Housing groups, small businesses say higher taxes causing stress

Representatives of the apartment industry, manufactured housing and other small businesses told legislators Dec. 2 that recent property tax hikes are going to hurt the rental community, primarily because apartments and manufactured home parks are charged commercial rates, not residential.

“I’m willing to say just about every mobile home in New Castle County is mis-appraised, mis-assessed,” said Jerome Heisler of the First State Manufactured Housing Association.

Taxes for many are going up more than $600 per year, he said – a steep increase for many making less than $35,000 per year.

“That’s a pretty substantial ask,” he said.

Apartment building owners echoed concerns over commercial rates, saying property tax increases and other costs cannot be absorbed by them and increases will be passed on to renters, through higher rents.

Kevin Wolfgang, president of apartment group Evergreen and representing about 35,000 rental units under the Delaware Apartment Association, about half of the state total, said residential rates, not commercial rates should apply.

“We are committed to affordable housing … and you’re making it incredibly difficult for us to maintain that commitment,” Wolfgang said. “This is a crisis, a critical moment where the housing stock is in real jeopardy, and we need action.”

Small businesses such as child care and restaurants will be particularly affected by the higher commercial property tax rates, speakers said.

Carrie Leishman, president and CEO of the Delaware Restaurant Association, said the increases are not good for business. Costs overall are increasing, from healthcare to utilities to supplies.

“We are an industry with razor-thin profit margins,” she said. 

During questioning by legislators, Rep. Claire Snyder-Hall, D-Rehoboth Beach, asked property owners how much of their profit is going to pay property taxes.

For an affordable housing complex near Wilmington, Deborah Burgos, chief operating officer of Evergreen Apartment Group and member of the Delaware Apartment Association, said there is not enough profit to pay for that, citing a facility that is now in the red.

For other apartment units not considered affordable, Wolfgang said older buildings are requiring capital investment that eats into their profit.

“We’ve had historic increases in expenses,” he said of inflation and insurance increases. “If it was just taxes and there were no other line items to worry about, OK, but this is sort of a straw that is breaking the camel’s back.”

If they raise rents too high, he said, renters move out.

Manufactured home communities have similar slim profit margins, but no one would commit to whether housing groups have a 7% profit margin.

“You’re making it sound like there is no profit to be had for landlords, which is hard to believe because otherwise why are you in the business?” Snyder-Hall said.

Snyder-Hall also questioned the number of manufactured homes at the beach that are second homes. Heisler said Pot-Nets homes are rising in price as more people move to the area from out of state.

Sen. Russ Huxtable, D-Lewes, asked for restaurant data for Sussex County, and asked whether any properties that were underassessed have appealed. The answer was no.

“That’s very important to know because that burden then gets shifted to the people who did not get underassessed,” he said.

Huxtable also asked how many apartments in the beach area are used as second properties, but the panel did not have information to share on that.

The next hearing will feature representatives from Delaware school districts, and will be held at 9 a.m., Monday, Dec. 15.