Treasury Unveils Rules for Big Investor Homebuyers After Congress Set Limits

The Department of the Treasury released its long-awaited guidance on how it plans to restrict institutional investors in the housing market.

Treasury unveiled the proposed rule that establishes standards for large institutional investors in the housing market. It follows a January executive order from President Donald Trump meant to discourage investors from benefiting from federal assistance in home purchases.

That led to some large investors to pull back, Realtor.com found in its own data. Small investors tend to have a far larger presence in the housing market, and they have been less scarce in the meantime.

"Treasury is working to ensure American families and workers have a fair shot at purchasing homes in their communities by increasing housing supply and limiting large institutional investors' role in the market, while supporting a strong, stable housing market and avoiding unnecessary disruption," Treasury Secretary Scott Bessent said in a statement.

The new rules help define what makes a large instututional investor and creates carve-outs to the rules. In particular, for renovate-to-rent businesses. Often these companies purchase homes that require more work than an average homebuyer can afford, and then flip them.

The rules also clarify proposed penalties against real estate investors, which could reach up to $1 million, or three times the purchase price of a property. The rules are open for public comment for 30 days.

Congress codified further limitations in the 21st Century Road to Housing Act , which became law in July. That bill targets investors who own more than 350 properties. After some wrangling , it excludes the build-to-rent industry .

Large investors are concentrated in some large markets where they account for a significant share of the housing stock.

As expected, the rules prevent investors who control 350 or more single-family homes from purchasing more, starting January 7, 2027. Home bought before the bill became law on July 11 don't have to be sold.

The new material in the proposed rule is mostly in the exceptions and carve-outs, Realtor.com economist Hannah Jones said. For build-to-rent properties, a home must be a new build that is bought within 18 months of its certificate of occupancy. And, it must be occupied by a renter, though the bill does not specify a set period for them to live there.

Treasury indicated it has a few open questions. It's asking for comment on whether it should add a minimum time for renters to be in a property to prevent investors from building, renting briefly and then quickly selling homes.