Code Games 2.0

Happy Tuesday, and welcome to another edition of Rent Free. This week’s newsletter includes stories on:

• The Trump administration’s latest strategy for boosting manufactured housing construction.
• Anti-pot activists’ use of California’s environmental review law to stop new cannabis facilities.
• Yet another data center backlash in the heart of data center country.

Building codes for traditional site-built housing are typically set by states or local governments. Manufactured housing, which is built in off-site factories and then delivered as a completed unit to its final destination, is controlled by building codes set by the U.S. Department of Housing and Urban Development (HUD).

One major piece of direct deregulation in the 21st Century Road to Housing Act, which became law in July, was the elimination of the HUD code’s requirement that manufactured housing sit on a permanent steel chassis.

Wonks debate just how burdensome this rule was and how responsible it was for causing a major decline in the production of manufactured housing.

Regardless, no one believes that the requirement did anything but raise costs for what was once a major source of affordable housing.

While Congress’ new housing law officially eliminates the chassis requirement, actually implementing this deregulatory change will require a number of additional federal rules and further local and state deregulation.

The Trump administration got the ball rolling on the former last week, when HUD unveiled its “Next Generation Manufactured Housing Action Plan.”

It announced HUD’s plan to begin crafting new construction safety and installation standards for now-permitted chassisless manufactured housing. The Road to Housing Act requires this rule change, but does not set a deadline for when it needs to be done.

Additionally, HUD announced its plan to begin rulemaking on creating new energy efficiency standards for manufactured housing, as required by the new housing law. This must be completed by July 2027.

That’s the same deadline for states to submit certifications to the federal government that they’ve changed their own regulations on manufactured housing to conform to the new federal rules that no longer require a chassis.

These rule changes will all take time. We can at least be sure they will happen, given that the changes are required by the new housing law.

A potential bottleneck, as always, will be local zoning codes that are not directly impacted by Congress’ reforms.

Many localities still define manufactured housing as a home that’s built with a permanent chassis. That language could end up blocking manufactured homes constructed without a chassis under the new standards.

Another plank of HUD’s action plan is to provide “stakeholders” with information on zoning for manufactured housing. The 21st Century Road to Housing Act also creates various financial incentives for localities to update their zoning codes to allow for more housing.

That is to say, carrots can still be brought to bear to ensure that local deregulation happens. But voluntary action on the part of localities or additional preemption of local zoning laws by states will still be required for federal chassis reform to be fully realized.

Recreational marijuana was legalized by California voters a decade ago. The rule changes needed to allow entrepreneurs to grow and sell the stuff are still a work in progress.

Back in August, after five years of work, San Diego County at last certified its environmental review of zoning changes that would dictate where commercial cannabusinesses like dispensaries and grow operations could set up shop in unincorporated areas.

That certification has merely led to another roadblock.

In September, the group No Skunk Butts filed a lawsuit under the California Environmental Quality Act (CEQA) to block implementation of the new zoning rules.

CEQA requires local governments to study the environmental impacts of discretionary actions they undertake, including zoning changes. Third parties are empowered by the law to sue if they believe a locality did not conduct a thorough enough review of a zoning change’s environmental impacts.

As reported by Village News, No Skunk Butts alleges in its lawsuit that the county did not do enough to study cannabusinesses’ potential impacts on water and air quality, as well as noise and odor.

This is hardly the first time that CEQA has been used to hamstring the expansion of California’s legal cannabis industry. Local activists have frequently challenged individual permits for cannabusinesses and, as in San Diego County’s case, cannabis zoning and licensing regimes.

In 2017, the California Legislature attempted to forestall some of this litigation by allowing localities to pass cannabis regulatory regimes without going through CEQA. But that reform merely shifted CEQA onto individual businesses, who’d have to do their own environmental analysis when applying for permits.

Despite legalization, California’s heavy-handed regulation of the cannabis industry has enabled a large marijuana black market to persist. CEQA is a major, if underdiscussed, part of that story.

Last week, the Board of Supervisors of Fauquier County, Virginia, passed a raft of new restrictions on data center construction.

The new rules eliminate by-right zoning for data centers, meaning new projects will be required to obtain special, discretionary permits. The reforms also limit data center construction to a single zone within the county, reports InsideNoVa.

Prior to the changes, data centers were allowed to be built by right in business parks countywide.

The country is in the middle of a massive backlash against data center construction. It’s thus not inherently surprising that a county government would pass new rules on data center construction.

It is conspicuous that Fauquier County would do so. The jurisdiction sits just to the south of Loudoun County, home to the world’s largest concentration of data centers. (It’s been nicknamed “data center alley.”)

Data centers have been a massive economic driver in Northern Virginia and a massive fiscal boon to the Loudoun County government, which has taken in so much revenue from these facilities that it’s been able to cut property taxes on homeowners.

Loudoun County itself recently eliminated by-right zoning for data centers, which it once regulated like office spaces.

It doesn’t bode well for the industry if jurisdictions that once welcomed data centers with open arms, and profited handsomely from them, are moving to restrict new facilities.

• Tim Carney on the surprising walkability of America’s OG car-oriented suburb.
• The strange socialist-libertarian fusion that is Vancouver, Canada’s First Nation housing developments.
• Texas landowners in the way of President Donald Trump’s border wall fight the federal government’s eminent domain efforts.
• A British charitable foundation calls on the government to use rent control to reduce the cost of affordable housing subsidies. Road to Serfdom, anyone?