"House Frame" by BY-YOUR

The House’s amended version of the 21st Century ROAD to Housing Act removes the Elizabeth Warren poison pill that would force Build-to-Rent (BTR) housing to be sold within 7 years, implementing a de facto ban on BTR homes from qualifying for full Opportunity Zones tax benefits.

Americans for Tax Reform applauds Chairman French Hill (R-Ark.) and members of the House Financial Services Committee for reaching an agreement that protects BTR housing’s qualification for Opportunity Zone tax treatment by removing the 7-year forced sale requirement for BTR homes.

On Tuesday morning, President Trump told the Washington Examiner that he’s confident the House’s amended housing bill will be able to clear the Senate:

Opportunity Zones

The Working Family Tax Cuts established a permanent Opportunity Zone program, allowing for over $100 billion of investment in rural and low-income communities (a poverty rate of at least 20 percent). This tax cut broadened the Opportunity Zone program created in the 2017 Trump Tax Cuts.

Opportunity Zones provides capital gains tax relief for long-term investment and construction in designated census tracts within all 50 states. ATR has compiled local news reports on the benefits of Opportunity Zone construction.

Senate Bill’s 7-year Forced Sale of BTR Homes Conflicts with 10-year Holding Requirement for Opportunity Zones

The Senate-passed version of the 21st Century ROAD to Housing Act contains a provision (Section 901) that would require large institutional owners of BTR single family housing to sell to an individual homebuyer after 7 years.

This 7-year forced sale provision is in direct contrast to the requirement that BTR housing be held by the owner for 10 years to qualify for full opportunity zone tax benefits.

The 10-year rule is the most significant tax benefit available under the Opportunity Zone program. It allows appreciation generated to be excluded from federal capital gains tax, provided the investment is held for at least 10 years. If a BTR home is required by law to be sold before 10 years, it cannot qualify for the permanent tax exemption. Restricting Opportunity Zone tax treatment for BTR homes would lead to less home construction in lower income areas that Opportunity Zones were created to benefit.

The House-amended legislation correctly removes this 7-year forced sale provision, allowing BTR housing to fully qualify for Opportunity Zone Tax Treatment.

Forced-Sale Requirement Would Lead to Less New Housing Built

On April 22, a bipartisan group of 76 House lawmakers sent a letter to House leadership urging for Section 901 to removed, warning that, “Section 901 would effectively halt the production of Build-to-Rent (BTR) housing nationwide and eliminate hundreds of thousands of future units.”

These lawmakers are correct. An analysis conducted by Ed Pinto and Tobias Peter of the American Enterprise Institute found that Section 901, if enacted into law, would:

  • Reduce the supply of newly constructed single-family homes.
  • Reduce the supply of newly rehabilitated and renovated homes.
  • Not promote the conversion of renters into homeowners and exacerbate affordability challenges for renters.
  • Impose burdens on low- and middle-income renter households by reducing their housing choices, increasing their rental costs, reducing housing stability, and resulting in a costly displacement from their homes.

The Government Should not Interfere in the Market to Force Sales of Private Property

The House-amended bill correctly recognizes that owners for BTR homes should not be forced by the federal government to divest from their property. Owners of private property should be free to sell willingly at a point of their own choosing. The 7-year forced sale of Build-to-Rent (BTR) housing violates basic property rights.

A recent memo from the law firm Clement & Murphy, PLLC directly raises the constitutional concerns with the Senate’s forced-sale provision:

“The 21st Century ROAD to Housing Act is constitutionally flawed thrice over. Its forced-sale provision takes the property of LIIs in violation of the Takings Clause: It not only effects takings lacking just compensation, but also effects impermissible private takings for which no compensation can remedy the constitutional violations.”

Americans for Tax Reform urges Congress to protect Build-to-Rent housing’s qualification for full Opportunity Zone tax benefits and to oppose a forced sale requirement. ATR applauds the House-amended version of the 21st Century ROAD to Housing Act for achieving these ends.