BILL ANALYSIS
SENATE JUDICIARY COMMITTEE
Senator Ellen M. Corbett, Chair
2009-2010 Regular Session
AB 761 (Calderon)
As Amended March 24, 2010
Hearing Date: June 29, 2010
Fiscal: No
Urgency: No
BCP:jd
SUBJECT
Mobilehomes: Rent Control
DESCRIPTION
This bill would provide that, upon the sale, assignment,
transfer, or termination, of a mobilehome tenancy in a
mobilehome park, the management may increase the rent by a
minimum of 20 percent or $100, whichever is greater (thereby
permitting "partial vacancy decontrol"), as specified.
BACKGROUND
Enacted in 1978, the Mobilehome Residency Law (MRL) governs the
relationship between park owners or managers and the residents
of the 4,800+ mobilehome parks and manufactured housing
communities in California. In most of those parks, residents
own their home but lease the land on which their home is
installed. Although they have historically been called
"mobilehomes," it is very difficult to actually move a
mobilehome once it has been installed in a park.
To protect mobilehome park residents from rent increases on the
property underlying their home, over 100 jurisdictions in
California have enacted some form of rent control. Those rent
control ordinances are a proper exercise of the local
government's police power if their provisions are "reasonably
calculated to eliminate excessive rents and at the same time
provide landlords with a just and reasonable return on their
property." (Birkenfeld v. Berkeley (1976) 17 Cal.3d 129, 165.)
Although mobilehome parks are not subject to the Costa-Hawkins
Rental Housing Act (which restricts the use of rent control in
(more)
AB 761 (Calderon)
Page 2 of ?
other residential properties), the MRL does limit the
application of rent control in certain circumstances, including
if the lease agreement is greater than 12 months, or if the
mobilehome is not the owner's principal residence and is not
being rented to another party.
There are three main types of rent control ordinances - vacancy
control, vacancy decontrol, and partial vacancy decontrol.
Vacancy control ordinances generally prohibit a rent increase
when a mobilehome is sold and new tenants occupy the space.
Vacancy decontrol ordinances permit management to increase the
rent upon "vacancy" and then place the new rental rate under
control of the rent control ordinance. Partial vacancy
decontrol, a variant of vacancy decontrol that is used by some
jurisdictions, also permits a rent increase upon "vacancy," but
limits the increase to a specified amount (usually a percentage
of the previous rent).
In the case of sale, assignment, transfer, or termination of an
interest in a mobilehome, this bill would allow park management
to employ "partial vacancy decontrol" to set the initial rent at
an amount in excess of the maximum rent established by the rent
control ordinance by a minimum of 20 percent or $100.
CHANGES TO EXISTING LAW
Existing law requires local governments to make adequate
provision for their share of the regional need for housing for
all income levels, including the need for housing affordable to
households of very low income and low income. (Gov. Code Secs.
65580 - 65589.8.)
Existing law , the Costa-Hawkins Rental Housing Act, prohibits
"vacancy control" rent control laws for residential real
property, excluding mobilehome parks. That Act 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, as specified. (Civ. Code Sec.
1954.50 et seq.)
Existing law provides that rental agreements between management
and a mobilehome owner that are in excess of 12 months are
exempt from local rent control if specified requirements are
met. (Civ. Code Sec. 798.17.)
Existing law exempts all newly constructed mobilehome spaces
AB 761 (Calderon)
Page 3 of ?
held out for rent after January 1, 1990 from local rent control.
(Civ. Code Sec. 798.45.)
Existing law exempts mobilehomes that are not the principal
residence of the homeowner and that are not rented to another
party from local rent control. (Civ. Code Sec. 798.21.)
This bill would provide that, notwithstanding any contrary
provision of law, upon the sale, assignment, transfer, or
termination of an interest in a mobilehome or mobilehome tenancy
in a mobilehome park, the management of the park 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, by a minimum of 20 percent or $100, whichever is
greater. That increase would be added to the base rent and
shall be the base rent for purposes of applicable provisions of
law concerning rent regulation.
This bill would provide that no increase in the rent that may be
charged pursuant to the above provision shall be permitted
within 36 months of the last increase pursuant to that
provision.
This bill would prohibit a rent increase upon a sale or transfer
if the sale or transfer is either to a trust, provided that all
members of the trust are homeowners, or to a member of a
homeowner's immediate family, and the mobilehome becomes the
principal place of residence for the immediate family member.
This bill would provide that its provisions do not apply if any
of the following circumstances exist:
An assignment of a rental agreement that is exempt from
rent control under existing law due to being in excess of
12 months.
The mobilehome space is already exempt from rent control
because it is either: (1) not the principal residence of
the homeowner and not rented to another party; or (2)
because it is new construction.
A rental mobilehome park is converted to resident
ownership, as specified;
The sale, assignment, transfer, or termination of an
interest in a mobilehome or mobilehome tenancy in a park is
not subject to an ordinance, rule, regulation, or
initiative measure adopted by any local government entity
that establishes a maximum amount that a landlord may
AB 761 (Calderon)
Page 4 of ?
charge a tenant for rent.
Any applicable ordinance, rule, regulation, or
initiative measure adopted by any local governmental entity
that establishes a maximum amount that a landlord may
charge a tenant for rent authorizes a greater increase than
that provided above.
COMMENT
1. Stated need for the bill
According to the author:
AB 761 allows partial vacancy de-control which would be a
20% (or $100) increase in rent when there is a turnover in
the tenancy. The bill also prohibits an increase if a home
is sold or transferred within a 36 month period. AB 761
would only apply to rent control jurisdictions that have a
more restrictive policy than 20% or $100. For example, some
jurisdictions allow for full vacancy decontrol (rent raised
to market upon turnover) and this bill would not affect
those ordinances. The $100 component is essential in areas
where the rent has been held so artificially low that 20%
would be a minor increase in relation to actual market rent.
For example, Capitola's rent control ordinance has been in
place since 1979 [and] has some of the lowest rents in the
state, approximately $200 a space, yet the jurisdiction
right next door has rents in the $600-$800 a month range.
Last year one park owner in Capitola was granted a 28-cent
rent increase. However, a mobilehome park owned by the City
of Capitola raised its own rent on "second home" owners to
$600, still well below the market rents of $1500, but still
far above the $200 mobilehome parks are allowed to charge.
2. Opposition's concerns
By permitting partial vacancy decontrol in mobilehome parks,
this bill would preempt local rent control ordinances that
currently restrict the ability of management to set a higher
base rent upon vacancy. As a result, that initial rent - which
may exceed the maximum established by the rent control ordinance
by either 20 percent, or $100 - would be imposed despite a
decision on the local level to cap rents at a specified amount.
The opposition, including numerous residents of mobilehome
parks, express concern about the potential loss of equity as a
result of this bill, and that rents for those new residents will
AB 761 (Calderon)
Page 5 of ?
increase to a point where they are no longer affordable.
a. Drop in housing values
Unlike a traditional stick-built home, the value of a
mobilehome is based upon not only the home itself, but the
land upon which it sits and the rental price that will be
charged. As a result, the actual value of the home depends in
some part on the amount of the rent that will be charged by
park management. Individuals on a fixed or low-income must
ensure that they are able to pay not only their loan payment,
but also the rental payment for the space.
Given that the result of this bill would be to permit a higher
rental rate to be charged to a subsequent owner of a
mobilehome - the net result would likely be to reduce the
value of those homes because part of the price of the home
necessarily reflects the amount of rent that may be charged to
the purchaser. The Hayward Mobilehome Owners Association, in
strong opposition, states that:
As the vast majority of mobilehome owners are elderly,
seniors and the disabled who subside on extremely limited
incomes, the anticipated future sale of our homes becomes
paramount as for many of us our mobilehomes constitute
our only substantial asset.
All of us face the inevitability that one day we must
leave our mobilehome communities and move into assisted
living in order to receive the additional degree of care
we will require as we age. As assisted care facilities
are extremely costly, any legislation which impairs our
ability to find buyers who will pay a fair dollar amount
for our homes will have devastating consequences with
regard to our future comfort and well-being. The bottom
line is that if AB 761 becomes law, we will have to
substantially reduce the selling price of our homes in
order to compensate the new owner for the substantial
increase in rent.
The Golden State Manufactured-Home Owners League (GSMOL), in
opposition, further notes that mobilehomes are significant
investments, potentially the most valuable asset owned by a
senior or person with fixed income. GSMOL further asserts
that the direct consequence of the higher rents authorized by
this bill is "a devaluation in mobilehome equity at the time
AB 761 (Calderon)
Page 6 of ?
of resale, resulting in damage to the investments of tens of
thousands of low income and senior homeowners throughout the
state."
As an example of the potential reduction in housing prices,
the author contends that a home that is valued at $20,000 can
sell for $60,000 or more, even though it is only worth
$20,000. The author further notes that if vacancy decontrol
were in place, "the home may sell for only $20,000 or $30,000,
somewhere closer to the actual value." If that example were to
hold true, the effect of this bill would be to cause the
property to drop in value from $60,000 to $20,000, a loss of
$40,000 in equity that the owner may have been counting on as
part of his or her retirement. That drop in value would
affect not only members, but those financial institutions with
loans secured by the property - Bay Federal Credit Union, in
opposition, expresses concern that under AB 761: "our ability
to protect our security interest in our mobilehome mortgages
will be seriously harmed [by AB 761] and it will cause our
members to lose a substantial portion of their investments in
their mobilehomes."
Considering the recent economic downturn and the impact that
the loss of home equity has had on numerous Californians, the
Committee should consider whether the loss of equity resulting
from the passage of AB 761 might result in similar unintended
consequences. From a policy standpoint, steps have been taken
on the state and federal level in an attempt to stabilize the
housing market, and this bill appears to run counter to those
efforts by acting to reduce resale values of homes in these
communities.
b. Increased rents
The California Commission on the Status of Aging, in
opposition, notes that: "Many older adults live on fixed
incomes - many of which have been greatly reduced in the
recent stock market declines. The shortage of low-cost
housing already makes it very difficult for low-income adults
to find appropriate housing when they can no longer keep up
with the expense of a large family home. Rent control affords
them an important protection based on local government's
commitment to keep housing affordable for elders and other
low-income individuals."
The California Rural Legal Assistance Foundation (CRLA), in
AB 761 (Calderon)
Page 7 of ?
opposition, further contends that this bill would "change the
rules in the middle of the game" for homeowners who "bought in
a rent-control city paid a fair price for their home based on
the reasonable expectation that they would be able to re-sell
their homes under the same rules. " In those jurisdictions
affected by AB 761, the bill would instantly devalue those
homes by removing a protection that the homeowner paid a
premium for when purchasing the property.
Although this bill would permit an increase of 20 percent, or
$100, whichever is greater, the net effect would be to erode
away at rent control in mobilehome parks. At some point,
every property would be transferred and every rent would be
increased. The policy choice for this Committee is whether to
respect the authority of local governments to enact rent
control ordinances for mobilehome parks - if AB 761 preempts
those ordinances, the rent in mobilehome parks will increase
while the resale value of those units would decrease. For
local communities that have made a policy decision to preserve
the affordable rents in their mobilehome parks, this bill
would disregard that local choice in favor of a broad approach
not tailored to their specific situations.
It should also be noted that since AB 761 would permit the
rent to be increased by 20 percent, or $100, upon the sale of
the mobilehome, and that the value of the home decreases as
the rent increases, any purchaser is in the unique
circumstance of knowing that if they were to sell their
property, the property will be worth less due to the increased
rent that may be charged to the subsequent purchaser. That
knowledge - that a house you are buying will be instantly
worth less upon purchase - could discourage individuals from
purchasing homes in these communities (potentially driving
prices down even more).
3. Rent control jurisdictions
Western Manufactured Housing Communities Association, sponsor,
provides the following information about the current number of
mobilehome rent control jurisdictions:
52 local jurisdictions employ full vacancy control
(rental rate remains the same upon turnover)
38 employ partial vacancy decontrol (rental rate is
adjusted to be a certain percentage of the previous rent
and then put back under rent control)
18 employ vacancy decontrol (rental rate is adjusted to
AB 761 (Calderon)
Page 8 of ?
market rent and is re-rent controlled)
This bill would effectively remove vacancy control in those 52
jurisdictions. For those that already have partial vacancy
decontrol, this bill would affect the vast majority which permit
an increase of far less than the proposed 20 percent, or $100.
(For example, Concord permits an increase of 10 percent, and
Modesto limits increases to 6 percent.) As a result, this bill
would not only remove vacancy control, but permit rent increases
that are in excess of those permitted by local jurisdictions
that actually desire to impose partial vacancy decontrol, but
have elected to permit more modest increases.
Western Center on Law & Poverty, in opposition, further asserts
that "[t]hese ordinances were not created in a vacuum, but in
response to local conditions, including rent-gouging attempted
by some park owners, knowing that mobilehomes cannot
realistically be moved. Local governments are in the best
position to determine what kinds of rent controls, if any, are
needed."
4. Increase of a "minimum of 20 percent or one hundred dollars
($100), whichever is greater"
Western Center on Law & Poverty notes that "that the bill
requires any rent increase to be a 'minimum' of 20[percent] or
$100, whichever is greater, and no maximum (page 2, lines 9-10).
If the intent of the bill is to establish these figures as a
maximum, the bill should clearly state that." Committee staff
notes that WCLP appears to be correct - the author's and
sponsor' background materials, including the above stated need
for the bill, all note the intent to have the increase be either
20 percent, or $100, whichever is greater. That use of
"minimum" may at best create confusion, and at worst, permit an
increase greater than 20 percent.
Support : California Association of Realtors
Opposition : AARP California; Bay Federal Credit Union;
California Commission on Aging; California Rural Legal
Assistance Foundation; City of Los Angeles; City of Santa Rosa;
Pueblo Springs Mobilehome Owners Association; Golden State
Manufactured Home-Owners League (GSMOL); GSMOL Members residing
in Desert Sands Mobilehome Community; Hayward Mobilehome Owners
Association, Inc.; League of California Cities; Western Center
AB 761 (Calderon)
Page 9 of ?
on Law & Poverty; hundreds of individuals
HISTORY
Source : Western Manufactured Housing Communities Association
Related Pending Legislation : None Known
Prior Legislation : None Known
Prior Vote :
Assembly Housing and Community Development Committee (Ayes 4,
Noes 0)
Assembly Housing and Community Development Committee (Ayes 4,
Noes 2)
Assembly Floor (Ayes 38, Noes 27)
Assembly Floor (Ayes 42, Noes 27)
**************