Control rent or convert to condo?
April 24th, 2007 - Category: Condo, Real EstateAcross California, thousands of mobile home owners are confronting the question of whether to buy their lots. An estimated 30 California parks have begun owner-initiated conversions, and supporters and critics of the process say scores of California’s 4,822 mobile home parks could soon take the same step.
Park owners call the “condo-conversion” process a win-win situation that allows them to cash in on their real estate holdings and gives residents an affordable entry to homeownership.
Critics call it a cynical ploy that allows park owners to circumvent rent control laws.
They say park owners are exploiting what they consider to be a loophole in state law that exempts an entire park from the rent controls imposed by 102 California cities and counties after a single lot is sold to a resident. That provision, they say, puts undue pressure on the mostly senior citizens who live in mobile homes, because they must buy their lot or risk seeing their rents rise to a level that they can’t afford.
“It really is a rip-off of park residents, and the park owners know it,” said Ventura County Supervisor Steve Bennett, who is among the leaders of a statewide group of local government officials lobbying for a change in state law.
Rent control ordinance on hold
The “condo-conversion” trend hasn’t affected Stanislaus County’s 123 mobile home parks, according to county and city planning officials.
The conversions have to go through planning commission rezoning and subdivision map procedures, which can take four to six months.
Stanislaus County and its nine cities do not have a mobile home rent control ordinance, although mobile home owner advocates have been pushing for one to stem rapid increases in park rents in recent years.
The Stanislaus County Board of Supervisors recently put a proposed rent control ordinance on hold while it negotiates alternatives with Equity Lifestyles, a corporate park owner identified as the worst offender in raising rents.
Bennett, the Ventura supervisor, is supporting two bills proposed in the Legislature that would give local governments the ability to approve and place conditions upon any proposal to subdivide a mobile home park in their jurisdiction. That would include the ability to retain rent control for those residents who choose not to buy.
R. Douglas Johnson, regional representative for Western Manufactured Housing Communities Association, a mobile home park owners group, said the group would oppose legislation that would allow rent control to remain on parks that convert to condominiums.
Johnson, who has been involved in the rent control issue in Stanislaus County, said rent control doesn’t consider whether the park resident can afford the rent increases.
“We don’t think it’s fair,” he said, adding that low income residents could apply for rental assistance without rent control.
Bennett, testifying at a hearing held by the state Senate Select Committee on Mobile Homes this year, said the current law gives park owners unfair leverage.
“Imagine if I’m negotiating with you and I say, ‘You can buy at my price or watch your rents go up,’” he said. “How different would that be if I said, ‘You can buy at my price or you can continue to rent under your local rent control law’? That would be a much more fair negotiation.”
Park owners say Bennett and other critics are being alarmist.
“This is a success story, not a problem,” testified Robert Coldron, an attorney for the California Mobilehome Parkowners Alliance. “This is about options, about providing residents with the opportunity to participate in homeownership.”
While the conversions may be attractive to many mobile home owners, it doesn’t offer a solution to the problem of low income residents losing their homes to high park rents, Stanislaus County Supervisor Jim DeMartini said.
“I know that’s what I would want,” DeMartini said of the condo conversions. “But not everyone can afford it. Some can and some can’t.”
Those who are struggling to meet rent payments aren’t likely to be able to afford buying their spaces, DeMartini said.
Supporters of the conversion law say low income residents who continue to rent are protected by a statewide rent control provision that allows rents to increase annually no more than the rise in the consumer price index. Those of moderate income, however, would see their rents rise gradually over four years until reaching a market-based rate.
Economic incentives ‘too great’
In Stanislaus County, any person with an annual income of less than $31,350 or a couple with a combined income of less than $35,850 meets the state’s definition of low income. The ceiling, adjusted annually, is set at 80 percent of median household income in a county.
Bennett asserts that moderate income residents will be forced to make a difficult decision, many at an age when having to make unexpected financial decisions provokes anxiety and confusion.
“This trend has not exploded yet, but I guarantee you that if the Legislature does not fix this, it will explode,” Bennett testified before the Senate committee. “The economic incentives are simply too great for park owners not to go this way.”
Supporters of condo conversions say their model would be more beneficial to mobile home owners. By owning the home and the space it sits upon, owners would reap the appreciation in home and real estate values.
Critics of the current process acknowledge that conversions can be beneficial and even desirable for residents when conducted under the right rules: if park residents have a say in whether the conversion happens and if rent control remains in place for those who choose not to buy.
Information from: www.modbee.com
