Mobile homes are housing units installed on a permanent foundation owned by a la
ID: 1224816 • Letter: M
Question
Mobile homes are housing units installed on a permanent foundation owned by a landlord. Although a resident owns the home, she rents the foundation from the landlord. In theory, owners of mobile homes can transfer their home to a different foundation if the rent becomes too steep, but uninstalling, transporting, and reinstalling the mobile home is usually prohibitively expensive. This “lock-in” effect encourages state legislatures to create rent controls for mobile home foundations. Which statement is a plausible, unintended consequence of these laws?
A) The price of mobile homes is artificially low.
B) There are few new mobile home foundations constructed.
C) The price of transporting mobile homes is artificially high.
D) There are few new buyers of mobile homes
Explanation / Answer
The ultimate effect will be that there will be few new mobile home foundations constructed. The reason may be lower than market rate of rent. The rent control will lead to lesser homes now available in the market. The effect will be excess demand of mobile housing in relation to supply. The rise in rent can only reduce the excess demand gap, but due to rent controls the landlord cannot raise the rent. So the landlord will try not to or construct few new dwelling units foundation. The correct option therefore will be "there are few new mobile home foundations constructed".