Condo-ing mobile home parks: Part 3, who decides?
[Continued from yesterday's part 2 and the previous Part1.]
Two days ago, we looked at Santa Rosa’s Country Mobile Home Park, whose owner wants to condo the land (at least as reported in the San Francisco Chronicle; the owner wouldn’t talk to the newspaper), and yesterday we saw that in a forced condo conversion, land value would be a tussle. Yet why the choice of condo rather than co-op?
It has to do with optionality. Who can force or block what?
I’m blocking your conversion attempt
To sell to a co-op, by definition the land owner must persuade at least a majority of the residents – often a super-majority – that the proposed purchase is a good deal. With a condo, evidently the owner can act unilaterally through a subdivision procedure, putting the residents to a Hobson’s choice: pay the owner’s price – which can include a premium equal to the home owner’s sunk costs lost on relocation – or move.
Like it or lump it
Nor are mobile homes insignificant. According to the Chronicle,
The legislation’s sponsor echoes this post’s themes:
“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.”
The proposed legislation (text in pdf) opens with a policy statement, then quickly gets to a procedural solution:
SECTION 1. Section 66427.5 of the Government Code is amended to read:
66427.5. At the time of filing a tentative or parcel map for a subdivision to be created from the conversion of a rental mobilehome park to resident ownership, the subdivider shall avoid the economic displacement of all nonpurchasing residents in the following manner:
(a) The subdivider shall offer each existing tenant an option to either purchase his or her condominium or subdivided unit, which is to be created by the conversion of the park to resident ownership, or to continue residency as a tenant.
No one can be forced to buy or evicted for failure to buy.
(d) (1) The subdivider shall obtain a survey demonstrating support of a majority of the residents of the mobilehome park for the proposed conversion.
This equity-balancing procedure – the large landholder having to persuade at least a majority of the small landholders – dates back to the English Enclosure Acts, about which I posted by borrowing from Jack Aubrey:
Most of what I know about the Enclosure Acts, I learned in Aubrey-Maturin
Harry glared about him, scribbled sums on a piece of paper, and then said to
Back in
(3) The survey shall be obtained pursuant to a written ballot.
(4) The survey shall be conducted so that each occupied mobilehome space has one vote.
Voting about future use or sale is core to group ownership of property, as we saw in Florida’s Briny Breezes, and similarly core to land-use policy decisions, like the
After the condo conversion – assuming it goes through – the minority non-purchasing residents would receive extra protection akin to that they now have under the state’s mobile-home park ordinance:
(f) The subdivider shall be required to avoid the economic displacement of all nonpurchasing residents in accordance with the following:
(1) As to nonpurchasing residents who are not lower income households, as defined in Section 50079.5 of the Health and Safety Code, the monthly rent, including any applicable fees or charges for use of any preconversion amenities, may increase from the preconversion rent to market levels, as defined in an appraisal conducted in accordance with nationally recognized professional appraisal standards, in equal annual increases over a four-year period.
More fingers, Mr. President
(2) As to nonpurchasing residents who are lower income households, as defined in Section 50079.5 of the Health and Safety Code, the monthly rent, including any applicable fees or charges for use of any preconversion amenities, may increase from the preconversion rent by an amount equal to the average monthly increase in rent in the four years immediately preceding the conversion, except that in no event shall the monthly rent be increased by an amount greater than the average monthly percentage increase in the Consumer Price Index for the most recently reported period.
Assuming this legislation were to pass, one can expect it to be challenged by park owners, who have shown a consistent predilection for litigating mobile-home statutes, particularly at the county or local level.
In response [to ordinances barring mobile home park condo conversions in the name of affordable housing preservation], park owners have filed more than 15 lawsuits against the municipalities.
Though the home owners have a strong case in policy equity, particularly given the unique history of mobile homes and their netherworld status as an asset class, the park owners have a strong legal point: preventing subdivision and sale to the residents, regardless of price, materially compromises their rights as landowners.
The only one that made it through the appellate process was decided for the park owner, said Richard Close, a
Close to the owners?
Mr. Close has been on these issues for a quarter-century, and has successfully represented owners trying to condo their parks:
Mr. Close co-authored “Downward Mobility” (Los Angeles Daily Journal 2007); “Conversion to Resident Ownership: Does it make sense for you?” (WMA Reporter June 2007); “County Leaders Missing Point on Park Conversions” (
In several of these pieces he cites what seems a critical potential fact:
How can low-income residents afford to become homeowners? For low-income residents who elect to purchase their lots, the state provides 3% financing in an effort to preserve affordable housing and to promote affordable purchase housing.
Mr. Close’s assertion is not documented by a hyperlink, and it’s inherently suspect. Three percent financing is well below market, meaning there’s an implicit subsidy involved, which further implies finite resources, which implies competition for those resources … which implies they won’t be much help to mobile home owners. As negative confirmation of these deductions (beyond Mr. Close’s unsubstantiated assertion), the only reference I can find is to CalHome, a state program for which mobile homes are eligible but clearly neither preferred nor encouraged:
Grants to local public agencies or nonprofit corporations for first-time homebuyer downpayment assistance, home rehabilitation, including manufactured homes not on permanent foundations …
Assistance to individual households will be in the form of deferred-payment loans, payable on sale or transfer of the homes, or when they cease to be owner-occupied, or at maturity.
Note: CalHome does not loan directly to individuals.
If I have this straight, CalHome wouldn’t work in a condo situation, it would apply only if a non-profit rode to the rescue and bought the whole park. If I’m right about this, then Mr. Close’s claim is a red herring.
Something fishy?
Can’t blame a guy for trying
Financing is available through banking institutions, Cal-Vet loans and local governments often offer financial assistance through redevelopment funds/first-time home buyer programs.
Furthermore, most park owners offer financial assistance in an effort to facilitate sales and encourage resident ownership in the parks.
Translation: We’ll set the price out of your reach, then offer you a discount to swing your approval.
Remember: residents lack optionality, as in practical economic terms, they cannot move:
“In the old days, if you didn’t like a park, you unhooked and drove to another location,” said Sam DiGiacomo, who lives in a mobile-home park in the town of
Cover of the most recent GSMOL publication
“People think we’re nomads that travel from place to place,” said Suzanne Angeo, a resident of
Suzanne Angeo waters in front of her manufactured home at Country Mobile Home Park in
Many residents worry that going condo will wipe out that investment.
Potential buyers will heavily discount the value of the homes if they have to pay a big premium for the lots, said Will Constantine, a
“When a park owner converts, the mobile-home owners lose about 95% of their homes’ value,” he said.
That has to be hyperbole. It’s likely to be bad but not that bad.
“If a resident wants to sell, the person buying has to buy the lot. If you have to pay $200,000 for a lot, you won’t have much left over to buy the mobile home.”
Mr. Constantine’s numeracy seems no better than Mr. Close’s; in fact, the whole Chronicle piece is missing that crucial element. What price would the owner think equitable?
[Mr. Close's Downward mobility article offers as an example a favorable land purchase in Palm Springs, $88,000 spaces now worth $139,000, which sounds good, except that the cited home owner is now paying $190 in monthly association fees and $100 in taxes, plus a minimum of $440 per month in capital costs (6% x $88,000), for a total occupancy cost of $730 monthly versus the $500 he paid before in monthly rent.]
Let’s play our game, with your home on the line
What price is affordable?
The right price for a mobile home, not a trailer!
What price is financeable? Since we have no information on any of this, we fall back on procedure.
The owner wants all the optionality with none of the restrictions; the residents are rightly terrified that with such a power imbalance, if they lack legal standing they will lose their affordability.
“For many of us, this is our last home; we’ll go from here to the grave or a nursing home,” said Jean Warnes, 74, who chairs the homeowners association at Sequoia Gardens, a Santa Rosa mobile home park that has applied to go condo. It has the same owner as the Country park.
For most of us, housing is not only a comfortable haven for our declining years, it’s also a source of inflation-hedged wealth to be monetized for ourselves or our children:
You should have listened to me when I recommended buying the lot
“When we pass away, our heirs cannot inherit our homes if they must buy the air-dirt underneath. If we go to a nursing home, we will have nothing for our keep.”
“As many years as we’ve paid rent, we could have bought this lot over and over,” said Joan Allen, who has lived in
Probably not, actually. And your rent’s likely been cheaper than the cost of owning a home would have been.
“I feel it would be more advantageous to buy the lot. If we had the opportunity and the price was right, it would be a good investment.”
Once again, it’s back to the question of price – and the related question, at least in the unique asset class of mobile homes, of who has what optionality.
The bill passed the Assembly in May on a 41-31 vote and is eligible for a vote on the Senate floor Aug. 17.
Wonder how they’ll vote?
I predict it will be enacted.
I make laws with my right hand
Then it’ll be litigated.
So sue me
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