KBRA releases research analyzing the 21st Century ROAD to Housing Act, which became federal law on July 11. The act, which is intended to address the nation’s housing shortage and affordability, is expected to have a variety of impacts on the housing sector, including institutional single-family rentals (SFR). Earlier this year, KBRA discussed the potential implications of a prior version of the bill (see Institutional SFR Ownership Limits Could Slow Sector Growth).

While the act is not expected to affect existing SFR portfolios in a meaningful way, it could slow the pace of institutional portfolio growth, reshape acquisition strategies toward build-to-rent (BTR) development and other alternative growth channels, and influence the long-term evolution of institutional ownership and future SFR securitization issuance.

This report examines some key provisions of the act and their implications for the institutional SFR sector and related securitizations.

Key Takeaways

• Large institutional investors controlling 350 or more single-family homes would be prohibited from purchasing additional homes after a 180-day implementation period, but existing SFR and BTR portfolios are grandfathered and not subject to divestiture.
• Exceptions for newly constructed homes, BTR communities, purchases from other large institutional investors, and foreclosure- and servicing-related acquisitions preserve important avenues for portfolio growth, portfolio transfers, and workouts despite the purchase restrictions.
• The near-term credit impact on existing SFR securitizations is expected to be benign. The legislation primarily affects future portfolio growth rather than existing collateral, and SFR values are expected to remain supported by individual home sales to owner-occupants rather than institutional buyer demand.

Click here to view the report.

Related Publications

• Institutional SFR Ownership Limits Could Slow Sector Growth
• CoreVest American Finance SFR Comprehensive Surveillance Report
• Single-Borrower SFR Comprehensive Surveillance Report

About KBRA

KBRA, one of the major credit rating agencies, is registered in the U.S., EU, and the UK. KBRA is recognized as a Qualified Rating Agency in Taiwan, and is also a Designated Rating Organization for structured finance ratings in Canada. As a full-service credit rating agency, investors can use KBRA ratings for regulatory capital purposes in multiple jurisdictions.

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