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Delaware Affordable Housing: Legislation Won’t Fix Any of It

By: Kathleen Rutherford, Executive Director

Delaware is in the midst of an affordable housing crisis — there’s no question about it. Rents are rising, inventory is dwindling, and people are struggling. As legislators consider possible solutions, they must be careful not to exacerbate the problem.

Data released this year by Housing Alliance Delaware says the state faces a shortage of more than 18,000 affordable and available rental homes for extremely low-income renters. An annual household income of $46,846 would be required to reasonably afford a two-bedroom rental home in Delaware, according to the National Low Income Housing Coalition. The fair market rate for that two-bedroom home would be $1,071 per month, according to the U.S. Department of Housing and Urban Development.

In response, lawmakers have proposed a number of bills that, however well-intentioned, will do nothing to fix Delaware’s affordable housing crisis. One such bill — Senate Bill 90 — would have forced landlords, large and small, to accept Housing Choice Vouchers, commonly known as Section 8 vouchers.

In its synopsis, sponsors wrote that the bill would “prohibit discrimination based on source of income,” suggesting the reason a landlord might turn down Housing Choice Vouchers must be discrimination. What sponsors didn’t mention in the bill is that units in the Housing Choice Voucher program are subject to myriad additional regulations, including regular mandatory inspections — ones that take weeks or even months to schedule.

The Housing Choice Voucher program was designed to incentivize rental owners to participate. This is accomplished, in part, by the government providing direct rental payments to rental owners, some of whom are thrilled to accept Housing Choice Vouchers. After all, the money is guaranteed by the government and landlords don’t have to worry about rent checks bouncing or coming in late. There is no denying, though, that the program is administratively burdensome, difficult to navigate and subjects all landlords, whether they like it or not, to the unpredictable timelines of government agencies. For that reason, forcing a landlord into the program — especially a “mom and pop landlord” — is unfair and will likely have the opposite of the intended effect.

Another bill, Senate Substitute 1 for Senate Bill 101, would have guaranteed tenants the right to legal counsel in eviction proceedings and established an eviction diversion program aimed at resolving disputes after a landlord files for eviction.

Proponents said the bill would protect tenants who are unable to afford legal representation and are outmatched when they arrive in court for their eviction proceedings. The reality, however, is that by giving tenants access to free legal counsel during evictions, proceedings are drawn out over months and landlords are forced to retain legal counsel of their own. All the while, landlords may not be receiving their rent payments.

That cost — and the cost of the attorney — inevitably get passed on to consumers in the form of rent increases. With exceptions for extreme situations, having a tenant in a home and paying rent is what’s best for both landlords and tenants. Only in those most extreme of situations is eviction necessary, and when it is, forcing additional expenses on landlords only adds insult to injury. Prior to the pandemic, the process to adjudicate such cases would take two months or less. Currently, due to staffing shortages and other issues within the JP Court system, these cases can take six months or more. This loss of income must be compensated for, most often in the form of rent increases. That’s not because landlords are greedy — it’s because if a landlord goes out of business, a family is out of its home.

Other lawmakers have pushed more extreme proposals, such as rent control and affordable housing mandates. The reality is, these proposals don’t work. “While rent control appears to help current tenants in the short run, in the long run, it decreases affordability, fuels gentrification, and creates negative spillovers on the surrounding neighborhood,” according to a study from the Brookings Institute.

There are two solutions to the affordable housing crisis that may prove effective, and neither involves forcing landlords to keep rents artificially low or accept vouchers they’re not equipped to accept. First, we should focus on getting the government out of the way. Zoning laws and regulations on building heights, lot sizes, and parking requirements have proven to exacerbate the housing shortage. An estimated 424,000 families could access federal housing assistance if regulations were relaxed in just 11 metropolitan cities, a study 2021 study found.

Second, government must incentivize private developers to voluntarily create more affordable housing. This could be achieved by creating a state-level Low Income Housing Tax Credit program. The LIHTC was created in 1986 and signed into law by President Reagan. The purpose of the legislation is to encourage a private/public investment to preserve and construct new affordable rental housing. Alone and in combination with tax-exempt private activity bonds, the LIHTC has been the most productive sources of affordable housing financing in the nation’s history. The equity raised through the tax credit investment makes it possible for developers to attract the financing needed to create or restore low-income rental housing.

Nineteen states have expanded the federal program on the state level or created entirely separate programs. In Missouri, for example, every dollar spent on the program resulted in $10.59 in economic activity and $5.81 in gross state product. As a result, Missouri expects $5.23 billion in statewide economic impact and $2.86 billion in gross state product, as well as the creation of 35,600 construction jobs.

Delaware could also eliminate or loosen regulations on tiny homes and accessory dwelling units, or ADUs. ADUs are typically secondary dwellings built on existing lots such as guest homes, mother-in-law suites or tiny homes. Many Delaware cities, like Newark, outright ban ADUs. At the county level, pages of burdensome regulations impose restrictions on the structures. By cutting through the regulatory obstacles, Delaware could support its citizens’ property rights while also alleviating the affordable housing crisis.

It’s by incentivizing developers, reducing regulation, and supporting property owners’ rights that Delaware will be able to make a dent in the affordable housing crisis. Efforts to force landlords into programs they don’t want to participate in and meddle with the supply and demand of Delaware’s housing market, will have the opposite of the intended effect.