Tomorrow night, the Huntington Beach City Council will consider whether to place on the November 2022 ballot a series of amendments to the city charter formulated by its charter review committee. These include converting the City Attorney, City Clerk, and City Treasurer from positions elected by the people into posts appointed by the city council, as well as several other, more technical, changes.
Not on the agenda will be a demand by a group of mobile home residents for a ballot measure exempting mobile home parks from the city charter’s prohibition on rent control. That push is opposed by park owners and other mobile home park residents who contend rent control infringes on property rights and will do nothing to increase the supply of affordable housing.
Time is running out for mobile home rent control proponents, who want to avoid the arduous process of qualifying their “carve out” measure for the ballot by having the city council to place it on the November ballot for them.
Last month, the city’s Mobile Home Advisory Board voted 5-4 to recommend placing a “carve out” on the ballot, although one of the five “aye” votes, Scott Miller, questioned the wisdom of doing so.
Section 803 of the city charter (the Property Rights Protection Measure) prohibits rental control of any kind and was added in 2002 with the support of 68.7% of Huntington Beach voters. The mobile residents group wants a “carve out” for mobile home parks only, leaving the rent control ban in place for apartment dwellers and other tenants.
The “carve out” campaign was born last year in the 167-space Skandia Mobile Country Club, following an ownership change in which Investment Property Group (IPG) purchased the 58-year park for $60 million from the family that had owned it since 1964.
Under Proposition 13, property is only re-assessed for property tax purposes when it changes hands. IPG’s purchase of Skandia triggered a new assessment and the park’s property tax bill skyrocketed. On a per space basis, the property tax surged from $50 to $260 per space.
IPG also invested an additional $100,000 into community improvements such as asphalt and new pool furniture.
The significant increase in the park’s operating costs made a rent increase unavoidable. At the time of the acquisition, most Skandia residents paid a monthly space rent of $1,128.
The owners adopted a two-pronged approach: the monthly space rent for new residents would increase to $2,195 (about the market rate for the area) while the monthly rent increase for existing residents would be capped at $75 a month or 6.6%. The Consumer Price Index for Orange County is currently 8%.
“The Skandia property tax increase has not been passed on to the park’s current residents,” IPG states in its May 2022 newsletter to park residents.
Eligible residents could also apply for the rental assistance program operated by the Manufactured Housing Education Trust. Under the MHET program, qualifying residents receive subsidies equivalent to 10% of their monthly space rent, which is greater than the $75-a-month increase. As of the end of May, three Skandia residents were receiving the rent credit, with more going through the application process.
Nonetheless, a group of Skandia residents organized the self-styled Skandia Home Owners Association under the leadership of Carol Rohr, a three-year Skandia homeowner. Their goal: carve out an exemption for mobile home parks from the city’s rent control ban.
In Between Home Ownership And Apartment Living
Living in a mobile home park occupies a middle ground between home ownership and apartment life. They are both homeowners and tenants: they own personal property in the form of their manufactured home, but rent the real estate that it’s on.
Likewise, mobile home residents pay the property tax on the value of their manufactured home, while the park owner pays the property tax on the land it sits on.
Although manufactured home is a house, it is more properly understood as personal property in the same sense that a car is. It – in and of itself – depreciates over time. Separated from the leased space on which it sits, a mobile home loses value. However, a manufactured home’s value increases if affixed to real estate: on a leased space in a mobile home community.
It’s true that if one puts the mobile home on a truck for transport, it loses re-sale value. The reality is this rarely happens. Virtually all mobile homes are sold in place. The owner has a right to sell their mobile home on the space leased from the park owner, which confers value on the leasehold interest, and therefore the mobile home the new buyer purchases.
Are Manufactured Homes In Skandia Losing Value Or Not?
A core contention of Rohr and the Skandia HOA is that raising the space rent for new residents reduces the re-sale value of their manufactured homes. The group’s website claims the increase for new residents is a disincentive to buy in Skandia and has caused “home values of current residents to plummet $75,000 and more!”
“Carve-out” opponents say this argument is disingenuous, saying Rohr and her group want to hold on to the top-of-the-market price their mobile homes were commanding before the sale of Skandia. Given the desirability of Skandia’s location and its continued affordability relative to other housing options, those values will continue to increase, they contend.
“Skandia HOA activists want a premium for their home with well-below market rent. They have no contract entitling them to either,” commented Julie Paule, regional representative for the Western Manufactured Housing Communities Association, which advocates for owners, operators, and developers of manufactured home communities in California.
IPG contends the claims of lost value are baseless.
“The statement that home values have dropped $100,000 to $150,000 and more is blatantly false,” the park owner contends in its May newsletter to Skandia residents.
“Home sales prices in Skandia are at an all-time high. Eight homes have sold since the park sold in 2021,” according to IPG.
MHVilleage.com, a leading website for buying, renting, or selling manufactured homes, lists 12 mobile homes for sale in Skandia, ranging in price from $340,000 to $95,000 – the latter for a 2 bedroom, 2 bath mobile home dating from 1963.
Studies have shown the resale value of manufactured homes goes up and down with the traditional housing market if they are affixed to a space in a mobile home park.
This past December, the New York Times reported on a Lendingtree.com study showing mobile home values increased more rapidly than those of traditional homes between 2014 and 2019. According to the study, which relied on Census Bureau data, the median value of mobile homes rose 39% during that period, versus 33% for traditional homes.
In California, the rise in mobile home values has been even more dramatic: during the same five-year period, the median value of a manufactured home in the Golden State rose 85%, to $91,400. Rents also increased during that same period, undercutting the argument that rising space rents undermine appreciation.
Daniel Weisfield, whose company Three Pillars Communities invests in mobile home communities, disputes the idea of manufactured home owners as “victims.”
In June 8, 2022 column on Linkedin, Weisfield wrote:
“The idea that ‘manufactured homes cost a lot to move, and this puts park residents at a disadvantage’ is wrong, and is based on a misunderstanding of how the market for manufactured homes actually works. The reality is that more than 90% of manufactured homes installed in parks will never move. When a park resident decides to move, the home remains in place, and the resident sells the home to someone who wants to live in the park. As a result, manufactured homes in parks behave like real estate, and they tend to appreciate over time.”
Skandia Owners Offering Multi-Year Leases
IPG maintains it has done its best to mitigate the ownership change on Skandia residents, including in the area of leases for existing and new residents. In response to resident feedback, the company is officering a range of multi-year leases to all Skandia residents.
- No lease/existing lease, on a month-to-month basis.
- A 12-month lease
- A 5-year lease, in which annual rent increases would be capped at CPI
- 15, 20 and 25-year lease agreements, under which annual rent increases in 2022, 2023 and 2024 would be limited to $75 per month. Beginning in 2025, annual rent would increase by the CPI (and not less than 5%).
Rohr says that several of her group’s members have already signed leases under the new ownership.
“Carve Out” Proponents Refuse To Say What Rent Control Would Look Like
While pressing the city council for months to place a “carve out” on the November ballot, proponents refuse to provide specifics on the rent control regime they want.
Earlier this month, I had the opportunity to meet with Rohr and about a dozen elderly mobile home residents from Skandia and other Huntington Beach mobile home parks, for a spirited and often chaotic conversation. A good deal of the discussion consisted of these residents advocating the same points they have been making at city council meetings for the last several months.
All were adamant in their demand for placing a “carve out” on the ballot. However, when pressed to describe what kind of rent control they want – maximum annual rent increases, creation of a rent control board to approve increases, etc. – no one would answer the question.
I noted that since the imposition of rent control was their goal, and the “carve out” merely a means to that end, then voters would reasonably want to know what form of rent control “carve out” advocates want.
“I think you’re asking for something specific and we really don’t want to cover that today,” Rohr said at one point. “We won’t do it.”
Rental Assistance v. Rent Control
Chris Houser and his family have owned and operated the 379-space Rancho Del Rey Mobile Home Estates in Huntington Harbour since 1965. The median monthly space rent is $1,465, although half the residents pay more than $1,500.
Houser says rent control demanded by Rohr’s group is inequitable and unfair.
“We are more than happy to assist residents that need help, and we participate in the MHET’s rent subsidy program,” said Houser.
“But I am opposed to singling out mobile home park owners for rent control,” said Houser. “Who is going to put limits on the increases to our expenses, which go up every year: insurance, employment costs, constantly climbing maintenance costs.”
“It would just lead to rundown mobile home parks,” he said.
Rent control opponents point out that while rental assistance is means-tested in order to target it at residents in need, rent control makes no distinction between the wealthy and those struggling on fixed incomes.
Rohr, who is leading the fight for mobile home rent control, is herself a landlord: she owns a fourplex in the upscale Belmont Shores neighborhood of Long Beach.
“I’m an apartment owner under rent control, in Long Beach,” said Rohr, referring to AB 1482, the 2019 state law that limited rent increases to CPI plus 5%, with a cap at 10%. Given the current bout of record inflation, all California housing providers can now legally increase rents by 10% annually.
“I don’t have any problems staying within those guidelines, and still getting what I want,” said Rohr, who said she rarely increases her rent.
Slightly smaller 1-bedroom, 1-bathroom units in the same ZIP code as Rohr’s fourplex are renting for around $2,000 a month.
Doorstead.com pegged the recommended rent for Rohr’s fourplex at $2,120 to $2,820 per unit.
This highlights an equity issue, say opponents of imposing rent control on mobile home parks, pointing out that – unlike rental assistance programs – there is no means-testing in rent control. They contend there is an equity issue when more affluent mobile home residents like Carol Rohr, who is paying below market space rent and receiving rental income on her fourplex, in addition to any other retirement investments, have their rent capped.
“Is that fair to other mobile home owners who are less affluent, not to mention park owners, whose rising costs are not controlled?” said Paule. “This is where rent control turns into a property owner-funded rent subsidy.”