Although the housing affordability debate has been front and center for years, only recently has that debate included questions about entities buying up single-family homes as investment opportunities. Leasing, short-term leasing, and especially the large-scale purchase of homes intended to be leased, has been a hot topic for community associations, their boards, members, managers, and others in the industry.
On July 11th, the 21st Century ROAD to Housing Act became law and will impact who is able to purchase homes, the housing market, and local communities.
Although debate has suggested a broad ban on investor-owned housing, the actual legislation is much narrower in scope.
The new law targets only “large institutional investors”—defined as groups that own or control 350 or more single-family homes. These entities will generally be prohibited from purchasing additional single-family homes beginning 180 days after the law took effect.
Importantly, the new law will not affect most individual real estate investors or small landlords. Investors who own a handful of rental properties, family LLCs, and even many regional investment companies would fall below the new law’s ownership threshold and would not be subject to the acquisition ban.
The proposal also contains several exceptions. Large institutional investors could continue purchasing newly constructed homes, acquiring homes as part of build-to-rent developments, obtaining properties through foreclosure or mortgage servicing activities, participating in lease-to-own programs, and completing certain corporate reorganizations. Existing ownership is also protected—the law does not require investors to sell homes they already own.
To encourage compliance, the law requires large institutional investors to file annual reports with the U.S. Department of Housing and Urban Development (HUD) identifying their ownership levels and could impose substantial civil penalties for violations.
Although the new law will certainly have a chilling effect on the largest rental groups involved in the housing market, it remains to be seen whether it will have much impact on a local level.
For questions about any HOA/Condo meeting issue or other matter, contact a community association attorney at Law Firm Carolinas’ North or South Carolina offices.