COMMENTARY: Law detriment to Delaware economy, affordable housing

As an elected official, I am concerned over the welfare of the city and its inhabitants. Keeping housing affordable and helping the growth of the economy to keep taxes as low has been hurt by state laws. Therefore, this sense of urgency.

Chapter 70, §7040, recognizes the imbalance between a person or persons who invest money in a home placed on someone else’s property and the property owner. In recognition that rents continued to increase unabated during the recession, the Rent Justification Act passed in 2013. At the same time, §7042 of the law guarantees a landlord a profit by shifting the cost of nearly everything to the home owner.

Fred Neil

The absurdity of seniors and low-income home owners who do not own the land can be force to pay for: repairing the property damaged in a hurricane in addition to their own home; a $2 million pay raise for a community manager; any capital improvement to enhance the community long after the home owner is gone, and pay tax increases on the property they don’t own. The home owners pay a rent increase for capital expenses as part of their base rent forever.

The request by Hometown America, Chicago, to charge homeowners of Rehoboth Bay, a $100 increase per month to rebuild the bulkheads, raises questions. Did they do their due diligence before they bought the property and put aside rent money for what they knew would need repairing? What about the corporation from whom they bought the property? Did they put money aside?

If my 2011 figures are correct, $2.4 million will be taken away from Rehoboth Bay home owners for a capital expense they have already paid for. That’s $2.4 million they can’t spend in the local Delaware economy but enhances the value of the property their homes sit on.

The price-fixing market rent provision is about the most illogical anti-free enterprising, anti-economic development section of all. It has nothing to do with free market, but relies primarily on subjective opinion, that doesn’t include vacancies, prices of houses or length of time it takes to sell a house. If an apartment building has a lot of vacancies, the owner can offer leases with lower rents, or so many months of free rent, or new appliances to attract renters. In addition, the landlord is responsible for the upkeep of the building.

Chapter 70 laws have been heavily criticized by Delaware judges with good reason. Laden with loopholes and virtually no enforcement powers, RHP Properties, Farmington Hills, Michigan, swooped in and paid $41 million for the 786 home community of Murray Manor, New Castle, and $16 million for the 223 homes in my Wild Meadows Community, Dover in 2017. They want the home owners to pay for it, but not own it.

The minimum increase rent RHP has asked for is $35 per month from Murray Manor and $40 for Wild Meadows, which adds up to $440,000 taken out of the local economy and sent to Michigan. Scared of losing their homes and/or the uncertainty of yearly rents, the seniors in my community are being enticed to sign a 10-year, 4 percent compound lease that will permanently remove that money from the local economy. If enough people agree, those who don’t could be forced to pay the same amount under the inane market rent provision.

Not only has the cost of housing taken a jump, but the local economy has taken a loss. Will our state legislators permit this to continue?

EDITOR’S NOTE: Fred Neil is a Dover city councilman representing the 3rd District.

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