The Exclusion is meant for homes that are your Principal Residence. The Nonqualified Use rule basically prorates the exclusion so it only applies to the time it was your Principal Residence.
Yes, there is a bit of a 'loophole' that if you rent it out AFTER you live in it (and DON'T move back in), it avoids the Nonqualified Use rule. But the general rule is that it is meant to only exclude the gain based on the time it was your Principal Residence.
