Affordable Housing Institute : US

You own a mobile home. The land is owned by a third party landlord who likes nothing better than jacking up your rents.

Legally, mobile homes that lack land aren’t real estate, and you can’t finance one as real estate; instead you get a chattel loan. You can’t avail yourself of the legal protections of a property owner (like RESPA); you can’t use a real estate broker. The law sees your home as a tin can on wheels

You want to buy the land, don’t you? Reunite your home and the land on which it sits by turning your mobile home park into a condominium?

If you owned a home here, wouldn’t you want to own the land under that home?

Or do you?

As profiled in an intriguing San Francisco Chronicle article, how and with what approvals or consent rights a mobile home park may turn from a rental to ownership is a politically incendiary issue in California:

Tuesday, July 21, 2009

(07-20) 20:22 PDT — Mobile home parks, still affordable to many people, have become the latest housing battlefield. A growing number of park operators want to convert the spaces those mobile homes occupy to condominium ownership – a move that some residents say would price them out of their homes.

A bill being debated in the Legislature would give local governments and park residents more say in such conversions. It would allow municipalities to give more weight to surveys of community residents in deciding whether to approve condo conversions.

Surveys, we discover from reading the proposed legislation, really mean majority-vote referenda – as they should, because a decision to go condo is irrevocable and economically disruptive. If the park owner can compel it unilaterally, then that ground owner can evade the resident rent protections otherwise available to mobile-home park residents under California law.

At issue are two things:

1. Who gets to choose if the mobile home property goes condo?

2. What’s the right price?

Ooh, the Right Price is gonna be a tough question

The ‘right’ price may be fair, it may be affordable, it may be something else.

How can I figure if the Price is Right?

Mobile homes represent unique challenges in public policy surrounding land rights. They are legally awkward, as they are neither true rental nor true ownership. Instead owned mobile homes on rented spaces possess the worst optionality features of both:

• Rental – lack of controllable occupancy cost
• Ownership – substantial capital investment that is lost upon relocation

Neither fish nor fowl, neither ownership nor rental, they place the home owner at a horrible leverage disadvantage versus the park (land) owner, which is why so many states, California among them, have enacted a series of incremental mobile-home-owner protection laws.

Previously I’ve posted extensively about mobile homes, which remain to me America’s great overlooked and underappreciated form of affordable housing.

Mobile homes are also the closest configuration and tenure form we in the US have to the global south’s informal settlements, including the regularization of land tenure and the challenges of municipal infrastructure (which ain’t free).

Traditionally, mobile home park owners rent out lots and maintain common areas such as roads, clubhouses or pools. Residents own their dwellings but pay rent for the lots where they sit.

Relative to the home owners, the mobile home park land owner is in much the same position as a developing-world municipality is with its slum dwellers, with the significant differences that the park owner is not publicly accountable and is out for pure profit.

“Not that there’s anything wrong with profit!”

As in global-south slums, the occupants often lack legal standing, but as their numbers grow, they gain political clout, and in liberal democracies, they learn how to wield it:

“We’re trying to make sure that people whose lives are going to be affected have a voice,” said Assemblyman Pedro Nava, D-Santa Barbara, the bill’s sponsor. “Mobile home parks are affordable housing. The notion that you could have the land sold out from under you is just abhorrent.”

Nava wants the home owners to have a say

[The California-oriented Web site Sham Conversions not only lets you know exactly where they're coming from, but also links to the source material – Ed.]

When a park converts to condo-style ownership, which requires approval to subdivide from the municipality, the so-called air space the mobile homes occupy is offered for sale, often for prices of $100,000 to $200,000, eliminating rent.

This framing entangles two threads that often intertwine but need not necessarily: valuing the land, and rendering the resulting price affordable to the residents.

Critics say park owners are exploiting a loophole in state law that lets them cash in big-time, circumvent local rent control and gentrify affordable housing.

California allows local regulation of mobile home park ground rents, typically at levels whose escalation is tied to some external metric (like CPI) that allows the owner an inflation-hedged return, but not a pain-threshold or highest-and-best-use return. Recognizing that owners of mobile-home park land may want to sell, or may want to use selling as an end-run around regulation, many states have right-of-first-refusal or similar right-to-buy statutes that are activated if the land owner starts a sales process.

Captain, sensors indicate our legal deflectors are losing power

Some owners try to maneuver around this protection by taking sequential actions that achieve the same economic outcome – decontrol – without invoking the resident-protection provisions. We saw these shenanigans in New Jersey’s Paradise Park (see Part 4 of A Christmas Present for Paradise Park), whose owners undertook an I-know-nothing approach to their conversion-oriented sale:

Whether or not you like a mobile home park in your town, says the court, the legislature has decided that existing mobile home park residents are entitled to protection, and the law must carry out that policy conclusion.

Judicial review of individual statutory sections of the Act must, therefore, be guided and informed by these two overarching legislative policies:

1.  To continue the use of mobile home parks on lands currently used for such a purpose; and

2.  To encourage and promote ownership and self-governance by the residents of these parks.

A consistent theme running throughout these exemptions is that none of the transfers or conveyances carry a significant risk of changing the property’s use to something other than as a mobile home park. That is, if properly carried out in good faith, none of these transactions undermine the Legislature’s commitment to encourage park-ownership by mobile home residents, and self-governance in mobile home communities.

In other words, for a sale to be exempt from triggering resident rights, it must not increase the threat to those rights. This is an entirely sound public-policy principle, one that finds its expression in numerous affordable housing preservation statutes.

My sovereign duty is to protect my people

Mobile homes are the dark matter of the affordable housing universe – significant, important, and ignored.

Good faith is the linchpin of this analysis. If courts permit interested parties to utilize these statutorily recognized transactions as legislative loopholes, i.e., as a means of circumventing the procedural and substantive rights bestowed to mobile home park residents in N.J.S.A. 46:8C-11 and N.J.S.A. 46:8C-12, then the public policy rationale embodied in the Act is frustrated.

Because they’ve crept on us as a configuration and tenure (see Mobile homes: how they got here, Part 1, Part 2, Part 3, Part 4), mobile homes are unofficial affordable housing. The resulting jurisprudence of their affordability derives from case and common law – meaning that it’s always evolving, and patchwork, and hence has both gaps and strains.

Found a gap in our land-use laws

But [California's mobile home] park owners say:

1. This is a property rights issue

2. Going the condo route is the best way to capitalize on their investment

3. It benefits residents who can afford to buy or can obtain publicly assisted loans to buy.

The park owners are right that the legislature or courts need to grapple with property rights. If these are judicially compromised, then it’s potentially an eminent domain taking and hence governed by rigorous procedural rules and strong protections of property owners’ economic rights.

That said, the park owners’ arguments boil down to:

1. Touch my property and I’ll sue you for eminent domain taking compensation.

2. This is how I can maximize my return.

3. Anyone living in the park who can’t afford the land price should get help from the government, not me.

Admittedly, this casts their position in a harsh light, based on secondhand reporting in a possibly-unsympathetic newspaper.

You want sympathy? I’ll show you sympathy!

But let’s go back to the issue of process. Who decides?

Santa Rosa’s Country Mobile Home Park is one whose owner has applied for condo conversion, a move opposed by a majority of its residents. Among them are Phil Dion, 70, and his wife, Mickie, 67.

Courtesy of Google (Earth and maps), here’s the property:

1180 Fulton Road, Santa Rosa, CA 95401

Good location; only a couple of miles from downtown and the US 101 freeway, yet at the same time on the edge of development (with all that agricultural land directly to the west).

Do those look like tin cans on wheels to you?

Most striking in the photograph is how good the homes are, and how well laid out on the site. By contrast with some higgledy-piggledy single-wide developments, that look like the back end of a distribution warehouse, these are carefully laid out on subdivided streets. Moreover, Google’s street view (link should work, UPS van emerging) shows a trim bungalow-style complex, with a discreet wall along the main road and the property’s name on an entrance sign. No one driving by would think it a trashy trailer park.

Fortunately, this isn’t our subject property

Thus it seems evident that residents might be interested in buying the land underneath their park.

Will they? At what price? Who will decide?

[Continued tomorrow in Part2.]

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