There is no more peculiar animal in California housing than the mobile home park. It’s a place where residents own their dwelling but rent the land on which the dwelling is located. The dwelling is theoretically moveable, but it’s not going anywhere. So the landlords and the residents are stuck with each other -- and in a constant struggle that involves government regulation, property rights and California's sticky affordable housing problem.There is no more peculiar animal in California housing than the mobile home park. It’s a place where residents own their dwelling but rent the land on which the dwelling is located. The dwelling is theoretically moveable, but it’s not going anywhere. So the landlords and the residents are stuck with each other. Residents can sell their dwellings on the open market, but buyers must pay month-to-month rent on the spaces. The landlords can charge rent for the “pads” but have no control over who owns the “coaches.”
So it’s not surprising that the landlords and the residents are in a constant war. The residents – often older folks – use their political clout to get local governments to impose rent control on the “pad rents.” The landlords – politically outnumbered but economically powerful – use litigation aggressively in hopes of striking down rent control laws or squeezing local politicians to change them. For 20 years, the landlords have lost in court.
Now, however, they’ve extracted an important, if tentative, ruling from one panel on the Ninth U.S. Circuit Court of Appeals. The split decision in Cashman v. City of Cotatifound that any ordinance that potentially permits the mobile home residents to capture a premium when they sell their dwellings is unconstitutional on its face (see CP&DR Legal Digest, September 2004). And, for the moment at least, this ruling has called into question virtually all of the state’s 100 or so local mobile home rent control laws.
All this would simply be an entertaining sidelight to the California housing crisis if mobile homes weren’t such an important source of low-cost housing. There are almost 600,000 mobile homes in California – about 4.5% of the housing stock. An increasing number of them are located on individual lots in rural mountain areas. But most are located in mobile home parks in communities with astronomical land prices. There are, for example, 610 mobile homes in Malibu, 380 in Redondo Beach, and 700 in Novato. There are 3,100 in Huntington Beach, 4,300 in Anaheim, and 3,400 in Oceanside. Many of the mobile home parks are age-restricted and provide a haven for senior citizens on modest incomes.
The politics of mobile home rent control are not surprising. The land is immensely valuable and a market rent would be out of the reach of most residents. Mobile home residents represent hundreds if not thousands of votes in many communities, and they tend to be older residents who vote regularly. There are only a few mobile home park owners, and often they are absentee investors. (Full disclosure: When I ran for the Ventura City Council last year, I supported the city’s existing mobile home rent control ordinance and received the endorsement of the mobile home residents association. Ventura has 2,600 mobile homes, about 6% of the city’s housing stock, and virtually all of them are in a handful of parks.)
Naturally, the park owners, like other political minorities, take to the courts. Like conventional apartment landlords, the park owners focus on “vacancy control,” which bars them from raising rents to the market value when one resident moves out and another moves in.
For defenders of rent control – both conventional and the mobile home variety – vacancy control is the linchpin of affordability. Without it, all rentals would become unaffordable sooner or later. But mobile home park owners have a slightly different argument than apartment owners. Their tenants have something to sell when they move out – the mobile home itself. So, park owners claim, if the pad rent is cheaper, then the mobile home itself will become more expensive. In other words, they claim, vacancy control simply transfers equity from the land to the mobile home, and, hence, from the landlord to the mobile home resident. Park owners love to tell stories of ratty, rusty singlewides that sell for several hundred thousand dollars because they are sitting on a rent-controlled pad.
This is the essence of the argument the Ninth Circuit panel bought in the Cotati case – that under these circumstances, a transfer of equity is almost inevitable. But the majority went one step further. Wrote Judge Robert Beezer for the two-judge majority: “A rent control ordinances that does not on its face provide for a mechanism to prevent the capture of a premium is unconstitutional as a matter of law, absent sufficient evidence of externalities rendering a premium unavailable.”
In other words, Beezer concluded, if the possibility of an equity transfer exists, the rent control ordinance cannot, as a matter of law, serve a legitimate governmental purpose and therefore is unconstitutional.
This ruling would seem to stand more than a century of economic regulation on its head. By its very definition, economic regulation seeks to prevent landowners and the owners of other economic assets – railroads, for example – from extracting the speculative value of those assets from tenants, customers, and others in the economic food chain. The relevant question is not really whether a rent control ordinance creates the possibility of an equity transfer. Rather, the relevant question is whether the legitimate governmental purpose of lower-cost mobile home housing is furthered by the ordinance.
This was pretty much the argument of Judge William Fletcher, who wrote the minority opinion in the Cotati case. “After today’s decision, the possibility of capture of any part of a premium by a tenant renders a rent control ordinance unconstitutional,” he wrote, adding: “With all due respect to my colleagues, this simply cannot be the law.”
And it may not be. Cotati and other cities have petitioned for an en banc hearing before the Ninth Circuit, and it would seem likely that more liberal judges on the court would have a hard time upholding such a fervent property rights ruling. Even if Cotati gets reversed, however, it shighlights the need for new strategies.
The fundamental problem is the dual-tenure system that has built up around mobile homes in California: Investors own the land and residents own the dwellings. Strong economic regulation would be less necessary if it were possible to defuse the economic pressure that high land prices have created. There are two ways of doing this. Both ways demand compromise, requiring landowners to moderate their revenue expectations and residents to trust alternatives to the strong economic regulation currently in place.
The first is long-term ground leases. Mixed-tenure situations are not unusual in the United States, but rarely do they involve month-to-month rentals. Most often, they involve a public agency or institutional entity willing to enter into a 99-year lease that for all practical purposes is a sale. In the mobile home context, landlords are unlikely to surrender long-term flexibility, while some residents may not trust the concept. (In some cases, landlords have sought to get around rent control by requiring longer-term leases with high rent increases.)
The second is a buyout, either by the residents themselves or by a nonprofit housing corporation. Residents have purchased a few mobile home parks, often with local housing funds or with the assistance of a state program administered by the Department of Housing and Community Development. But these deals usually require a landlord with moderate revenue expectations and a very patient group of residents. Increasingly, nonprofit organizations have entered the buyout game. A nonprofit deal brings with it the possibility of a higher price – the organization may have access to more financial options than residents do – but the residents must be willing to surrender control of the park, and perhaps some of their own future equity, in the interest of keeping the mobile homes permanently affordable.
With hundreds of parks sitting on extremely valuable land throughout California, the long-term lease and buyout process will be long and slow. But California land conservationists have shown us that, through diligent effort, it is possible gradually to buy our way out of a regulatory system that generates sticky property rights problems and lots of lawsuits. Maybe it’s possible to do the same with mobile homes.
