The U.S. Department of Treasury on Thursday proposed new regulations to implement a signature portion of the bipartisan housing bill that passed in July capping investor purchases of single-family homes.

Historically poor homebuying affordability in the wake of the COVID-19 pandemic prompted Congress to pass its most ambitious piece of housing legislation since the 1990s, dubbed the 21^st Century ROAD to Housing Act. The bill carries a range of provisions aimed at boosting housing supply and expanding access to mortgage financing.

One stipulation of the bill was that investors who own 350 or more single-family homes cannot purchase additional properties. Build-to-rent, rent-to-own, and rehabilitate-to-rent investor activities also drew scrutiny from lawmakers.

Though the legislation takes effect on Jan. 7, 2027, federal regulators and local authorities must ultimately launch complex and time-intensive pilot programs and rulemaking processes to actually implement many of the bill’s provisions. For some aspects of the legislation, that process could take years, experts say.

But the Treasury Department took a first step last week to clarify elements of investor homebuying restrictions, which have been widely touted as a ban on investor purchases. In reality, the housing bill introduced purchase limits for the largest residential investors, organized by certain activities, with a range of carve-outs.

A phased approach to rulemaking would be taken around the investor restrictions, given the short implementation window and complexity of rulemaking involved, Treasury said.

“This proposed rule is the first phase, focusing on issues that Treasury believes would be beneficial to address as soon as possible to provide clarity and minimize market disruptions,” read the proposal, which requested public comment submissions by Nov. 23.

Notable aspects of Treasury’s proposed rules

A range of suggestions and requests for feedback were included in the 96-page document.

For example, the Treasury proposed an 18-month grace period window starting after the statutory Jan. 7 effective date for new build-to-rent communities. During that window, large investors would still be able to buy those units, so long as the homes were built for the purposes of renting and had not been previously owner-occupied.

For developers and home builders with build-to-rent projects already underway or in the pipeline, this provides flexibility in wrapping up those projects without undue harm. Developers and builders who complete new purpose-built rentals or whole communities of those properties within that 18-month window — but hold them beyond that period — would be unable to place them with large investors afterward, unless they satisfied other exemptions.

Feedback was solicited on whether the 18-month window was sufficient, in addition to whether using the issuance of a certificate of occupancy to mark completion of the “newly constructed home” is an appropriate standard.

Treasury said rentals of existing build-to-rent communities would not be included with the 18-month exemption window. Those properties could still swap ownership between large institutional investors, however, if the purchase satisfies one of the exemptions laid out in the proposal.

Seeking industry input, the proposal also teases apart aspects of direct, indirect and so-called “passive” investment in single-family homes, by which lawmakers had defined who qualified as investors subject to purchase restrictions.

Exemptions for rehabilitate-to-rent investors were also maintained in Treasury’s proposed regulations, so long as institutional investors who qualify make renovations and improvements to the property totaling at least 15% of the purchase price. This is regarded as a barrier to investors claiming “rehabilitation” exceptions on the basis of merely cosmetic upgrades.

Violations of the various purchase restrictions by large investors could trigger a civil penalty of up to $1 million, Treasury proposed, or three times of the property’s purchase price. Treasury said more rulemaking would follow to implement other aspects of the investor restrictions contained in the ROAD Act.

Elizabeth Warren, D-Mass., is the ranking member of the Committee on Banking, Housing, and Urban Affairs that led ROAD Act negotiations in the U.S. Senate. She released a statement on Thursday after the proposal was released, noting that final implementation of investor restrictions was “far from done.”

“Congress will be watching closely to ensure the Trump Administration finalizes strong final rules without loopholes for corporate landlords that drive up costs for renters and families trying to buy a home,” said Warren.