BILL ANALYSIS ------------------------------------------------------------ |SENATE RULES COMMITTEE | AB 1542| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: AB 1542 Author: Evans (D), et al Amended: 6/5/07 in Assembly Vote: 21 SENATE TRANSPORTATION & HOUSING COMMITTEE : 6-2, 7/3/07 AYES: Lowenthal, Cedillo, Corbett, Kehoe, Simitian, Torlakson NOES: McClintock, Ashburn NO VOTE RECORDED: Dutton, Harman, Yee SENATE JUDICIARY COMMITTEE : 3-2, 7/10/07 AYES: Corbett, Kuehl, Steinberg NOES: Harman, Ackerman SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8 ASSEMBLY FLOOR : 41-32, 6/7/07 - See last page for vote SUBJECT : Mobilehome park conversions SOURCE : City of Santa Rosa County of Sonoma DIGEST : This bill maintains local rent control on lots that are not purchased by residents within a mobilehome park that converts to resident ownership. ANALYSIS : The Subdivision Map Act (Act) governs the division of real property into parcels or condominiums and CONTINUED AB 1542 Page 2 requires that a subdivider file a tentative map for approval by a local agency. Under the Act, a subdivider of a mobilehome park who wishes to convert that park to another use must file a tentative or parcel map and must also file a report on the impact of the conversion on residents of the park. This report must specifically address the availability of adequate replacement space in mobilehome parks. When approving the map, the local agency may require that the subdivider take steps to mitigate any adverse impacts of the conversion on the displaced residents of the park. Existing law creates an exemption to the Act for conversions of mobilehome parks to resident ownership. Under this exemption (Section 66427.5 of the Government Code), a subdivider of a mobilehome park submits a tentative or parcel map to the local agency for review and approval. This exemption requires the subdivider to avoid the economic displacement of non-purchasing residents by: 1. Offering each existing tenant an option to buy his/her lot. 2. Filing a report on the impact of the conversion on residents and making that report available to residents of the park. 3. Surveying residents about their support for the conversion. 4. Submitting to a local agency hearing solely on the subdivider's compliance with the law requiring avoidance of economic displacement of non-purchasing residents. 5. Limiting rent increases of non-purchasing, low-income residents by an amount equal to the average monthly increase in rent in the four years immediately preceding the conversion, except that in no case shall the increase be greater than the increase in the Consumer Price Index. 6. Limiting rent increases on those non-purchasing residents who are not low-income to market-rate levels through equal annual increases spread over a four-year AB 1542 Page 3 period. This bill: 1. Permits the local government to review matters beyond compliance with the law on avoiding the economic displacement of residents. 2. Provides that only in the absence of local rent control shall the limits on rent increases that may be charged non-purchasing residents apply (i.e., those in #5 and #6 above). 3. Maintains local rent control measures on spaces that are not purchased when a mobilehome park converts to resident ownership. Background The residents of California's nearly 5,000 mobilehome parks typically own their mobilehomes and rent the spaces in mobilehome parks on which the homes are placed. Mobilehomes, once placed in a park, are difficult to relocate. Because of this, many local governments impose mobilehome park space rent controls to limit the amount that rent on a space can increase each year. As the value of the land under a mobilehome park increases, rents for those spaces may not increase commensurately in local communities with rent control ordinances. For various reasons, mobilehome park residents in some parks have decided to join together and buy the park or their individual spaces within it. This is referred to as a conversion to resident ownership. Historically, when mobilehome parks have converted to resident ownership, the residents have initiated the process and enlisted the help of a nonprofit organization. The nonprofit organization typically buys the entire park and sells lots to individual owners. Until 1996, local jurisdictions imposed their own conditions on proposed subdivisions of mobilehome parks into individual, resident-owned lots. In the 1990s, some AB 1542 Page 4 argued that local governments sometimes imposed conditions under the Act that prevented the conversion of a park into resident ownership. For example, a local government might condition the map on the building of sidewalks, curbs, and gutters on the streets in the mobilehome park. In 1995, then Senator Craven introduced a bill to address this issue. SB 310 (Craven), Chapter 256, Statutes of 1995, amended the Act to ensure that subdividers of mobilehome parks gave residents the opportunity to purchase a space in the park and to avoid being displaced if they could not afford to purchase a space. Under this law, residents who cannot purchase their spaces are allowed to remain as renters, and the bill prescribed a formula for how rents for non-purchasing residents would be calculated. That formula raises rents to market levels over a four-year period, except those renters that are low-income may only have their rents increased by the average monthly increase in rent in the four years immediately preceding the conversion, but in no case by more than an amount equal to increases in the Consumer Price Index. In 1993, the owner of the El Dorado Mobile Country Club, a 377-space mobilehome park in Palm Springs, filed a tentative subdivision map as a first step to converting the park to resident ownership by existing residents or other persons. The Palm Springs City Council, concerned that this was a "sham" conversion to circumvent its local rent control ordinance, approved the map subject to several conditions, including that the effective map date would be the date escrow closed on 120 lots in the park. Under this condition, the park would cease to be subject to the city's mobilehome space rent control ordinance when 120 of its lots sold. After that date, the formula for mitigating economic displacement under SB 310 would be applicable. This would prevent circumventing the rent control ordinance by just selling a few lots (i.e., a "sham" conversion). El Dorado's owner filed a lawsuit in superior court to compel approval of the subdivision map without the conditions, including the condition delaying the effective AB 1542 Page 5 date of the map. El Dorado's owner claimed that the effective date of conversion was when one lot was sold, and the city council did not have the power to impose more stringent requirements. The lower court denied the park owner's petition, but in 2002, the 4th District Court of Appeal reversed that decision ruling in favor of the park owner in El Dorado Palm Springs, Ltd., v. City of Palm Springs . The appellate court ruled that the city was limited to the scope of assuring that El Dorado's owner had complied with requirements of Section 66427.5, the exemption to the Act enacted by SB 310. The court ruled that Section 66427.5 takes effect as soon as one unit is sold, and therefore, its rent formulas supersede a local rent control ordinance as soon as that first lot is sold. The proponents of SB 310 did not foresee instances in which mobilehome park owners, rather than residents, would use its exemption to the Act to convert their parks into condominium-type parks, where the owner subdivides the park and sells spaces to the residents. Since the owner of El Dorado Park in Palm Springs first used the Act for conversion to resident ownership, many more mobilehome park owners have pursued this type of conversion. This has set up a conflict between park owners and park residents over the use of existing state law for conversion of parks to resident ownership. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: Yes SUPPORT : (Verified 8/30/07) City of Santa Rosa (co-source) County of Sonoma (co-source) American Planning Association, California Chapter California Rural Legal Assistance Foundation California State Association of Counties City of Carson City of Cloverdale City of Cotati City of Hayward AB 1542 Page 6 City of Los Angeles City of Scotts Valley City of Winters County of Santa Cruz Eden Gardens Mobilehome Park Homeowners Association (Hayward) Golden State Manufactured-Home Owners League Golden State Manufactured-Home Owners League, Inc., Chapter 416 Hayward Country Club Mobilehome Owners Association Hayward Mobilehome Owners Association League of California Cities Mayors' and Councilmembers' Association of Sonoma County Pacific Grove Mobile Home Park Homeowners Association (Capitola) Palo Mobile Estates Homeowners Association (East Palo Alto) Pueblo Springs Mobilehome Owners Association (Hayward) State Building and Construction Trades Council of California Trailer Haven Homeowner's Association (Santa Cruz) Western Center on Law and Poverty OPPOSITION : (Verified 7/24/07) California Association of Realtors California Mobilehome Parkowners Alliance Californians for Resident Ownership Western Manufactured Housing Communities Association ARGUMENTS IN SUPPORT : 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 AB 1542 Page 7 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. "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." ARGUMENTS IN OPPOSITION : Opponents note that existing law provides for state regulation of rent increases after a park converts, that local control of conversions will add delay to the process, and that delaying the process will discourage owners from converting, thus eliminating homeownership opportunities for those who wish to buy their lots. Writing in opposition, Western Manufactured Housing Communities Association (WMA) states that there has been no showing of any harm to a resident from conversions that have taken place. Additionally, WMA writes that this bill further confuses the conversion process, because it creates separate conversion rules for communities with local rent control and those without rent control. ASSEMBLY FLOOR : AYES: Arambula, Bass, Beall, Berg, Brownley, Caballero, Carter, Coto, Davis, De La Torre, De Leon, DeSaulnier, Dymally, Eng, Evans, Feuer, Fuentes, Hancock, Hayashi, Huffman, Jones, Karnette, Krekorian, Laird, Leno, Levine, Lieber, Lieu, Mendoza, Mullin, Nava, Portantino, Price, Richardson, Ruskin, Salas, Saldana, Swanson, Torrico, Wolk, Nunez NOES: Adams, Aghazarian, Anderson, Benoit, Berryhill, Blakeslee, DeVore, Duvall, Emmerson, Fuller, Gaines, Garcia, Garrick, Horton, Houston, Huff, Jeffries, Keene, AB 1542 Page 8 La Malfa, Maze, Nakanishi, Niello, Parra, Plescia, Sharon Runner, Silva, Smyth, Spitzer, Strickland, Tran, Villines, Walters NO VOTE RECORDED: Charles Calderon, Cook, Galgiani, Hernandez, Ma, Solorio, Soto JJA:mw 8/30/07 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END ****