Small investors are tightening the path to homeownership

A federal push aims to limit investor activity in single-family housing, following a proposed ban on large-scale institutional investors. Concerns include reduced homebuilding and supply, which could offset demand improvements and worsen affordability. The House passed the ROAD to Housing Act, which bars investors owning at least 350 single-family homes from buying more, while allowing carve-outs for build-to-rent and renovate-to-rent projects. A requirement for these owners to sell within seven years was not included, and the bill now moves to the Senate. Data indicates investors of all sizes account for about 30% of U.S. home sales, with small landlords driving roughly 90% of non-owner-occupied transactions. Institutional landlords owning 1,000+ homes hold only 1% to 3% of single-family rentals, and in many metros they sold more than they bought. Small investors purchased more and held properties longer, with about 40% keeping homes a decade or more, affecting local rent levels over time. Systemic costs like interest rates and insurance are passed through more strongly for small landlords.

"The report comes on the heels of a push by the federal government to limit investor activity in single-family housing. In January, shortly after the Trump administration proposed a ban on large-scale institutional investors, Malone told HousingWire that the move could harm efforts to improve affordability. This could occur through a homebuilder pullback, blunting the impact of reduced demand by also reducing supply."

"While the revised bill prohibits investors who already own at least 350 single-family homes from buying more, it also included carve-outs for build-to-rent and renovate-to-rent projects. A proposal that would've required these owners to sell within seven years was not included in the House bill. The legislation now returns to the Senate for reconciliation efforts."

"Investors of all sizes account for roughly 30% of U.S. home sales today, but small landlords (those who own fewer than 10 homes) represent about 90% of non-owner-occupied transactions. Conversely, institutional landlords defined as firms with 1,000 or more homes own only 1% to 3% of all single-family rentals, Cotality found."

"In six of the 10 largest U.S. metro areas, these institutional players sold more homes than they bought last year, although they bought 12.6% more than they sold at the national level. By contrast, small mom-and-pop investors that dominate the market purchased 2.3% more homes than they offloaded. They are also holding properties longer. About 40% keep their homes for a decade or more, similar to owner-occupants, which allows them to influence local rent levels for extended periods."

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