After some important changes, the Senate and Congress, with both Republicans and Democrats, have agreed on the content of an act to reform how housing is governed in the USA. Despite the President not signing it, the Act will become law today (July 11).
To someone following the housing market, what was left out of the act is probably more significant than what went in.
- no ban on build-to-rent developments
- no requirement for institutional investors to sell their existing properties
- no ban on institutional investors buying new builds
- no forced sale of build-to-rent properties after 7 years
- no ban on institutional investors buying and selling to each other
- under some circumstances, institutions are still permitted to buy to renovate and rent
- institutions can buy resale homes if they have established rent-to-own schemes for residents
All of these provisions are different from what was initially proposed in at least one version of the legislation.
Since institutions stopped buying resale homes long ago, the prohibition (with loopholes) has almost no practical effect on the Arizona market.
If the act had been enacted as originally proposed, it could have forced institutional investors to quickly dispose of their properties. A few have been doing this of their own free will, but a forced liquidation in a short timescale would have had a similar effect to a new wave of foreclosures, delivering additional and excessive inventory at the lower end of the market.
This is not going to happen now.
Most of the remaining provisions of the act are intended to encourage planning to develop more housing at the affordable end of the market. However, this will be a slow, steady process, and the effect on the market will be similarly gradual and gentle. Don’t expect any major changes in supply.