Housing bill clears Senate hurdle despite institutional investor ban

The Senate moved closer to advancing a comprehensive housing package aimed at improving affordability on Wednesday, but a Trump-backed provision banning institutional investors from buying single-family homes is emerging as a flashpoint.

Lawmakers cleared another procedural hurdle for the bill on Wednesday, setting up a possible final vote before leaving Washington on Thursday.

The Housing for the 21st Century Act passed the House on a bipartisan 390-9 vote last month. The legislation includes comprehensive measures to increase the supply of affordable housing.

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Sen. Sen., chairman of the Senate Banking, Housing and Urban Affairs Committee. Tim Scott, R.S.C. and senior Democratic Sen. Elizabeth Warren, D-Mass., teamed up to advance and amend the bill in the Senate.

“When President [Donald] “Trump, Elizabeth Warren and Senate Republicans may be on the same page on the housing bill, showing that if you put partisan politics aside and focus on the issues that affect the American people, you can get results,” Scott told CNBC’s “Squawk Box.”

In its original form, the legislation was aimed primarily at helping first-time homebuyers and low-income Americans enter the housing market or access more affordable housing options.

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Sen. Tim Scott, R.S.C., arrives for a Senate Banking, Housing and Urban Affairs Committee confirmation hearing at the Dirksen building on Thursday, Feb. 27, 2025. (Tom Williams/CQ-Roll Call, Inc. via Getty Images)

But the initial bill lacked the key policy Trump wanted: banning institutional investors such as hedge funds or large corporations from buying single-family homes. Trump signed an executive order banning the practice earlier this year and called on Congress to legalize it during his State of the Union address.

“I’m asking Congress to make this ban permanent because there are homes for people, and that’s actually what we want,” Trump said. “We want homes for people, not companies.”

Scott and Warren added this provision to the bill. If passed, the package would include policies ranging from the ROAD to the Housing Act, a separate Senate housing proposal that had previously stalled.

This provision would ban large-scale investors from purchasing single-family homes and require companies that exceed a certain ownership threshold to divest within seven years.

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Sen. Brian Schatz, D-Hawaii, warned they were a “problem” with the Senate’s bipartisan housing package. (Bill Clark/CQ-Roll Call, Inc via Getty Images)

But the ban on institutional investors leads some Senate Democrats and industry stakeholders to argue it could eliminate rental housing units.

Sen. Brian Schatz, D-Hawaii, said on the Senate floor that “there is a problem” with the bill. He argued that the ban on companies and hedge funds buying single-family homes was written to force “anyone who owns and rents more than 350 units, single-family, or duplexes” to sell after a seven-year period.

“There is literally no reason for this,” Schatz said. “And the problem is, it was written in a way that tried to describe the hedge fund problem, but they wrote it wrong.”

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“And so the definition of institutional investor essentially says that leasing and operating 350+ units is bananas,” he continued.

Many members of the housing and rental industry wrote in a letter to Scott and Warren that the seven-year clause would “effectively halt build-to-rent development, leading to less supply and fewer options for tenants.”