Thursday, May 31, 2012

HB205: Rent Control

My thoughts on the discussion of HB205, creating rent controls in Manufactured Housing communities, on DelawareLiberal:

I can’t help but think there’s a better way to deal with this problem. Is there some kind of regulatory distinction between a “Manufactured Home” and a site-built home that allows ownership of the structure to be transferred without transferring ownership of the property? Can you do that with site-built homes? That arrangement would make sense if the manufactured home is sufficiently mobile that it could be relocated in response excessive rent increases, but a permanently affixed manufactured home doesn’t subject the lot owner to these competitive pressures.

I understand that developers and property owners have a tendency to take advantage, and I can see that there’s clearly a problem here, I’m just concerned that rent controls subject to some bureaucratic agency will backfire. Take as an example: A lot owner has his costs go up one year in excess of the CPI, but he can’t get approval to raise his rates accordingly, so he takes a bath. The next year, even if his costs DON’T go up, he will increase his rents automatically by the CPI just in case he needs to raise rents beyond next year’s CPI next year. New lots will start off with higher rents as a hedge against future cost increases that cannot be made up in rent increases without bureaucratic approval.

There’s also the possibility that at some point in the future the Governor’s Advisory Council on Manufactured Housing becomes nothing more than a rubber stamp for any requests submitted to it, establishing a precedent that effectively neuters this legislation entirely. Maybe the cost of land ownership grows at a faster pace than the CPI, and rather than take a bath every year as cost growth outpaces revenue growth, they just shut down entirely, which further drives up rental rates due to the decrease in available supply.

Again, I can see the problem with the status quo, I’m just concerned that rent controls are too blunt of a solution. They have side effects.

My instinct would be to vote against the bill, but I would be interested in finding an alternative solution to this issue.  I welcome your comments.

UPDATE:  Another commenter informed me that these permanently affixed structures are titled at the DMV as "vehicles" based solely on the fact that they were "manufactured" off site rather than built on site.  This strikes me as a highly problematic confusion of property rights that should be addressed before we skip straight to rent control.

UPDATE(again):  Been looking at the code.  If this subchapter is governing the rental of real property with fixed structures owned by someone else constructed on it, there are some issues that can't be addressed by rent controls but might abrogate the need for them.

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