Evicting Wall Street From the Housing Market Will Be Messy

Law restricting activities of big investors in residential real estate could mean less cash to build new supply

By Carol Ryan of The WSJ. Excerpts:

"Under the 21st Century ROAD to Housing Act . . . investors who already own more than 350 family homes can’t buy any more from the existing housing stock."

"Any landlords that don’t already have scale will find it hard to expand their portfolios through the exemptions."

"Big landlords are being nudged to pour cash into the build-to-rent sector instead. This means taking on development risk and constructing entire rental neighborhoods from scratch. The benefit of constructing whole rental communities in one area is that they are much cheaper to maintain than homes that are scattered across dispersed neighborhoods."

"Build-to-rent is exempt from restrictions under the new law. Like multifamily apartment buildings, it is an area of the housing market in which large investors can continue to operate freely."

"Anyone considering putting money into the housing market . . . must now weigh the risk that future administrations could tighten the rules further."

"Returns on build-to-rent investments don’t look high enough to compensate for the risk."

"Build-to-rent communities are hard—or impossible under some zoning rules—to sell off individually to consumers"

"Eight large institutional investors were net sellers of more than 3,000 homes in the second quarter of this year, a fivefold increase in net-selling activity from the same period of last year"

"some smaller investors plan to cash out permanently by selling homes to individual home buyers over time"