The ROAD Act passed by the Senate aims to expand America’s housing supply. It’s likely to shrink it instead

Earlier this month, the U.S. Senate passed the 21st Century ROAD to Housing Act by a margin seldom seen for an important piece of legislation, 89 to 10. The measure, primarily written by Sen. Elizabeth Warren (D-Mass.) and her staff, targets the single-family home rental industry as a major cause of America’s painful housing shortage.

The idea motivating the bill: These enterprises are either buying or building, then renting out for profit, houses that would otherwise get listed for sale, shrinking the supply on the market and hence raising prices and limiting shoppers’ choices for the ranches, colonials or condos available in the neighborhoods where they’d like to live. That idea has broad bipartisan support: President Trump has said he supports keeping investors out of the single-family home market, and issued an executive order to that effect in January.

It’s unclear if the law will get adopted in its present form, since the House is currently debating whether to add its provisions to its own housing bill passed in February. But if the ROAD Act’s principal elements become law, it’s likely to undermine its own intentions—by severely curbing investment in new single family housing.

As Ed Pinto, director of the American Enterprise Institute’s Housing Center and former chief credit officer at Fannie Mae, told Fortune, “The Senate bill makes it clear that the rental-home industry is an unwanted sector in America. It’s a textbook example of the law of unintended consequences.”

Pinto stresses that this now-threatened business barely existed 15 years ago, and that it arose out of a need. “People rent single-family homes for three good reasons,” Pinto avows. “First: They can’t qualify to buy because they don’t have enough savings, or sufficient income, or suffer from low credit scores. And we’re seeing more and more of that situation as prices have exploded. Second: They plan on moving in a year or two. Or third: They want........

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