BILL ANALYSIS Ó
SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: Ab 225
SENATOR MARK DESAULNIER, CHAIRMAN AUTHOR: chau
VERSION: 7/2/14
Analysis by: Carrie Cornwell FISCAL: yes
Hearing date: August 5, 2014 URGENCY: YES
SUBJECT:
Mobilehome Park Purchase Fund
DESCRIPTION:
This bill gives the Department of Housing and Community
Development (HCD) greater flexibility in its administration of
the Mobilehome Park Purchase Fund, including allowing HCD to
lend these funds for individuals to repair their mobilehomes and
for nonprofit sponsors or local public entities to acquire
mobilehome parks.
ANALYSIS:
The residents of California's nearly 5,000 mobilehome parks
typically own their mobilehomes and rent the spaces in the
mobilehome park in which the homes are placed. 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. In 1984, the Legislature created the
Mobilehome Park Purchase Fund (fund) to encourage and facilitate
this process for converting mobilehome parks to resident
ownership through low-interest loans to resident organizations,
individual residents, qualified nonprofit housing sponsors, or
local governments. HCD administers the fund under its
Mobilehome Park Resident Ownership Program (MPROP).
To qualify for a loan, at least 30 percent of the converting
park's spaces must be for homes owned by low-income residents.
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In addition, HCD must verify that at least two-thirds of a
mobilehome park's households support the conversion to resident
ownership, that any displacement of residents will be mitigated,
that the conversion is consistent with state and local law, and
that the conversion is financially viable.
Existing law requires HCD to adopt regulations to administer the
fund and to make loans from the fund with a term of no longer
than 30 years and an interest rate of 3% per annum, unless HCD
finds that a lower interest rate is necessary and will not
jeopardize the financial stability of the fund. Existing law
also permits HCD to establish flexible repayment terms if needed
to achieve affordable housing costs for low-income borrowers and
if such terms do not risk the security of the fund. In
addition, loans to individuals must be secured with 100%
collateral, including that securing any senior debt (i.e., an
existing mortgage on the home).
This bill :
1.Renames the Mobilehome Park Purchase Fund as the "Mobilehome
Park Rehabilitation and Purchase Fund" and renames MPROP as
the "Mobilehome Park Rehabilitation and Resident Ownership
Program."
2.Permits HCD to make loans from the fund to nonprofit housing
sponsors and local public entities to acquire a mobilehome
park. Such loans must be to either:
Cure significant outstanding violations of state law
governing health and safety in mobilehome parks.
Support a park acquisition that in the determination of
HCD will substantially benefit low- and moderate-income
homeowners, including maintaining affordable space rent
level.
In either case, HCD shall make the loan for the minimum amount
necessary to bring the park into compliance with all
applicable health and safety standards and maintain
affordability, be for no more than 40 years at 3% interest,
and not exceed the value of the collateral securing the loan.
The bill directs HCD to determine eligibility for and the
amounts of these loans by considering, among other things, all
of the following:
Current health and safety conditions in the park and the
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likelihood that they could be remedied without the loan
The degree to which the loan will benefit lower-income
homeowners
The age of the park and the age of the infrastructure
that will be rehabilitated
In addition, before making a loan, HCD must verify the
projected operating budget of the park, funds for and costs of
purchase and rehabilitation, and that no park residents will
be involuntarily displaced as a result of the purchase or that
the displacement shall be mitigated as required under state
and local law.
1.Permits HCD to make loans to resident organizations or
qualified nonprofit sponsors to assist lower income homeowners
to make needed repairs or make accessibility-related upgrades.
Applicants must otherwise have qualified for an MPROP loan
and demonstrate sufficient organizational stability and
capacity to manage a portfolio of loans to individual home
owners. HCD may adopt guidelines to implement this loan
program.
2.Allows HCD, when lending from the fund to individual
homeowners or resident organizations in support of a
conversion to resident ownership, to loan for a term of up to
40 years (rather than 30). For any loan made to an
individual, HCD may make a loan for up to 115 percent (rather
than 100%) of the value of the collateral securing the loan
(e.g., the individual mobilehome).
3.Is an urgency measure.
COMMENTS:
1.Purpose . Created to provide low-interest loans to finance the
conversion of mobilehome parks to resident ownership and
ensure that low-income residents' housing costs remained at an
affordable level after conversion, MPROP has seen little
activity in recent years, with only a handful of loans made
since 2007. The program had no successful applications in
either 2010, 2012, or last year. HCD points to the increasing
cost and complexity of park conversions as two of the primary
reasons for the reduction in the number of successful
applications.
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The author introduced this bill to facilitate programmatic
changes to MPROP that will make the application and loan
requirements more attractive to potential borrowers. He hopes
this will ensure that HCD can use the accumulated funds to
preserve affordable homeownership opportunities. The author
asserts that the bill aims to achieve three key goals:
Make MPROP work better for conversions to resident
ownership. The bill would make several changes to ensure
the most attractive loan terms for resident-initiated
conversions. These include increasing the maximum
loan-to-value ratio to 115% and allowing for a longer
repayment period to better match MPROP loans with other
potential funding sources, such as loans from the Federal
Housing Administration.
Ensure that MPROP can be used for acquisition and
rehabilitation of mobilehome parks by nonprofit developers
who will own and operate the park. Some parks in
California are suffering from years of neglect, leading to
substandard conditions within the park. If not remedied,
the park could eventually close, displacing the homeowners.
With many troubled parks, having a nonprofit owner take
over ownership and management while undertaking repairs can
stabilize the park and ensure that it remains an affordable
source of housing. This bill streamlines MPROP rules
governing acquisition by nonprofits by separating in
statute the MPROP funding rules for nonprofit acquisitions
from those governing conversions to resident ownership.
The proponents believe this will ensure that the program
better supports funding for nonprofit acquisition and
rehabilitation.
Allow a portion of the funds to be used by homeowners
for rehabilitation and accessibility improvements. The
bill authorizes MPROP funds to be used to provide low-cost
loans to low-income homeowners in need of minor repairs or
accessibility upgrades for their homes, to be provided in
connection with an MPROP-funded acquisition or conversion
by nonprofit organizations.
1.MPROP funding and history . The fund receives revenues from a
$5 fee that mobilehome owners pay with their annual
registration fee. The fund also receives repayments of loans
HCD has made under MPROP. Currently approximately $24 million
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is available. Between 1985 and 2001, MPROP provided loans to
assist with conversion in 66 mobilehome parks around the
state. Since 2002, new loan activity under the program has
slowed and continues to decline. The program had only two
successful applications in 2011 and, as noted above, none in
the past two years. HCD staff reports that there is currently
one pending application.
2.Technical amendments .
On page 6, line 38, delete "Flexible repayment terms may
include," and delete
lines 39-40
On page 6, lines 24-25, delete "or qualified nonprofit
sponsors"
On page 9, line 35, delete "Flexible repayment" and
delete lines 36-37
On page 10, line 32, delete "applicant"
On page 10, line 39, delete the comma and delete second
"make"
On page 11, line 3, delete "is authorized to receive
loans" and insert "has received a loan or loans"
RELATED LEGISLATION:
AB 692 (Torres) would have expanded the allowable purposes for
loans HCD makes from the Mobilehome Park Purchase Fund to
include those to rehabilitate a mobilehome park's
infrastructure. AB 692 passed this committee by a 10-0 vote on
July 9, 2013, but was never heard in the Senate Appropriations
Committee. In June of this year, the author amended it to
address another subject matter.
Assembly Votes are not relevant.
POSITIONS: (Communicated to the committee before noon on
Wednesday, July 30,
2014.)
SUPPORT: Golden State Manufactured-Home Owners League
(sponsor)
OPPOSED: None received.
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