By Hollie Croft and Nicholas Heckman
On July 11, the 21st Century ROAD to Housing Act became law, bringing about several changes designed to increase housing supply and affordability. Section 1001 of the legislation — titled “Homes Are for People, Not Corporations,” creates a sweeping federal prohibition on the acquisition of single-family homes by “large institutional investors,” subject to narrowly defined exceptions.
The law represents one of the largest federal interventions in the single-family housing market that we have seen in decades, imposing structural limitations on investment strategies and new reporting obligations. It also establishes a federal renter outreach and dispute resolution process.
For investors, the central questions are straightforward: Does the organization meet the law’s definition of a large institutional investor? Does a proposed acquisition qualify for an exception? And are your organization’s reporting and compliance systems prepared for the new requirements?
The General Rule
Beginning Jan. 7, 2027, a large institutional investor generally may not directly or indirectly purchase — or enter into a contract to purchase — a single-family home unless an exception applies.
The law defines a single-family home as a residential structure containing no more than two dwelling units, each intended for occupancy by a single household. Manufactured homes are excluded from the definition.
The restriction applies broadly to most types of acquisitions, including transactions involving mergers, foreclosures, construction and portfolio or bulk deals.
The law, however, allows certain exceptions. These include purchases made as part of a restructuring or reorganization involving single-family homes that were owned or acquired on or before July 11, 2026.
The law does not require large institutional investors to sell or otherwise divest interests in single-family homes they acquired before the enactment date.
Who Qualifies as a “Large Institutional Investor?”
A “large institutional investor” is generally a for-profit entity that invests in, owns, rents, manages or holds single-family homes and, either alone or together with one or more entities, directly or indirectly controls investment of more than at least 350 homes.
Homes acquired through qualifying excepted purchases after enactment on July 11, 2026, are not included.
The statute’s definition of “investment control” is especially important. The definition looks beyond the name included on the title to include those who actually have the power to make investment or management decisions about the property.
Generally, an entity has direct or indirect investment control over a single-family home if it:
- Owns the home;
- Has primary authority or a fiduciary responsibility to make investment management decisions;
- Controls the general partnership, managing member, investment manager or advisor of the owner;
- Has other governance rights over the owner; or
- Owns or controls more than 25 percent of an equity class in the entity that owns the home, unless it is a passive investor.
Compliance and Risk Considerations
When determining whether you meet the definition of large institutional investor, pay close attention to your joint ventures, organization structures and REIT subsidiaries as the statute aggregates control across affiliated entities.
Moreover, parties involved in M&A transactions should pay special attention to the post-close structure to ensure that the transaction does not inadvertently trigger “investment control.” Even non-real estate acquisitions can bring a portfolio above the 350 single-family home threshold.
What is an Excepted Purchase?
The law identifies several categories of excepted purchases that are not subject to the general prohibition. They include:
- Newly constructed or renovated homes sold by institutional investors
- Build-to-rent programs and renovate-to-rent programs;
- Programs that boost homeownership, which generally offer right of first refusal and price concessions;
- Foreclosure-related acquisitions by servicers or lenders;
- Purchases from non-covered investors, so long as such purchase does not occur after Jan. 7, 2027;
- Transfers among large institutional investors; or
- Seniors housing.
An investor should have procedures in place to ensure acquisitions meet at least one of the above excepted purchases.
Reporting Obligations, Compliance and Penalties
A large institutional investor must notify HUD by Jan. 7, 2027, that it meets the statutory definition. By Dec. 31 of each subsequent year, it must report:
- Whether it continues to qualify as a large institutional investor;
- The number of single-family homes under its direct or indirect investment control; and
- The city and state where those homes are located.
Renter Outreach Obligations
The statute requires HUD to establish a renter outreach resource consisting of a toll-free number and a website. Investors must provide written notice of this resource at move in and annually thereafter to their tenants.
Moreover, the investor must provide the name, phone number and email address of the person responsible for addressing rental disputes for the investor. Investors will need to update the tenant with new information within 30 days if such information changes. Additionally, the investor must prominently display the resource on their public website that is accessible to the renter.
If investors violate the general rule, they may be subject to a civil penalty in an amount that is not more than $1 million per violation, or three times the purchase price of the property involved, whichever is greater.
Going Forward
Section 1001 introduces a new regulatory landscape for institutional participation in the single‑family housing market. While the core prohibition is simple, the practical implications are complex. The definition of “large institutional investor” is broad, “investment control” can be triggered through multiple indirect pathways, and the excepted‑purchase framework requires careful, well‑documented diligence for every transaction.
Beyond acquisition restrictions, the statute imposes ongoing operational obligations — annual HUD reporting, renter‑outreach requirements and civil‑penalty exposure — that will require investors to strengthen internal governance, data tracking and compliance processes. For organizations with layered structures or multiple affiliates, proactive monitoring of ownership and control will be essential to avoid inadvertently crossing the 350‑home threshold.
Hollie Croft and Nicholas Heckman are partners at Nelson Mullins’ Orlando office. Croft can be reached at [email protected]. Heckman can be reached at [email protected].