ATTACKS ON MHP RENT STABILIZATION – PART 1

ATTACKS ON MHP RENT STABILIZATION

The GSMOL Board of Directors thinks California’s mobilehome park rent stabilization ordinances (RSO’s) are under attack. They are right.

The Board has asked me to write a three-part article on the situation. I’m going to answer 3 questions: (1) What is going on? (2) What might happen (or is already happening) to your park? and (3) What can do you do about it?

[There is an IMPORTANT NOTE at the end of this article. Do Not miss it.]

My name is Deane Sargent, and for the past 32 years I’ve specialized in helping resident groups purchase the mobilehome parks where they live. When called upon by attorneys representing residents in rent stabilization disputes, I’ve also served as an expert witness, testifying on behalf of the residents. I am not an attorney, so I can’t give you legal advice. I am basically a “finance guy,” having analyzed hundreds of MHP financial statements to arrange financing for resident park purchases, or to form an expert opinion for court or administrative hearings.

I am also pretty blunt.

1. What Is Going On?

– There are more then 100 different MHP RSOs in California. Many more jurisdictions (cities and counties) are considering RSOs at this time.

– Park Owners (“POs”) hate RSOs.

– POs have money and are organized. So, they can hire “experts” to testify about how their attempts to thwart rent stabilization are perfectly fair and justified. In many cases, though, this is BS.

[I actually don’t have a problem with the proposition that PO’s should be able to enjoy a reasonable profit, and to adjust park space rents to compensate for inflation and improvements to the park. Fair enough.]

Every investor today thinks mobilehome parks are great business opportunities, and wants to own one (or at least, part of one). These investors have been sold on the idea that MHP ownership provides stable investment returns and high profits, like (to quote one notorious park owner) “a Waffle House where the customers are chained to the booths.”

 

So, investors throw lots of money at syndicators who are looking to buy MHP’s. Real estate syndicators (sometimes called general partners) strategizes real estate investments and then secures financing from individual “passive” investors. The syndicators must find investments that justify their fees, so they throw piles of money at current park owners to get them to sell. As a result, investors often pay much more than market value to acquire a MHP.

Many syndicators and investors do not view MHP residents as real human beings. Rather, you folks are viewed like ‘stock certificates’ that pay dividends on a regular basis. And the syndicators have to figure out how to increase the return (dividend) on their investment. They also want to increase the value of the MH park where you live (that is, their “stock certificate portfolio”).

They have many ways to try to do this:

 

– Attack your RSO with ridiculous rent increase demands.

– Make it difficult for you to sell your home, so the park owner becomes the only buyer.

– Convince new residents to give the park ‘right of first refusal’ on their home when it’s sold.

– Rent ‘park-owned homes‘ (POH) on leases that circumvent the RSO.

– Bring in new homes, ignore the RSO and get new residents on leases.

– Try to convert 55+ communities into ‘all-age’ parks.

– Cut back on maintenance and other services, such as limiting clubhouse use.

– Increasingly harass residents with “7-day notices,” in the effort to drive them from the park.

– Cover available space with solar panels, to benefit the park owner (esthetics be damned).

– Submeter water and anything else the PO can imagine.

– Use other creative ways to increase the PO’s income, or lower his expenses, or both.

 

We will discuss all these issues in the NEXT installment.

IMPORTANT NOTE: If you have a local mobilehome park RSO, get a copy of it and read it. Find out who in your local government administers the RSO. Get to know them. Think about what support you might be able to get from them.

If you don’t have a local RSO, locate your Regional GSMOL representative (See listing in the Californian magazine – GSMOL.com) Contact them and find out why you don’t.

We’ll discuss all this next time.

Deane

Deane Sargent is the Managing Principal at PMC Financial Services, Louisburg, Kansas (formerly of Oregon by way of California). Deane.f.sargent@gmail.com. 415-271-3919 This article was originally published in the GSMOL Californian in the Spring 2024 issue. (GSMOL.com)