BILL ANALYSIS
SENATE JUDICIARY COMMITTEE
Senator Ellen M. Corbett, Chair
2007-2008 Regular Session
AB 1542 A
Assemblymember Evans B
As Amended June 5, 2007
Hearing Date: July 10, 2007 1
Government Code 5
CS:jd 4
2
SUBJECT
Mobilehome Park Conversions: Rent control of unpurchased
converted spaces
DESCRIPTION
This bill would require, notwithstanding a conversion of a
mobilehome park, that local rent control measures remain
applicable to any rental of a mobilehome space within the
park.
The current statutory controls on rent increases on a park
space in a converted mobilehome park would remain
applicable to the rental of the space by a non-purchasing
tenant in absence of any local rent control.
BACKGROUND
The Subdivision Map Act (hereinafter Map Act) governs the
division of real property into parcels or condominiums and
requires that a subdivider file a tentative map for
approval by a local agency, which may, in its discretion
impose conditions on the conversion. However, when a
subdivider of a mobilehome park wishes to convert a park to
resident ownership, there is an exception under the Map Act
that limits the scope of the local agency's hearing and
provides a separate process for the subdivider to follow.
The process of converting a rental mobilehome park to
resident ownership is a relatively new phenomenon. Prior
to 1996, local jurisdictions were authorized to impose
(more)
AB 1542 (Evans)
Page 2 of ?
their own conditions on proposed conversions of mobilehome
parks, yet many residents and park owners argued that it
made conversions extremely expensive and in some cases
impossible. However, the entire purpose of converting a
mobilehome park for resident ownership is to afford a
cost-effective way for residents to own the space on which
their mobilehomes are sited, but a workable process was not
afforded until recently.
In response to concerns raised by residents, SB 310
(Craven, Ch. 256, Stats. 1995) was passed by the
Legislature to amend the Map Act and provide a process to
ensure that subdividers of mobilehome parks could give
residents the opportunity to purchase a space in the park
without burdensome conditions imposed by local government
agencies. SB 310 also provided statutory rent protections
for residents who could not purchase their spaces and
therefore allowed them to remain as renters. With that,
the law also prescribed a formula for how rents for
non-purchasing residents would be calculated.
Despite the well intended process afforded to residents,
which has led to more resident owned parks, another new
phenomenon was reported as a result of the law created by
SB 310. As discussed in El Dorado Palm Springs, Ltd., v.
City of Palm Springs , 96 Cal.App.4th 1153 (2002), various
local government agencies and residents have shown that at
least one park owner has engaged in what was described as a
"sham" conversion, which occurs when a park owner uses the
process to either price the lots out of the reach of the
residents' purchasing limits or sells at least one lot in
order to escape any existing local rent control measures.
( Id ., at 1165.)
The problem with a sham conversion, among many, is that it
is essentially legal under existing law. Following the El
Dorado decision, park owners reportedly began using the
exception provided by SB 310 to engage in "sham"
conversions, but primarily to convert their parks to avoid
local rent control measures, and obtain increased rents
from their tenants as allowed under the conversion law.
AB 1542 intends to close the loophole which has allowed
other park owners to use the current mobilehome park
conversion process in order to avoid local rent control
AB 1542 (Evans)
Page 3 of ?
measures. In addition, the bill would remove the current
limitations placed on local government agencies when they
conduct a hearing in regards to a proposed mobilehome park
conversion for resident ownership.
CHANGES TO EXISTING LAW
Existing law requires that at the time of filing a
tentative or parcel map for a subdivision to be created
from the conversion of a rental mobilehome park to resident
ownership, the subdivider must avoid the economic
displacement of all nonpurchasing residents by: 1) offering
each tenant an option to either purchase his or her
subdivided space or to continue residency as a tenant; 2)
filing a report on the impact the conversion will have upon
the residents of the mobilehome park and make a copy of the
report available to each resident; 3) obtaining a survey of
support from the residents of the mobilehome park, as
specified; 4) subjecting the proposed conversion to a
limited hearing by a local legislative body or advisory
agency which will approve, conditionally approve, or
disapprove the map; and 5) complying with statutory rent
protections for nonpurchasing residents. (Government Code
Section 66427.5.)
Existing law limits the scope of the hearing conducted by
the local legislative body to the issue of compliance with
Government Code Section 66427.5. (Government Code Section
66427.5(e).)
Existing law requires the subdivider to avoid the economic
displacement of nonpurchasing residents in accordance with
the following: 1) as to nonpurchasing residents who are not
lower income households, as defined in Section 50079.5 of
the Health and Safety Code, the monthly rent, including any
applicable fees or charges for use of any preconversion
amenities, may increase from the preconversion rent to
market levels, as defined in an appraisal conducted in
accordance with nationally recognized professional
appraisal standards, in equal annual increases over a
four-year period; and 2) as to nonpurchasing residents who
are lower income households, as defined, the monthly rent,
including any applicable fees for use of any preconversion
amenities, may increase from the preconversion rent by an
amount equal to the average monthly increase in rent in the
four years immediately preceding the conversion, except
AB 1542 (Evans)
Page 4 of ?
that in no event shall monthly rent be increased by an
amount greater than the average monthly percentage increase
in the Consumer Price Index for the recently reported
period.
This bill would remove the limitation on the scope of the
hearing.
This bill would require, notwithstanding a conversion of a
mobilehome park, that local rent control measures remain
applicable to any rental of a mobilehome space within the
park.
The existing statutory rent control measures would continue
to apply to any rental of a mobilehome space for
nonpurchasing residents, in the absence of any local rent
control.
COMMENT
1. Need for the bill
According to the author:
Mobilehomes have traditionally provided affordable
housing to people that would otherwise be priced out
of any type of ownership. [Therefore] local rent
control ordinances keep mobilehomes at an affordable
rate for seniors and working families who are on a
fixed income.
Current law allows a mobilehome park to be subdivided
into residential ownership. The original law was
written in order to give the residents of mobilehome
parks an opportunity to buy the land they live on.
Serious unintended consequences have surfaced (as a
result). For instance, if one parcel in a mobilehome
park is sold, the four year phase-out of rent control
begins. This means that a parcel that is rented for
$600 today may be rented for $1000 to $1500 in a very
short four years. The end result is that the
affordable housing stock will be severely compromised.
Seniors and working families will be pushed from their
homes.
AB 1542 (Evans)
Page 5 of ?
In the past few years, there has been a surge in
applications being filed by park owners who want to
convert their parks from rental mobilehomes into
residential ownership. This is often being done over
the protests of local government and residents of the
parks, who have no recourse to stop the conversion.
AB 1542 does not ban conversions. Instead, it strikes
a balance between an outright ban on conversions, and
no regulation at all.
2. Senate Select Committee on Manufactured Homes and
Communities
Informational Hearing and subsequent transcript/report
provides valuable insight on the mobilehome conversion
process as reported by residents, park owners, attorneys,
advocates, and staff
a. Staff synopsis of issue
Within the last few years, a growing number of
mobilehome park owners have been utilizing a special
provision of the state's Subdivision Map Act to convert
their parks to so-called resident owned condominiums or
subdivisions, which thereby exempts the parks from
local mobilehome rent control. Condominium interests in
mobilehome park spaces must be offered to renting
homeowners, and low-income homeowners who cannot afford
to buy can continue to rent their spaces under the
statute which limits annual rent increases, including
"pre-conversion" pass-through fees, to the Consumer
Price Index (CPI). However, non-purchasing residents
who are not low income no longer have rent control
protection upon the conversion and may have their rents
increased to higher so-called "market levels" over four
years.
b. Approximately 700,000 Californian's live in mobilehome
parks
?In California, there are 4,822 mobilehome parks and
manufactured housing communities listed on the
California Department of Housing and Community
Development's Mobilehome & RV Park website, not
AB 1542 (Evans)
Page 6 of ?
including parks owned by public entities. The Select
Committee conservatively estimates there are about
700,000 residents living in these parks. In the vast
majority of parks, mobilehome residents own their
homes, but rent spaces on which their homes are
installed from the park on a month-to-month or
long-term lease arrangement. Most of the 4,822 listed
parks are owned by private investor groups, operators,
or owners, but an estimated 150 parks are owned by
resident organizations or by non-profit organizations.
c. A minority of jurisdictions provide
mobilehome park rent control
Many mobilehome owners are long-time park residents,
often seniors on low or moderate incomes. Since 1997,
due to complaints from residents in some parks about
high rent increases, and local governments' concerns
about the need to preserve affordable housing in their
communities to meet general plan requirements, 102
local agencies (mostly cities), according to figures
compiled by the Select Committee from various sources,
have enacted some form of mobilehome park rent control
in California.
The Select Committee report states, "[p]ark residents
may feel rent control is the only protection they have
from economic eviction, while park owners believe it
inhibits the profitability of their investment and
resale of their parks. There have been a number of
legislative and legal battles over the years [as a
result]?In 1996 park owners campaigned to pass
Proposition 199, a statewide ballot initiative designed
to phase out mobilehome park rent control, but the
measure was rejected by the voters. Some park owners
have successfully sued local governments over their
rent ordinances, but in other cases the local
governments have prevailed or the issue has been
settled.
?As park rents climb in non-rent control jurisdictions,
the rent control controversy continues."
d. Conversions to resident-owned condo parks should not
be prohibited, nor should abuse of the process be
AB 1542 (Evans)
Page 7 of ?
ignored
Based on the hundreds of letters, news articles,
testimony made for and against mobilehome park
conversions taken from the informational hearing, and
other related information, the Select Committee
concluded:
?.as a matter of policy, it would not be desirable to
prohibit the conversion of mobilehome parks to
resident-owned condo parks, as some opponents of
conversion may wish to achieve, but it would also not
be desirable to ignore the possibility of abuse of
the process, which proponents of conversion may
minimize or ignore.
1. Opponents claim that the bill will inhibit resident
ownership and/or
discourage mobilehome park conversions
According to opponents, the California Association of
Realtors and the Western
Manufactured Housing Communities Association:
AB 1542 will stifle resident ownership of mobilehome
parks; will take a uniform, fair, state directed
process and create local confusion regarding how to
address the issue of subdividing mobilehome parks; and
with proposed conversions occurring predominantly in
locations in which strict rent control exists, WMA
doesn't believe that the local governments will be
able to act in an impartial and objective manner.
(Letter of Opposition from the Western Manufactured
Housing Communities Association, dated July 5, 2007.)
Local controls placed upon mobilehome park conversions
could delay the process and discourage owners and
residents from converting their parks to resident
owned.
AB 1542 (Evans)
Page 8 of ?
Existing law provides lifetime protections for
low-income residents who do not want to purchase their
units, as well as a four-year phase-in for moderate
income residents to full market space rent. This bill
would remove those statewide provisions for
municipalities with locally imposed rent controls.
Often times, these local rent control provisions do
not permit vacancy decontrol and create a hostile
environment for park managers to operate and earn
enough revenue to maintain their properties and
receive a fair return on their investment. While local
governments may want to preserve mobilehome parks,
this bill will have the net effect of discouraging
investment in them. (Letter of Opposition from the
California Association of Realtors, dated July 5,
2007.)
In short, opponents do not acknowledge the abuses of the
current law which would allow "sham" conversions and
instead argue against the imposition of local rent
controls on park spaces.
2. Proponents argue that AB 1542 will prevent park
owners from exploiting the
current law, while continuing to promote resident
ownership
According to proponents, numerous cities and mobilehome
owners:
AB 1542 will close a loophole in existing
condo-conversion law that allows for mobilehome park
owners to subdivide and sell individual lots without
being subject to local government approval. While in
theory this exemption was meant to make it easier for
Californian's to purchase the land they live on, in
practice it has had negative unintended consequences on
mobilehome residents across the state.
Under current statute, when any one parcel of land in a
mobilehome park is sold, it triggers a phase-out of any
local rent control ordinance for the rest of the
mobilehome park residents. During a time when
affordable housing in California is difficult to find,
this loophole must be closed to ensure that this type
AB 1542 (Evans)
Page 9 of ?
of affordable housing is available to seniors and
working families statewide. (Letter of Support from
the California Association of Counties, dated July 6,
2007.)
AB 1542 does not preclude conversions of mobilehome
parks to tenant ownership. It simply allows communities
that have chosen to adopt local ordinances to retain
those protections for those tenants who choose not to
purchase?.
Lack of affordable housing continues to plague the
state, and it is especially acute in those areas that
have seen huge increases in the price of
housing?[Therefore] AB 1542 allows local communities to
preserve local discretion in retaining affordable
housing stock. (Letter of Support from the sponsor,
City of Santa Rosa, dated May 30, 2007.)
Support: State Building and Construction Trades Council of
California;
California State Association of Counties (CSAC);
League of California
Cities; Golden State Manufactured-Home Owners
League, Inc.
(GSMOL); Western Center on Law & Poverty; American
Planning Association-California Chapter; City of
Carson; City of Scotts Valley; City of Winters;
City of Cloverdale; City of Cotati; City of Hayward;
County of Santa Cruz
Opposition: California Association of Realtors; Western
Manufactured Housing
Communities Association; California Mobilehome
Parkowners Alliance (WMA), California Mobilehome
Parkowners Alliance (CMPA)
HISTORY
Source: City and County of Santa Rosa
Related Pending Legislation: SB 900 (Corbett) would
eliminate an existing
condo-conversion law that allows for
mobilehome park owners to subdivide
AB 1542 (Evans)
Page 10 of ?
and sell individual lots without
being subject to local government
approval. SB 900 is pending before
the Assembly Housing and Community
Development Committee.
SB 981(Padilla) requires, among other
things, the management of a
mobilehome park to keep existing
physical improvements of common
facilities of a park in good working
order and condition through rents and
not other fees. This bill is pending
on the Assembly Floor.
AB 1309 (Calderon) would establish,
among other things, vacancy decontrol
for mobilehomes sold in mobilehome
parks in jurisdictions with local
rent control ordinances. AB 1309 is
pending before Assembly Judiciary
Committee.
Prior Legislation: AB 930 (Keely, Ch. 1143, Stats.
2002), required that a proposal to
subdivide a mobilehome park into
resident ownership must include
survey results of the residents
indicating their support for the
conversion.
SB 310 (Craven, Ch.256, Stats. 1995)
established, among other things, the
process for converting a mobilehome
park for resident ownership.
Prior Vote:Assembly Housing and Community Development
Committee (Ayes 5, Noes 2)
Assembly Local Government Committee (Ayes 4, Noes
2)
Assembly Appropriations Committee (Ayes 10, Noes
5)
Assembly Floor (Ayes 41, Noes 32)
Senate Transportation and Housing Committee (Ayes
6, Noes 2)
AB 1542 (Evans)
Page 11 of ?
**************