U.S. Treasury proposes rules barring home purchases by institutions controlling 350 homes

Key Facts

The U.S. Treasury Department proposed rules to implement a statutory ban on home purchases by large institutional investors with investment control over at least 350 homes. The draft seeks to clarify the application of certain exemptions and enforcement of the ban enacted under the housing law, according to the proposal published in the Federal Register. The law prohibits covered investors from buying a home or entering into a contract to buy one, directly or indirectly, subject to statutory exemptions. The law's requirements and prohibitions begin on January 7, 2027, the effective date of the statutory ban. The regulatory step thus defines aspects of how a restriction already enacted by lawmakers will apply, as part of an intervention aimed at expanding the housing supply available to individual buyers.

The definition of a large institutional investor rests on direct or indirect investment control, alone or jointly with other entities, according to the law. Homes subject to such control are aggregated when calculating the threshold, excluding exempt purchases made after the legislation's enactment. The definition of a covered home extends to buildings containing two or fewer housing units, encompassing both single-unit and two-unit buildings. On enforcement, the law sets the maximum civil penalty for each violation at $1,000,000 or 3 times the price of the property concerned, whichever is greater. This provision links one of the two alternative penalty ceilings to the value of the property involved in the violation, with the higher alternative determining the statutory maximum.

Statutory exemptions provide specific avenues for some acquisitions to continue, including purchases of homes for renovation and rental. This exemption requires improvements totaling at least 15% of the home's purchase price, according to the law. It also requires substantial rehabilitation of homes that fail to meet structural or core systems requirements under local building codes. The renovation exemption thus combines a minimum improvement expenditure with a condition concerning the building's state and the work needed to rehabilitate it. The law also exempts purchases of homes from an investor not covered by the ban, provided the purchase is completed within two years of its effective date.

For existing portfolios, the law does not require large institutional investors to divest or sell homes purchased before its enactment. This provision keeps previously purchased homes outside any obligation to sell under the ban, which regulates subsequent purchases and contracts. Providing the backdrop to the intervention, President Donald Trump summed up the political rationale for the move by saying, in the executive order published on the White House website, that "people live in homes, not corporations." The Government Accountability Office had found that institutional investors owned between 1% and 3% of all single-family homes in the metropolitan areas it studied by 2024. That share concerns homeownership in those areas, where the office's study examined institutional investors' presence in the housing market.

The drafting of the ban's rules coincides with pressures on residential construction, as privately owned housing starts in September 2026 reached a seasonally adjusted annual rate of 1,221,000 units. Single-unit housing starts totaled 859,000 units at an annual rate, according to Census Bureau and Department of Housing and Urban Development data published on October 20. The National Association of Home Builders attributed the decline in single-unit home construction in September to higher financing and building materials costs and persistent labor shortages. In October, the homebuilder confidence index fell 3 points to 29, according to the association. Meanwhile, 43% of builders cut prices that month, alongside declining confidence and the cost pressures described by the association.

The Treasury draft sets a public comment deadline of 30 days after the proposal's publication in the Federal Register. This stage allows comments on the proposed rules governing the application of exemptions and enforcement. The department said subsequent rules could address other categories of statutorily exempt purchases, along with compliance procedures. Those rules could also include reporting and recordkeeping requirements and enforcement procedures, according to the draft. For tracking industry activity, the October housing construction report is scheduled for release on November 18, 2026, according to the schedule announced by the Census Bureau and the Department of Housing and Urban Development.