Large Mobile Home Buckles Under Rent Control Dispute

The future of a large senior citizens mobile home park in California is in play right now, its residents and owners unable to settle a dispute over the “fair” price for lot rents in the community.

Besaro Mobile Home Park in Fremont, California has 236 spaces.  The park is only for residents age 55 and older.  The park is under a rent control agreement for Alameda County that limits rent increases to 3 percent per year. Rents currently average about $669 per month.  The owners propose to raise rents to $895 per month – an increase of about 33 percent.  For some residents who are grandfathered in at lower rents, though, the increases could be as high as 49 percent.   At these prices, rents are relatively low.  Comparable parks in the area apparently charge above $750 for rent.

The owners of the park feel that the prices do not permit them to recoup an adequate return for the land, which they value at approximately $68 million. Under current rents, the park generates a steady, if not exciting return of about $1 million per year in net income.  That is less than 2 percent.

One option for the ownership group would appear to be to close the park.  Yet there is a downside to that – the Alameda County rent control ordinance has another provision that requires park owners to provide financial assistance to help residents with the cost of moving if the park is closed.  The park owners have taken their concerns to the 9th Circuit Court of Appeals, but have not been able to get relief.

Rent control’s benefits and costs are hotly debated.  Mobile home parks are different in some key ways.  For one, while land is by nature rented in a mobile home park, both residents and land owners can have ownership of the units.  Mobile homes are not very mobile.  Generally, the resident moves out of a park, but the unit stays.  For this reason, the “winner” in a rent control ordinance on a mobile home park is the unit itself.  Those units experience a significant gain in their value, depending upon the degree to which rent control lowers the monthly rents below prevailing market rates.

Secondly, zoning rules often limit the ability of new mobile home parks to be developed.  So the supply of lots is often fixed.

Hall v. City of Santa Barbara considered the concept that mobile home park owners suffer a takings when a park is put under rent control.  It may amount to a physical occupation, or it may not – the decision only considered it as a factor in play.