Tim Scott Wants to Deregulate Manufactured Housing

Plus: An alleged slumlord gets a "tenant empowerment" grant, Seattle's affordable housing mandates lead to less housing, D.C.'s affordable housing crisis.

Happy Tuesday and welcome to another edition of Rent Free. This week's stories include:

• The federal government has given a "tenant empowerment" grant to the AIDS Healthcare Foundation, which just settled a lawsuit filed by its own tenants about the "inhumane" condition of its properties.
• Seattle's affordable housing mandates are leading to less housing getting built.
• Affordable housing in D.C. is in financial crisis, thanks to rising operating costs and a court process that takes years to remove nonpaying tenants.

But first! Our lead story about Senate Republicans' new housing bill.

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Tim Scott Versus the Chassis Requirement

On Thursday, a group of Republican senators led by Sen. Tim Scott (R–S.C.) introduced the Renewing Opportunity in the American Dream (ROAD) to Housing Act, which proposes a grab bag of reforms to federal housing programs.

Unlike the slew of federal YIMBY (Yes in my backyard) bills that have been introduced in recent years, Scott's bill doesn't try to poke, prod, or bribe local and state governments into liberalizing their zoning codes. "Housing policy is inherently local, and federal legislators should encourage local solutions to local problems," reads the press release on the bill.

Nevertheless, the bill does include at least one idea to increase housing supply.

That includes a repeal of the federal regulation requiring that manufactured housing sit on a permanent steel chassis.

Residential building codes for traditional, site-built housing are set by state and local governments. Manufactured housing, which is built off-site and shipped to its destination, is regulated by the U.S. Department of Housing and Urban Development.

Housing wonks have long singled out HUD's requirement that manufactured homes sit on a permanent steel chassis, even once they're delivered, as a major headwind on manufactured home productions.

There's some debate about whether HUD's chassis requirement is primarily responsible for a massive, post-1970s drop in manufactured home production, or whether it's a slightly less ruinous but still unnecessary, costly regulation.

Wherever one lands on that debate, everyone would seem to agree that repealing the chassis requirement will reduce the cost of building the cheapest form of housing on the market.

Scott's bill would also repeal the cap on the number of public housing units that can be "converted" to other types of subsidized affordable housing under HUD's Rent Assistance Demonstration (RAD) program.

RAD is intended to address the massive backlog of capital improvements needed at public housing complexes by shifting these units into other programs where funding is more dependable and private capital is available.

Current law caps the number of public housing units that can be converted using the RAD program at 455,000 (or close to half of public housing units).

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Nonprofit Accused of Operating Slum Housing Gets $10 Million 'Tenant Empowerment' Grant

This past week, I reported that the U.S. Department of Housing and Urban Development (HUD) gave the AIDS Healthcare Foundation (AHF), along with the Massachusetts Alliance of HUD Tenants, a $10 million grant which they will jointly distribute to tenant associations at privately owned, federally subsidized multifamily housing. The tenant groups will use that money to ensure their landlords maintain their buildings and provide habitable living conditions.

HUD's decision to give this grant to AHF is highly questionable, given the organization's track record of managing its own residential properties. From my article:

A detailed Los Angeles Times investigation published in November 2023 reported a number of issues at AHF-owned properties, including apartments infested with cockroaches, exploding radiators, water shut-offs so regular that tenants had to defecate in wastebaskets, violent crime and drug dealing left unaddressed, and months-long elevator shut-offs that left disabled tenants stuck on upper floors or forced to sleep in the lobby.

While many of these problems are common at residential hotels on Skid Row, AHF-managed properties were more frequently hit with code complaints and emergency calls than similar properties, reported the Times.

A former AHF employee described the living conditions at foundation properties as "inhumane."

Just yesterday, AHF settled a class action lawsuit filed by tenants of one its Los Angeles buildings. The nonprofit agreed to refund tenants a portion of their rent, hire an elevator consultant, and work with pest control experts to fight bug infestations in its buildings.

HUD told me in a statement that AHF "is part of a team that applied for these awards. The team is not only eligible, but the best qualified applicant."

One would think that a nonprofit that hadn't been accused of leaving their tenants in "inhumane" conditions would be more qualified to help tenants fight for better living conditions. According to HUD, that's not the case.

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In Seattle, Affordable Housing Mandates Mean Less Housing

Seattle's Mandatory Housing Affordability (MHA) Program, like all "inclusionary zoning" programs, is predicated on the idea that building new housing somehow makes housing less affordable.

When Seattle upzoned the city's "urban villages" to allow denser construction under the MHA program, it also required developers to offset the alleged affordability impacts of their new, larger projects by either building below-market-rate housing or paying an in-lieu affordable housing fee.

The program has been controversial from the jump. City staff warned that fewer projects would be feasible under the costs of the MHA's affordable housing mandates. The city is being sued by one Seattle homeowner over a $77,000 MHA fee that was charged when trying to add more units on her property to house her adult children.

Earlier this month, researchers Jacob Krimmel and Betty X. Wang published a new study confirming the complaints of MHA's critics.

"We find that new construction differentially declined in the upzoned, affordability-mandated areas," they write. "Developers intentionally avoided MHA-zoned areas – despite their upzoning– opting instead to build on nearby blocks without affordability requirements."

The difference in construction rates between MHA and non-MHA blocks is as much as 70 percent, they found.

This confirms past research on other cities' inclusionary zoning policies. They raise the costs of building housing, raising costs and reducing construction.

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D.C. Affordable Housing In Crisis

The vast majority of subsidized housing units in Washington, D.C., aren't making enough money to cover their operating expenses, reports BisNow. That leaves the properties themselves at the risk of foreclosure and affordable housing tenants at risk that they'll be forced to vacate their homes once they're foreclosed on. From the Bisnow story:

More than 80% of housing properties that have received D.C. funding aren't bringing in enough rental income to pay their mortgages and maintenance costs, according to the District's Department of Housing and Community Development.

And more:

The scale of the crisis is viewed as existential: 22,000 units that house 48,000 vulnerable residents are at risk of foreclosure today, according to DHCD.

Landlords are blaming the situation on a mix of higher operating costs and the housing court delays caused by D.C.'s pandemic-era eviction policies, which have allowed tenants to stay for years in their units without paying rent.

Delinquencies have risen dramatically, the report [ by Apartment and Office Building Association] concludes, because of D.C.'s pandemic-era policies that have tripled the length of the legal process required to evict nonpaying tenants.

While cases have been delayed, many tenants continue living in units without paying rent and rack up tens of thousands of dollars in debts, a massive financial hole that is difficult to escape from. They have left landlords with substantially less revenue to maintain their operations and few options to generate more income.

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Quick Links

• Kevin Erdmann on RealPage and its incoherent critics.
• California voters will decide whether to repeal state limits on local rent control policies when they vote on Prop. 33 this November. In anticipation of it passing, San Francisco politicians are already drafting an ordinance to expand rent control to units built after 1979.
• Atlanta is threatening landlords of allegedly blighted properties with eminent domain if they don't repair their buildings to the city's satisfaction.
• Britain's new Labor government wants to build new towns to combat the country's housing cost crisis, reports The New York Times.
• Minnesota YIMBYs regroup after a bruising legislative session where most of their bills went nowhere.