Delaware Legislators reduced the supply of manufactured homes

Delaware Legislators reduced the supply of manufactured homes

by Dr. John Stapleford

Co-Director Center for Analysis of Delaware's Economy & Government Spending

May 7, 2021

Beginning in 2010, Delaware State legislators began efforts to put rent controls on manufactured home communities.

The argument was that there was an unequal bargaining position between community owners (landowners) and tenant-manufactured homeowners (homeowners).

If the homeowners believed that a rent increase was untenable, their only recourses were selling their unit or moving it. Either option entailed considerable personal disruption and possible financial losses.

After numerous attempts at legislation, a rent control bill was finally signed by Governor Markell in 2014. The new law required that landowners requesting rent increases above inflation must have the increase affirmed by the Delaware Manufacturing Home Relocation Authority (Authority).

The Landowners must also disclose financial and other pertinent documents and prove that expenditures on capital (e.g., sewer system repairs) have not already been recovered through rent income.

Regardless of the Authority's decision, the homeowners can file for arbitration. The landowners must appeal the decision to the Delaware Superior Court within 30 days. 

The Delaware State Legislators must have believed that the homeowners did not have such flexibility to respond to the market prices that emerge from the plethora of forces that drive markets.

Their reasoning was that rent increases not exceeding annual inflation were acceptable.

The legislators' intentions were well-meaning. However, the facts from the research literature on the reaction of self-interested rental property owners to rent control are crystal clear.

?Over time, the landowners reduced maintenance of the property and had eventually converted the property to other uses or sell. (Self-interested renters, of course, would be happy with a rent of zero.)

The data shows that this is the case for Delaware. 

Between 2010, when State rent control efforts began, and 2019 the American Community Survey shows that the supply of mobile homes fell 17% in both New Castle and Sussex counties.

Recent conversations with landowners reveal plans for major conversions to permanent residential or commercial developments over the next two years.

When government attempts to impose a vision of justice on a complex world of self-interested individuals, it produces unfortunate unintended consequences. If landowners raise prices beyond what the market will bear, new tenants will dry up, vacancy rates will rise, and rents will be lowered.