Contractors warn housing bill uncertainty already impacting jobs

As Congress debates major housing bill, concerns over investor restrictions slow work for contractors.

As homeownership remains out of reach for many Americans, Congress is debating what could become one of the most comprehensive housing bills in decades.

The proposed 21st Century Road to Housing Act includes provisions aimed at increasing housing supply, encouraging zoning reform and expanding access to affordable housing. But one section drawing significant attention and debate would impact large institutional investors. The most recent version approved by the house includes a ban preventing investors with more than 350 single family homes from buying additional single-family homes, with some exceptions.

The bill has not yet become law, but some North Texas contractors say uncertainty surrounding the legislation is already affecting business.

Clayton Stidham owns Shield Properties. He says his company has seen investors slow down purchases while waiting to see what happens next in Washington.

Stidham said his crews typically renovate damaged homes and turn them into move-in ready rental properties across the Dallas-Fort Worth and Houston areas.

“This new legislation now thats caused the delays in purchasing of houses we are down to only two on the SFR side, so I've had to let go of all these guys and so we got, I got 36 to 40 guys that are not working right now,” Stidham said.

Under the proposed legislation, institutional investors defined as companies owning 350 or more single-family homes would be prohibited from purchasing additional homes. The bill is part of a broader effort to keep more homes available for buyers who want to live in them instead of adding them to investor-owned rental portfolios.

Cody Phelps with Main Street Renewal, which owns about 45,000 single-family homes nationwide, said there are misconceptions about the role institutional investors play in the housing market.

“I think today there's a lot of misinterpretation on what's going on in this space, just in general,” Phelps said. “You know, the American dream, everybody wants to live in a home, and we provide affordable housing for everyone, basically, and especially for the ones that can't get qualified for a mortgage.”

Phelps said many of the homes his company purchases are distressed properties that require extensive repairs before they are livable.

“We're coming in buying homes that are typically distressed beyond what somebody could come in and just drop 40, 50, 60 thousand dollars plus to get a home back to a nice neighborly condition,” Phelps said.

He said about 70% of the company’s residents can afford monthly mortgage payments but cannot qualify for home loans because of issues including credit history, job history, student loans or lack of a down payment.

“Sometimes it does come down to the fact that they don't have the down payment,” Phelps said.

Phelps also pushed back against the idea that institutional investors are simply large corporations profiting from housing.

“Our pension funds from the fire department, teachers, our police department, it's their future retirement funds that are actually funding and investing in our properties, so ultimately they're the ones that are owning these homes,” he said.

According to data from Realtor.com, institutional investors, defined as buyers with more than 350 single-family home purchases since 2015, accounted for about 1% of total single-family home purchases nationally.

Many investors have already scaled back activity as higher interest rates, taxes, and insurance costs have made single-family rentals less attractive financially.

Still, housing experts say lawmakers are responding to growing frustration from consumers who feel locked out of homeownership.

“I think what people mistake sometimes is that the investor class in America is absolutely helping make housing supply available to people through rentals, which we need,” Justin Landon, president and CEO of the MetroTex Association of Realtors, said. “But alternatively, I can totally understand why a consumer might look and say one company owns tens of thousands of homes, and those homes are coming out of the pipeline that might be available to others.”

The Senate version of the bill previously included a requirement that investors who build homes specifically for rental communities would have to sell those homes within seven years. The House passed a revised version on May 20th that removed the forced sell-off requirement. It also added increased oversight of investor housing portfolios and established a tenant eviction hotline. This updated version received overwhelming bipartisan support and has the backing of major builders, Realtors, and housing advocacy groups.

The legislation now heads to the Senate for further consideration.