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)



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          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  
                                                                       




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          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  
                                                                       




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          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. 
                                                                       




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               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  
                                                                       




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              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  
                                                                       




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              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. 

                                                                       




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               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  
                                                                       




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              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  
                                                                       




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                                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)
                                                                       




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