As the TaxMonkey pointed out, a rental is still passive even with Material Participation.

§469(c)(2) says "Except as provided in paragraph (7), [paragraph 7 is about Real Estate Professionals] the term “passive activity” includes any rental activity."
https://www.law.cornell.edu/uscode/text/26/469#c

It says ANY rental activity, which includes one that rises to the level of a Trade or Business and/or has Material Participation.