders closely watched the developments surrounding the Senate's original text related to large institutional investors (included as Section 901). This provision would have generally forced an LII to divest of SFHs acquired pursuant to certain excepted purchases, to an individual homebuyer, within seven years of acquisition. Notably, the text included in public law contains no such divestment requirement. As such, the bill ensures many housing investments remain viable.

Treasury Rulemaking Authority

The U.S. Department of Treasury, in consultation with HUD, the Federal Housing Finance Agency (FHFA) and U.S. Securities and Exchange Commission (SEC), has been given the authority to issue regulations to carry out the section's purposes, including regulations to 1) minimize market disruptions upon identifying a risk of material negative impact on the housing market and 2) mitigate, to the extent possible, negative impacts on consumers and communities.

Renter Outreach Resource and LII Reporting Obligations

Section 1001(c) requires HUD to establish, not later than 180 days after the date of enactment, a renter outreach resource – a toll-free telephone number and public website – to assist renters of LII-owned SFHs in notifying federal agencies of disputes (including potential violations of federal law), sharing information about such disputes with other federal agencies, monitoring disputes and resolving disputes to the extent practicable. HUD must establish procedures to promptly respond to and document renter complaints and, where a complaint implicates a potential federal law violation, investigate – including by requesting information from the relevant LII. Where a complaint implicates a potential state law violation, HUD must, at a minimum, refer the renter to the appropriate state authority. HUD must also take measures to protect the confidentiality of personally identifiable information received through the resource and must submit an annual public report to U.S. Congress that aggregates or anonymizes dispute data.

Each LII must, at the time a renter first occupies an LII-owned SFH and annually thereafter, provide written notice describing the renter outreach resource and identifying the person or entity responsible for receiving and addressing renter disputes on the LII's behalf, updating that contact information within 30 days of any change. Each LII must also prominently feature information about the renter outreach resource on its own public website.

Separately, not later than 180 days after the date of enactment nor later than December 31 of each year thereafter, every person or entity meeting the definition of an LII must notify HUD whether it qualifies as an LII and, if so, disclose the number of SFHs over which it has investment control as of the date of the notice, broken out by city and State. Disclosure is not required for any city in which the LII owns 10 or fewer SFHs.

Congressional Oversight: Required Studies and Sense of Congress

Section 1001(e) requires two rounds of oversight studies. The U.S. Comptroller General  must submit a U.S. Government Accountability Office report to the Senate Committee on Banking, Housing, and Urban Affairs and House Committee on Financial Services not later than two years after the effective date, nor later than 10 years after the effective date, addressing the impact of LII ownership of SFHs on housing availability and affordability for renters and homebuyers, as well as the effectiveness of the prohibition in reducing LII demand for SFHs and expanding homeownership. HUD must submit a parallel report on the same timeline, prepared in consultation with the Treasury Department, Rural Housing Service, U.S. Department of Veterans Affairs, SEC and FHFA, addressing whether the definition of "large institutional investor" should be adjusted and the financial impact of the section on LIIs, renters and homebuyers, as well as any legislative recommendations to improve the section's effectiveness.

Operational Flexibility

When analyzing potential transactions in light of the provisions of the 21st Century ROAD to Housing Act, parties should keep in mind:

1. The general prohibition against acquisition of SFHs by LIIs does not take effect until 180 days after the date of enactment of the legislation. Accordingly, an LII contemplating a potential acquisition has until January 7, 2027, to close SFH-related transactions before the prohibition takes effect.³
2. The general prohibition is repealed 15 years after the effective date (July 11, 2041).

Section 1001 provides LIIs with substantial latitude to continue to expand their SFH rental inventory under any number of applicable excepted purchase categories in the bill – and those, notably, will not be subject to any divestment requirements.⁴

Notes

¹ The date of enactment is July 11, 2026. The exceptions to the prohibition are in Section 1001(b)(2)(A) and (B).

² Senate Banking Chairman Tim Scott (R-S.C.) had expressed his view that the Senate's original language provided this exception even though not expressly stated in text. As modified, the final bill reflects Sen. Scott's stated intent.

³ Though there is delayed implementation of the prohibition, LII should remain mindful that properties would still be subject to the bill's limitations.

⁴ See Section 1001(a)(2)(I). This clause allows LIIs to purchase SFHs from investors not covered by Section 1001, meaning parties who are not LIIs, for a period of two years after the effective date of the general prohibition in Sec. 1001(f) – in other words, until January 7, 2029.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland \\\& Knight representative or other competent legal counsel.