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Rent Control is the Wrong Prescription for California’s Housing Crisis

September 16th, 2016 No comments

How much sense would it make if your doctor applied a band aid to fix a broken leg? None whatsoever, however, this is how misdirected some prescriptions are to solving California’s housing crisis.

According to analysts, government imposed regulations and fees are leading contributors to why California is the most expensive place to live in the U.S., placing homeownership out of reach for many middle-class Californians. Instead of addressing the root cause, some policymakers are championing rent control, despite the fact that it has never effectively preserved or expanded affordable housing stocks.

One of their favorite targets is manufactured housing communities or mobilehome parks, as if private property owners are responsible for the housing crisis. However, when manufactured homes offer all the quality and comfort of a stick-built house, at prices 30% less, government should create incentives to build more mobilehome parks and not less.

Rent control’s failure is obvious when applied to manufactured homes, primarily, creating a tradeoff between lower rents and the capital investments parkowners must make to protect a park’s viability, quality of life and the value of the privately-owned homes located in the community. To understand how it has truly failed to increase the stock of affordable housing, one must also understand how parks operate.

Unlike traditional rental property such as apartments, mobilehome parks operate like small villages or cities. They provide all the benefits of a traditional neighborhood (i.e. security, social interaction, open space, and close proximity to needed goods and services) and they appeal to all income levels. The notion that all mobilehome community residents are poor and in need of financial assistance is wholly inaccurate. The only real difference is the park’s residents own the manufactured home, and the parkowner generally owns the land beneath it.

Rather than collect taxes like cities, parkowners collect rent to cover property taxes and fund essential neighborhood services, such as park management, roads, lighting and landscaping. In some cases, rents also cover all utilities, including cable. Some parks include clubhouses, fitness rooms, pools and golf courses. Consequently, when the government imposes a rent control ordinance that reduces or freezes rents at below market rates, it threatens a community’s quality of life.  Just like cities, when revenue does not exceed expenses, essential services are reduced or eliminated altogether, and as the maintenance of neighborhoods decline, so do property values as blight takes root.

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Government subsidies for traditional housing and apartments require means-testing; however, mobilehome parks are the exception. It’s true. In fact, rent controlled mobilehomes in Malibu California are selling for $4 million dollars or more!

As a consequence, parkowners who are under rent control are required to personally subsidize the housing of residents regardless of income or need, forcing these small business owners to close parks when rents no longer support the balance between affordability and sustainability.

Under these circumstances, there is also no financial incentive for builders to expand or build new mobilehome parks, limiting the potential for more affordable housing and local jobs.

This is why state and local government regulators should abandon the current course of driving up the cost of housing with costly, unneeded regulations, only to hastily impose price controls that don’t work once homeownership becomes unattainable. It is time for real and meaningful solutions. Making housing construction less expensive and more plentiful so that the savings can be passed on to all prospective homeowners is a good place to start. WMA and our members look forward to fully participating in this important public policy discussion. ##

sheiladey-wma-westernmanufacturedhomecommunitiescalifornia-postedindustryvoicesmhpronewsSheila Dey
Executive Director
Western Manufactured Housing Communities Association

(Editor’s Notes: Sheila Dey’s article is republished here with her written permission. This relates to a recent Daily Business News article by Joe Dyton on rent control – linked here – and is a different take on the same topic shared by UMH CEO Sam Landy, JD – linked here.  Other perspectives on the rent control – or other MH industry related issues – are welcome.)