(Im)mobile homes: Part 2, laws and court cases
[Continued from yesterday’s Part 1.]
In yesterday’s Part 1, we saw that mobile home owners lack many if not most of the critical benefits of home ownership, and are economically much more like tenant-at-will renters. In an effort to give these homeowners some standing, many states have enacted consumer-protection laws aimed at giving home owners adequate disclosure and a fair economic shake. Some states and cities have gone further, capping the land owner’s return via mobile home park rent control.
The legitimacy of judicial control over mobile home park rents has reached the Supreme Court, with the famous 1992 decision in Yee v. City of Escondido, in which the Court upheld the city’s ordinance:
Under the California Mobilehome Residency Law, the … state law does not limit the rent the park owner may charge, but Escondido has a rent control ordinance setting mobile home rents back to their 1986 levels and prohibiting rent increases without the City Council’s approval. The Superior Court dismissed lawsuits filed by petitioners and others challenging the ordinance, rejecting the argument that the ordinance effected a physical taking by depriving park owners of all use and occupancy of their property and granting to their tenants, and their tenants’ successors, the right to physically permanently occupy and use the property. The Court of Appeal affirmed.
In Yee’s case, the Court held:
1. The rent control ordinance does not authorize an unwanted physical occupation of petitioners’ property and thus does not amount to a per se taking.
[…]
Here, petitioners have voluntarily rented their land to mobile home owners and are not required to continue to do so by either the City or the State.
[…]
Any transfer of wealth from park owners to incumbent mobile home owners in the form of sub market rent does not itself convert regulation into physical invasion. Additional contentions made by petitioners–that the ordinance benefits current mobile home owners but not future owners, who must purchase the homes at premiums resulting from the homes’ increased value, and that the ordinance deprives petitioners of the ability to choose their incoming tenants–might have some bearing on whether the ordinance causes a regulatory taking, but have nothing to do with whether it causes a physical taking.
(Early regulatory-takings jurisprudence found a taking only when there is physical adverse possession; more recent cases have recognized that economic confiscation by regulation can be a compensable taking.)
As AHI blog readers know, as a general proposition I loathe rent control, which is heroin for urban neighborhoods, is often grossly unfair, and has lots of unpleasant side effects.
For one thing, it ruins your political vision
Nevertheless, if there is a policy case for rent regulation, it must be in the context of mobile homes. As the Bee quotes the Modesto County committee:
People in a handful of parks are being forced from their homes by rents that have risen as much as $300 a month in the past three years.
Several committee members describe themselves as conservative and generally opposed to rent control. But in the case of mobile home parks, they see no other solution.
“I feel like washing my mouth out with soap when I talk about it,” said county Supervisor Jim DeMartini, a member of the committee. As chairman of the county’s Republican Party, DeMartini said he hates the idea of another layer of government regulation.
Have you been saying ‘rent control’ again, young man?
So does Ken Lane, a Ceres city councilman and another committee member. “I don’t like to get involved in property rights,” he said.
But the committee reached a consensus at a meeting Wednesday that a mobile home park rent-control ordinance is necessary.
It is impossible not to sympathize with the home owners, who thought they bought security and equity buildup and in fact have neither:
“I got 25 phone calls and 200 to 300 letters on this,” said Modesto City Councilman Will O’Bryant. “I hear these cases almost every day. So many people are so close to being homeless. It’s so sad. It’s kind of a bleak situation. The faster we do it, the better it will be.”
Asking the law lords to act quickly?
Public and political sympathy is relevant especially when observers reach the conclusion that landlords are exploiting their unequal power relationships:
According to Tim Sheahan, president of the Golden State Manufactured Home Owners’ League, Zell’s company is leading the nationwide trend of higher rental rates in manufactured home parks.
“It’s not all Sam Zell, but he’s the axis of it,” said Sheahan, who resides in a manufactured home in
Repeated calls to Equity International headquarters in
A typical Equity method after a park purchase, according to Sheahan, has been to raise rents high enough to force tenants to leave.
In other words, the economics can be twisted to deprive the mobile home owner with security of tenure. If the landlord no longer wants to be in the mobile home operator business, it can simply crank up the rent until the tenant have to crack:
Crank up the rent, fool!
ELS then takes over the property, razes the existing building, then constructs and sells its own housing.
If true, it is a rather direct and economically brutal, if not especially honorable, means of accelerating redevelopment of land in appreciating communities.
A look at the company Web site seems to underscore this strategy. On the site mhchomes.com, ELS markets its manufactured home parks as resort cottages or resort homes. The premise of placing your own manufactured home in one of their parks is not mentioned.
Banding together by owners of mobile homes is increasingly common, as reflected in the numerous state-level associations:
Terry Nelson, president of the Illinois Manufactured Home Owners’ Association, has lived in the same park near
Several years ago, 25 members of her association purchased one share apiece of ELS stock as a way to gain access and have their voices heard at the company’s annual shareholders’ meeting.
Through that experience and through numerous contacts with members of her organization, Nelson believes she’s pinpointed ELS’ growth strategy.
“Sam Zell targets seniors in many states,” Nelson said. “You have to be 55 or older to move into many of these communities. They run credit checks, so they know exactly what their income is. Then, by raising the rental rates, they force these fixed-income seniors out.”
If a locality concludes that mobile homes represent an important local affordable housing resource, then the locality has several tools at its disposal, starting with eminent domain acquisition. That costs money, which the government factory always spends second, only after trying government’s first product, laws:
A draft ordinance is being prepared by city and county attorneys for consideration in January.
Many of the 123 parks in the county have been “mom and pop” operations, said Sally Studer, an organizer of the Stanislaus Mobilehome Owners-Advocates group.
We’re happy the rent’s low!
But they are being sold to investors and corporations, she said, who aren’t as concerned about what happens to the residents.
We run them … run these little mazes until they die.
“Several mobile home parks are for sale in the county now. They are buying them for a big profit and no maintenance,” she said.
The other approach, tried by poor residents throughout the world, is to force the judicial issue:
Sharon Burch, who lives in Colony Park Estates in Ceres, has organized residents there to refuse to pay the most recent rent increase.
Burch’s rent went up $50 recently, bringing the rent and utility payment to $606.75. The rent has gone up $240 a month over the past three years, she said.
If so, that’s 18% annual increases, very steep.
Hey, the rents are totally on the level!
“We aren’t giving them one dime. They are not going to get it,” Burch said.
Brave words.
Rent strike!
Burch’s husband, Merle, has congestive heart failure, and is on oxygen. He has had four open heart surgeries in the last several years. Burch has her own health problems, with hepatitis C and a stroke.
“I can’t pay any more either, I just can’t,” she said. “I can’t sell my home. I tried to sell my house for $8,000; it was on the market a year. People wouldn’t pay the ridiculous rent.”
Again, the land rent swallows all the potential appreciation, leaving the mobile home owner with a wasting asset.
Coralwood and Colony Park Estates are owned by Equity Lifestyles, a Chicago-based company [founded by Mr. Zell — Ed.] that owns 294 mobile home parks across the country. The company also owns Quail Meadows mobile home park in Riverbank.
While Equity Lifestyles has been the most aggressive in the county in raising rents, residents of other parks say they are starting to see higher rent hikes as well.
The owners’ basis for raising rents?
“You look at their rents versus apartment rents, it’s way below market,” said Sheila Dey, executive director of the Western Manufactured Housing Communities Association in
O, the burdens of mobile home park ownership
Mobile home parks fall under a separate set of laws in California governing things such as the rental options that must be offered to tenants.
“You have a yard, space, a clubhouse. It’s a very good value for the money,” Dey said.
Some mobile home park rents have risen far faster than apartment rents in the last six years. Average apartment rents in
Should the mobile home park total occupancy costs be compared with those in an apartment?
Chelu Travieso, vice president of California Mobile Home Park Owners Alliance, said the rent increases may simply be owners trying to bring rents up to reflect growing property values.
“As housing cost is rising, the price of land is going up, and owners try to capture the value of their land,” Travieso said. “Problems arise when people say, ‘I’ve been here 25 years, I was paying $200 a month and now I’m paying $400 a month.’”
Are such comparisons fair when the mobile home occupants bought their houses?
But mobile home park residents say the rise has been much more dramatic than that.
“They justify it as rent comparable for the area, and for shareholders,” Judy Lawrence said. “F— the shareholders. They are taking grandparents out. They will have to drag me out by the hair.”
“The reason for me moving here was independent living. There was aluminum siding, no painting, the kids don’t have to come and help me,” she said. “Now, I’m trying to find a way to get out from under it. I just want to get out.”
