QuickTake: Build-to-Rent Exemption Creates Clear Path for Institutional Capital

New federal housing policy aimed at expanding homeownership is creating significant tailwinds for the build-to-rent (BTR) sector. Recent discussion has focused on limiting institutional ownership of individual, for-sale homes. However, what is not being targeted is just as critical. Purpose-built rental communities are explicitly exempt from these proposed actions, creating a clear and favorable path for institutional investment.

In a recent interview with The Wall Street Journal, Trevor Koskovich, Northmarq’s president of investment sales, explained how this policy distinction is set to reshape the single-family rental landscape and accelerate the flow of capital toward new construction.

A Clear Distinction: Scattered-Site vs. Purpose-Built

For years, institutional investors in the single-family rental (SFR) market primarily used a scattered-site model, acquiring individual homes across different neighborhoods. The new policy direction draws a sharp line between this approach and the development of purpose-built communities, which add new housing supply.

"There's going to have to be a change in the model," Koskovich told the Journal. "This is great for the build-to-rent segment."

This clarity matters. The explicit exemption for build-to-rent communities — which include not just single-family homes but also townhomes and bungalows — reinforces their role as a vital part of the U.S. housing solution. By encouraging new construction, the policy addresses the housing shortage without penalizing developers who add to the nation's inventory.

A Dual Impact: New Rules Drive New Opportunities

While some investors are adopting a "wait and see" approach, the policy's direction creates a dual impact. Legislation designed to benefit homebuyers will simultaneously drive value, demand and institutional interest toward professionally developed and operated rental communities. Capital naturally flows toward opportunity, and BTR now represents one of the clearest paths for institutional funds in the housing market.

"It's super easy for institutions to pivot to built to rent, and they've already been doing it," Koskovich noted. "This legislation could make them hyper focused on BTR."

This hyper-focus is expected to heat up demand for land suitable for BTR development. These purpose-built communities often expand in suburban areas where larger parcels are available, which may shift the traditional owner-renter mix in these submarkets.

The Persistent Supply Challenge

Despite the focus on ownership models, the fundamental issue in the housing market remains a lack of supply. An over-regulated environment has historically made it challenging and costly to build new homes in the United States.

The BTR exemption acknowledges that new construction is a critical part of the solution. By protecting developers who add net-new supply, the administration avoids stifling the very activity needed to address the housing crunch. However, as Koskovich advises, the long-term effects of this policy will need to be monitored closely. Past housing legislation has sometimes produced unintended consequences for the market.

A Defining Moment for the SFR Market

The current legislative environment is creating a defining moment for the evolution of the single-family rental market. As institutional strategies adapt to new regulations, the pivot toward purpose-built communities will be tremendous.

For developers and investors, this represents a meaningful tailwind. Northmarq sees this as a pivotal time for the BTR sector and is committed to playing an integral role in its expansion. We are excited to continue partnering with the developers and investors who are building the next generation of rental housing.

Looking ahead, the market can expect:

• Accelerated Investment in BTR: A significant shift of capital from scattered-site acquisitions to dedicated rental communities.
   
• Broader Development Scope: Increased focus on purpose-built townhome, bungalow and single-family rental projects.
   
• Focus on New Supply: A reinforced emphasis on new construction as the primary vehicle for institutional investment in residential real estate.