BILL ANALYSIS
AB 761
Page 1
Date of Hearing: May 13, 2009
ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT
Norma Torres, Chair
AB 761 (Calderon) - As Amended: May 6, 2009
SUBJECT : Mobilehomes: rent control.
SUMMARY : Allows the management of a mobilehome park in a
jurisdiction with a mobilehome rent control ordinance to set the
initial rental rate upon a new tenancy at up to twice the
last-charged rent. Specifically, this bill :
1)Provides that, upon the sale, assignment, transfer, or
termination of an interest in a mobilehome or a mobilehome
tenancy in a mobilehome park, the management may offer a new
rental agreement containing an initial rent in excess of the
maximum rent established by an ordinance, rule, regulation or
initiative measure adopted by a city, county or city and
county.
2)Specifies that a mobilehome park owner may establish the
initial rental rate for a new mobilehome tenancy as follows:
a) Beginning January 1, 2010, the initial rental rate may
be increased by up to 20% of the last-charged rent;
b) Beginning January 1, 2011, the initial rental rate may
be increased by up to 40% of the last-charged rent;
c) Beginning January 1, 2012, the initial rental rate may
be increased by up to 60 % of the last-charged rent;
d) Beginning January 1, 2013, the initial rental rate may
be increased by up to 80% of the last-charged rent; and
e) Beginning January 1, 2014, the initial rental rate may
be increased by up to 100% of the last-charged rent.
3)Authorizes higher rent increases if allowed by the local rent
control ordinance.
4)Specifies that after the initial rental rate is set, rent
shall be subject to the local rent control ordinance, rule,
regulation, or initiative measure, if one exists.
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5)Exempts the following from the rent increase formula described
above:
a) Changes in ownership or tenancy due to the death of a
mobilehome owner or tenant where the deceased homeowner's
or tenant's spouse takes ownership and occupancy of the
mobilehome.
b) An assignment of any existing lease that specifies the
amount of rent applicable to the assignee upon a transfer
of the interest in the mobilehome.
c) A park that contains common facilities or improvements
that constitute an unreasonable risk to life, health, or
safety for which a citation has been issued by the
appropriate governmental agency that remains unabated for
six months or longer preceding the vacancy.
EXISTING LAW
1)Under the Costa-Hawkins Rental Housing Act (Costa-Hawkins),
prohibits "vacancy control" rent control laws for residential
real property, excluding mobilehome parks. Costa-Hawkins
requires a local rent control law for residential real
property to permit the owner to raise the rent upon the
termination of a prior tenancy and the creation of a new one,
where the prior tenancy was "voluntarily vacated." However,
the owner's right to "decontrol" does not apply if the prior
tenancy was terminated by the owner on a 30-day notice, or was
terminated pursuant to a change in the terms of tenancy
notices pursuant to Civil Code Section 827, other than a
change permitted by law in the amount of the rent or fees.
(Civil Code Section 1954.50 et. seq.)
2)Exempts from local rent control all newly constructed
mobilehome spaces held out for rent after January 1, 1990
(Civil Code Section 798.45).
3)Allows the park management or ownership of a mobilehome park
to pass through government-imposed fees to mobilehome owners
in jurisdictions with local rent control ordinances (Civil
Code Section 798.49).
4)Exempts from local rent control mobilehomes that are not the
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principle residence of the homeowner and that are not rented
to another party (Civil Code Section 798.21).
5)Prohibits a park owner from requiring the removal of a
mobilehome when it is sold (Civil Code Section 798.73.)
FISCAL EFFECT : None
COMMENTS :
Background:
There are approximately 4,822 mobilehome parks and manufactured
housing communities in California, with an estimated 700,000
residents living in these parks. In the majority of parks,
mobilehome residents own their homes but rent the spaces on
which their homes are installed. "Mobilehome" is something of a
misnomer in that once installed in a park, it is very rare for a
mobilehome to be moved. This is due to both the difficulty and
cost involved, and also because the supply of mobilehome spaces
is very limited, vacancies are rare, and most park owners do not
allow the installation of older mobilehomes in their parks.
Birkenfeld v. Berkeley (1976) 17 Cal. 3d 129, provides that
cities and counties have within their police power the authority
to enact rent control laws so long as property owners are
assured a fair rate of return. Under existing law, local
governmental entities are free to enact rent control laws
regarding mobilehome parks. Mobilehome park rent control is not
subject to the state's Costa-Hawkins Act, which restricts
permissible rent control ordinances for other types of
residential real property, such as apartments. However, the
Mobilehome Residency Law (MRL) does limit the application of
rent control in certain cases. Under existing law, rental
agreements of twelve months or longer are exempt from local rent
control. Additionally, if a mobilehome is not the homeowner's
principle residence and is not being rented to another party,
then it is exempt from rent control. The MRL also exempts from
local rent control any mobilehome space constructed after
January 1, 1990.
Over 100 jurisdictions in California have some form of local
rent control ordinance limiting the amount of rent or
establishing a maximum amount of rent that the management of a
mobilehome park may charge a tenant. Under rent control, the
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space rent is set upon a change in tenancy through vacancy
control, vacancy decontrol, or partial vacancy decontrol. With
vacancy control, rent increases are generally prohibited when a
mobilehome is sold and a new tenant occupies the space. Under
vacancy decontrol, the park owner can set the rental rate upon a
new tenancy without limit. The new rental rate is then
controlled by the local rent control ordinance going forward.
Some jurisdictions have partial vacancy decontrol, allowing for
some rent increase upon turnover but limiting the increase to a
specified amount, usually a certain percentage of the current
rent. Most California jurisdictions with mobilehome rent
control use either vacancy control or partial vacancy decontrol
to regulate the initial rental rate; only about 20% allow for
full vacancy decontrol. All rent control ordinances allow the
owner to seek rent increases through an administrative process
if the owner does not feel that he or she is getting a fair rate
of return. They commonly also provide for automatic annual rent
increases tied to the Consumer Price Index or some other index.
Purpose and scope of this bill :
According to the author, severe and inconsistent local rent
control regulations have had a significant negative impact on
the investment in mobilehome parks and have resulted in a
reduction in the quantity and quality of parks. To address this
issue, AB 761 prohibits vacancy control as a means for
regulating rents upon changes in tenancy in mobilehome parks.
Instead, the bill requires a form of partial vacancy decontrol
under which park owners can set the initial rental rate for a
space upon a new tenancy at up to 20% of the prior rate in 2010,
up to 40% in 2011, up to 60% in 2012, up to 80% in 2013, and up
to 100% in 2014 and beyond. Increases greater than 100% would
be allowed if authorized by the local rent control ordinance.
Arguments in support :
In background materials provided to the Committee, the author
states:
"Over the last twenty years the Legislature has stepped in
on at least two occasions to address and ameliorate the
negative impacts of rent control at the local level. In
1987 it outlawed commercial rent control (controls on
retail, office, industrial and other non-residential uses).
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In 1995 the Costa-Hawkins Rental Housing Act established
guidelines for local apartment rent control ordinances.
The guidelines principally require that local ordinances
permit vacancy decontrol, the ability of an owner to raise
rent to market when a tenant voluntarily vacates (in the
mobilehome context the sale of a coach)?.
In the cases when the Legislature stepped in to modify
local rent controls the Legislature and Governor balanced
the general preference for local land use controls with the
overriding issues of statewide importance-the need for
investment in new and existing housing to add to the stock
and preserve the existing stock by stabilizing its
financial viability. In effect the Legislature was saying
that when local control either does not work, or worse,
causes negative local and extraterritorial impacts, which
stringent apartment rent control was found to have caused,
it is time to step in. For mobile home parks it is time,
indeed well past time, to restore some semblance of
regulatory balance and stability."
According to the sponsor, the Western Manufactured Housing
Communities Association (WMA), vacancy decontrol is necessary in
order to help stabilize and preserve the long-term financial
viability of the manufactured housing community industry. WMA
further writes that in strict vacancy controlled jurisdictions,
"there is no balance between what price the homeowner may set in
selling the home and what the park owner may rent the land for.
You have many instances where the 'rent' value of the space may
be 'affordable' but the resale price of the home is not. Local
government jurisdictions have essentially created a false value
for homes in severely rent restricted communities. New
homeowners are paying a 'premium' to occupy a rent controlled
space, value that is inherent to the land and not the home."
The California Mobilehome Parkowner Alliance argues, "In theory,
local rent control ordinances are designed to maintain
affordable housing. Ironically, they have the opposite effect.
Artificially low rents for mobilehome park spaces have
significantly increased the sales prices for the homes on those
rent-controlled spaces. In many cases this has eliminated
affordable housing otherwise offered by mobilheome parks because
the purchase price of the home increases beyond the reach of
many potential buyers."
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Arguments in opposition :
The Golden State Manufactured-Home Owners League, the California
Rural Legal Assistance Foundation, and the Western Center on Law
and Poverty argue that "AB 761 ignores the complexities of
property rights within mobilehome parks. Despite the claims of
some anti-rent control advocates that property ownership is some
sort of absolute with all of the rights vested in only one
party, for centuries the law has recognized that property
ownership is a bundle of rights that can vary. Mobilehome
ownership illustrates this concept: the homeowner has certain
property rights-the ownership interest in their home, the right
to keep the home in place, and the rights in his or her
leasehold interests-while the park owner retains the right of
reversion in the park space. The value of the homeowner's
property rights, which they have paid for, are lost if
state-imposed vacancy decontrol forces a homeowner to sell at a
fraction of what they paid. This is not simply a theoretical
argument over the nature of property ownership. The
consequences for homeowners are the loss of essentially most/all
of their equity in what is most likely their greatest single
asset."
The Bay Federal Credit Union writes that AB 761 will "devastate
our industries' mobilehome mortgage portfolios, very likely
making it impossible for our industry to continue to offer
affordable mobilehome mortgages in California. It will also
result in our primarily low- and moderate-income members losing
almost all of their investments in their mobilehomes, which they
simply cannot afford." Bay Federal further argues that AB 761
will have a devastating impact to affordable housing and
financing in California, creating a deeper economic crisis for
the state. The committee additionally received hundreds of
letters from individual mobilehome owners expressing concern for
their own financial stability should AB 761 become law.
The League of California Cities argues that once a mobilehome is
placed on a space within a park, the homeowner is at an unfair
bargaining position because the coach cannot be moved easily if
rents are increased. As a result, local agencies have adopted
regulations to control rents during and between transfers of
ownership between coach owners. This bill interferes with these
locally adopted solutions. With one act, this bill sets aside
local regulations that have been developed over decades to
address issues within the community and balance the
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affordability of pad rentals with the overall profitability of
the park itself. The point of transfer is an important element
of these regulations, and should not be erased unilaterally."
Staff comments :
The committee may wish to consider that the landlord-tenant
relationship in a mobilehome park is very different than in an
apartment situation. Mobilehome owners are a captive audience
in that their home is fixed to the space and cannot reasonably
be moved. Whereas an apartment tenant has a choice of all other
similar apartments on the market, a mobilehome owner effectively
has one choice of space-the one the home is already on. Absent
regulation, this gives the park owner extraordinary bargaining
power over residents. If the rents rise beyond their ability to
pay, mobilehome owners' only option is to sell the home. If
rents are so high that mobilehome owners cannot find buyers,
they effectively are forced to abandon their homes, losing their
entire investment. The Legislature recognized the differences
between mobilehome tenancies and apartment tenancies when it
passed the Costa-Hawkins Act, which required vacancy decontrol
for apartments but not for mobilehome parks. The special
situation at play in mobilehome parks is further evidenced by
the fact that over 100 jurisdictions in California have passed
mobilehome rent control ordinances, yet only about a dozen have
rent control for apartments.
When it was introduced, AB 761 imposed full vacancy decontrol,
allowing park owners to set the space rent without limit upon a
new tenancy. The bill has since been amended to allow park
owners in rent control jurisdictions to charge up to double the
prior rent upon a new tenancy starting in 2014. The committee
may wish to consider how potentially doubled space rents upon
sale will affect the investments that current mobilehome owners
have made in their homes. According to the opponents, AB 761
will immediately cause a disastrous drop in equity for thousands
of homeowners. Supporters do not necessarily dispute that there
will be some level of equity loss, but argue that vacancy
control has created false value for these homes and that the
equity is artificial paper value that is not related to the true
value of the home.
Although it is unclear to committee staff how many mobilehome
owners will be affected by AB 761 and to what extent, it is
clear that there will be a financial impact. Given the current
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state of the housing market and the economy in general, the
committee may wish to consider whether Legislative action that
would place an unknown number of people in a negative financial
situation is appropriate at this time.
The committee may wish to consider if it is better to leave
decisions about mobilehome rent control to local officials, who
are best equipped to assess what is happening in the mobilehome
parks in their community and determine what controls need to be
in place to ensure that park owners are able to profit from
their business while also ensuring that the investment of
homeowners is protected.
In background provided to the committee, the author states, "It
is beyond question that rent controls in general, particularly
the risk that stringent rent control could be enacted at any
time on any park, has resulted in virtually no investment in new
parks in years." A number of the support letters received by
the committee make a similar argument-that rent control prevents
investment in new parks. Given that state law expressly
prohibits rent control on any mobilehome space constructed after
1989, it is unclear how rent control poses a barrier to the
development of new parks.
Prior legislation
AB 1309 (Calderon, 2007) would have allowed mobilehome park
owners to set the initial rental rate at market levels for a new
tenancy (i.e., full vacancy decontrol) starting in 2011. AB
1309 passed out of this committee on May 9, 2007, with a vote of
4-2. The bill was never heard on the Assembly floor.
REGISTERED SUPPORT / OPPOSITION :
Support
Western Manufactured Housing Communities Association (sponsor)
California Association of Realtors
California Mobilehome Parkowners Alliance
2 Individual letters
Opposition
AARP California
Bay Federal Credit Union
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California Alliance for Retired Americans
Californians for Resident Ownership
California Rural Legal Assistance Foundation
City of Santa Rosa
Coalition of Mobilehome Owners-California
Golden State Manufactured-Home Owners League
Law Offices of William J. Constantine
League of California Cities
Alimur Park Homeowners Association, Soquel
Besaro Mobile Home Park Homeowners' Association, Fremont
Blue & Gold Star Mobilehome Park Homeowners' Association, Santa
Cruz
Blue Pacific Mobile Home Park Homeowners' Association, Aptos
Cabrillo Mobilehome Estates Homeowners Association, Capitola
California Hawaiian Mobile Home Park Homewners Association, San
Jose
Capitola Mobile Home Owners Association
Carriage Acres Homeowners' Association, Soquel
Chateau La Salle Mobile Home Park Homeowners' Association
Chatsworth Mobile Home Park Homeowners' Association
Contempo Marin Homeowners Association, San Rafael
Country Mobile Home Homeowners' Association, Santa Rosa
Cypress Square Mobilehome Park Homeowners' Association, Marina
El Nido Mobile Home Park Homeowners' Association, San Juan
Capistrano
Greenbrier Gardens Mobile Home Owners Association, Santee
Imperial Oxnard Mobilehome Park Homeowners' Association, Oxnard
Le Sage Riviera Mobile Home Park Homeowners' Association, Grover
Beach
Marina Del Mar Homeowners Association, Marina
Marina Mobilehome Owners Coalition
Monterey Vista Mobile Estates Homeowners' Association,
Watsonville
Oaks Mobile Home Park Homeowners' Association, Oroville
Olympia Glade Home Owners Association, Grass Valley
Pacific Cove Mobile Home Park Homeowners Association, Capitola
Pleasure Point Mobile Park Homeowners Association, Santa Cruz
Preston Park Tenants Association, Marina
Rancho Santa Paula Mobile Home Park Homeowners' Association,
Santa Paula
San Lorenzo Mobile Home Park Homeowners' Association, Felton
Sea Oaks Mobile Home Park Homeowners' Association, Los Osos
Sequoia Mobile Home Park Homeowners' Association, Santa Rosa
Seven Flags Homeowners Association, Sonoma
Sierra Homeowners Association, Cotati
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Shoreline Estates Residents' Association, Santa Cruz
Summit Mobilehome Park Homeowners' Association,
Sun Valley Estates Mobile Home Park Homeowners' Association,
Livermore
Surf and Sand Mobile Home Park Residents Association, Capitola
Trailer Haven Mobile Home Homeowners' Association
Vista Del Lago Homeowners' Association, Scotts Valley
Westlake Village Mobile Home Park Homeowners' Association,
Visalia
Whispering Pines Mobile Home Park Owners Association, Scotts
Valley
322 Individual mobilehome owners
Analysis Prepared by : Anya Lawler / H. & C.D. / (916)
319-2085