The Treasury Department on Oct. 22 released its proposed rules for the federal ban on large institutional investors buying single-family homes, laying out for the first time how build-to-rent operators, renovators and rent-to-own programs can keep buying once the prohibition takes effect on Jan. 7, 2027.
The notice of proposed rulemaking implements Section 1001 of the 21st Century ROAD to Housing Act, which was enacted on July 11, 2026. The draft, which was sent to the White House for regulatory review on Oct. 2 β RealtyWire reported when it reached the Office of Management and Budget β is scheduled for publication in the Federal Register on Oct. 23. Comments are due 30 days after that.
“Treasury is working to ensure American families and workers have a fair shot at purchasing homes in their communities by increasing housing supply and limiting large institutional investors’ role in the market, while supporting a strong, stable housing market and avoiding unnecessary disruption,” Treasury Secretary Scott Bessent said in the department’s announcement.
Who the institutional investor ban covers
The statute itself sets the threshold: a “large institutional investor” is an entity engaged in investing in, owning, renting, managing or holding single-family homes that has direct or indirect investment control over at least 350 of them. Starting Jan. 7, such an investor generally may not buy, or sign a contract to buy, a single-family home unless the deal qualifies as an “excepted purchase.”
Treasury’s proposal does not rewrite the statute’s definitions β the law bars it from amending certain of them. Instead, it fills in terms the law uses but never defines. Under the draft, an entity is “in the business of” single-family investing when it holds homes to earn income or financial gain, not when it does so incidentally to some other business. An entity would count as a passive investor in another company only if the two share no directors or officers and the investor has no “property control right” β a consent, approval, veto or similar right over buying, selling, leasing, renovating or managing the homes.
The proposed rule also defines “program,” which matters because the four main exceptions are all program-based. A program would have to be a set of written policies or procedures adopted before the purchases it covers and reasonably designed to keep every purchase within the law.
Build-to-rent: an 18-month window
For the build-to-rent industry, the central question has been what counts as a “newly constructed” home. Treasury’s answer: a home qualifies if no owner-occupant has lived in it, the investor buys it within 18 months of its certificate of occupancy, and its first occupants after the sale are renters.
The department said it considered a broader reading under which any home originally built to be rented, and still rented, would qualify β effectively letting existing build-to-rent communities trade among large investors under this exception. It rejected that approach in the proposal, writing that treating homes “renter-occupied for potentially decades” as newly constructed “appears to be inconsistent with the statutory text and purpose.” It also considered, and did not propose, a cutoff tied to the law’s enactment date. Separate statutory exceptions for purchases from another large institutional investor, loss mitigation and debts previously contracted are addressed elsewhere in the proposal.
Renovate-to-rent and rent-to-own terms
The statute’s renovate-to-rent exception requires improvements of at least 15% of the home’s purchase price. Under Treasury’s proposal, a qualifying program would cover homes that do not meet structural or core-system elements of local building codes when bought, and the investor would have to resolve all material deficiencies. It would add a non-exclusive safe harbor for the “substantial rehabilitation” test: spending at least 10% of the home’s purchase price on structural or core systems. The 15% floor still applies on top of that. Both thresholds are measured against the price of the structure, not the land beneath it.
The proposal also puts numbers on the “meaningful financial support” that homeownership programs must offer renters who buy their homes. Under a proposed safe harbor, an investor would satisfy the requirement by contributing the lesser of $5,000 or a percentage that rises with tenure β 2.5% after five years of renting and 3.5% after seven. The percentage would be calculated on the lower of the purchase price or the FHA one-unit loan limit for the county. Treasury said the 3.5% figure is borrowed from the FHA minimum down payment and that the $5,000 cap is meant to keep the programs from becoming “cost-prohibitive” for investors.
For “programs to boost homeownership,” the statute requires a right of first refusal and a 30-day first look. Under Treasury’s proposed safe harbor, an investor planning to sell a renter’s home would first send written notice with the intended price and terms, then wait 30 days without listing, marketing or negotiating with anyone else. If a later outside offer comes in at or below what the renter offered, the renter would get at least five business days to match it. The rights would run until 90 days after the lease ends or until the home is rented to someone else. Treasury said this is meant to stop an investor from declining to renew a lease and immediately selling.
Penalties, and what comes next
The law authorizes civil penalties of up to the greater of $1 million per violation or three times the purchase price. The proposed rule would treat a single prohibited purchase involving more than one large institutional investor β a fund, its manager and an affiliate, for example β as one violation when calculating that maximum.
Treasury called this the first phase of a “phased rulemaking approach,” citing the 180-day gap between enactment and the effective date. Later rules may cover the remaining exceptions, compliance procedures, reporting and recordkeeping, and enforcement. The annual notice that large investors must file with HUD about the homes they control is left to HUD and is not part of this proposal. The 96-page filing (docket TREAS-DO-2026-0529) asks 134 numbered questions, including whether the 10% safe harbor, the $5,000 cap and the five- and seven-year tenure steps are set at the right levels.
The proposal lands in a market where the largest buyers have already pulled back, as covered in our look at how mega investors cut buying by 10,000 deals in the second quarter. States are also acting on their own; Michigan has adopted its own ban on large-investor home purchases. Our reading of the draft is that the 18-month build-to-rent window and the narrow renovation test are the provisions most likely to shape where institutional capital goes after January. Comments will show whether builders and single-family rental operators push for the broader readings Treasury considered and set aside. More policy coverage is in our housing market section.
