Free Market Ideals call for Amending the Rent Control Ordinance in Oceanside

Greg Larkin Greg Larkin 5 Comments

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The Oceanside City Council faces a final vote tomorrow (Wednesday) on a measure proposed by Councilman Jerry Kern that would return free markets to city mobile home parks, thus simply allowing park owners to adjust rents to the market rate only when leasing to a new tenant.  Don’t let Councilmember Esther Sanchez and her regulatory, nanny-state minded cronies tell you any differently, although they will try, while draining the city of needed tax resources.

It’s basic economics, one that Sanchez doesn’t comprehend.  As a North County Times editorial recently noted, “It is axiomatic that if government controls the price of a thing, it distorts the market. With normal markets for goods — including property — prices rise (or fall) to points where the demand clears the supply … it is not surprising that Oceanside mobile-home-park owners have chafed under the weight of rent control imposed in that city in 1984 … not so obvious is that by suppressing the market rate for space in the parks, the pressure is increased on housing prices elsewhere.”

A little wonkish, maybe, but that’s exactly why emotion instead of facts often rule the day in these types of debates. Thank goodness that Kern and council colleagues Jack Feller and Gary Felien have an understanding of economics, as well as the courage to stand up for good public policy in Oceanside. The three voted previously to support an amendment to the city’s rent control ordinance, but are surely facing an onslaught of emotionally-based criticism heading into tomorrow.  The three need support, while Sanchez and Mayor Jim Wood could use a dose of reality, even if wonkish.

Councilman Kern also notes (in the NC Times):

“Let’s be totally clear: The proposal for a vacancy decontrol amendment to Oceanside’s current rent control ordinance retains full rent control for the current residents. Their rent will not be raised beyond what the current ordinance calls for, and they will be protected as long as they live in their current space. Rents will be adjusted to market rate only when a new tenant takes over the space.

“Rent control is a bad deal for the taxpayers of Oceanside. Over the past 20 years, the city of Oceanside has spent over $3 million on litigation and administration of the Mobile Home Rent Control Ordinance, including $325,000 that was transferred from general fund reserves to the Mobile Home Program Fund. These are tax dollars that should go to fund our basic services, libraries and recreation programs.

“Rent control laws governing mobile-home parks have also ‘confiscated’ a portion of the park owner’s equity in the property and transferred it to tenants. Rent controls constitute a ‘regulatory taking’ because the regulation has unfairly singled out mobile-home property owners to bear the burden to subsidize low-income residents. It is also not known how many of the current residents would qualify for housing assistance, since there is no means testing for space renters.”

By improving the current ordinance to allow owners to make fundamental, free market decisions when it applies to new renters, Kern and his colleagues are doing the right thing. They deserve support.  Please consider contacting the councilmembers today, or attending the Oceanside City Council meeting tomorrow, May 25, at 6:00 p.m.

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Comments 5

  1. It is unfortunate that Mr. Kern and Mr. Larkin fall into the trap that mobile home parks are free markets. They fail to realize that by definition and practice, mobile home parks (mhps) are anything but.

    In the free market, a seller and a buyer negotiate a price for their transaction. In the sale of a mobile home, the park owners – as a third party – can, at the very least, give final approval of the transaction and, at the very most, influence the sale price of the property by manipulating the space rent for the buyer, forcing the seller to devalue their home and investment.

    Some would say that this is a fair recouping of the property value that has been unfairly transferred to the home owner. In both the Yee v Escondido (US Supreme Court, 1992) and the Guggenheim v Goleta (9th Circuit Court of Appeals, 2010) cases, the courts found that there was no taking of private property, thus no unfair transfer of park owner profits.

    In fact, Justice Sandra Day O’Connor likened the park owners to a public utility; in so much that they operate as a psuedo-monopoly and because they effectively have a captive market, their pricing can, in fact, be regulated under existing law. She went on to conclude that their agreement to allowing the home owners’ easement onto their property was an acknowledgement of the regulation by which they need to operate.

    Of course, there is a remedy for them: They can, in full compliance with the law, close, sell or repurpose their land. It seems curious that if their land is so valuable – so much so that they are losing profits at the hands of the entitlement-minded home owners – that they would invest such a large amount of time, money and effort to fight rent control ordinances (which only restrict the amount of money they can make) and not invest that same amount of effort to realize their property’s full potential.

    The truth, as was discovered through a staff report at the Oceanside Council meeting on May 18, is that park owners are still making a very good return on their investments; even the investments made some 40-45 years ago. The park that was selected as a example showed returns that landed between 15% to 40% on their initial investment. Which business today in San Diego, or California, that is realizing that level of return on investment, is complaining that they’re suffering? Ads on the radio today urge listeners to invest with firms that are guaranteeing 8% to 10% return. Maybe they should invest in mobile home parks instead?

  2. Don Greene-
    When your mom purchased her mobile home that you now live in with her, didn’t she have her choice of where to live? She entered into that contract with a full understanding that rent was going to begin at market and only increase by the CPI every year. Why shouldn’t residents in Oceanside be treated in the same matter?
    Unfortunately your knowledge of the legal cases surrounding this issue couldn’t be more wrong. In Guggenheim it was undisputed that 90% of the coach value was actually transferred from the park (land) owner to the renter. In the City of Goleta homes were selling for well over $100,000 while only valued for fewer than $15,000. How is that fair?
    In Escondido, you have no litigation, no closures and for the most part harmony with landlords and tenants. And the reason for this—Vacancy Decontrol. Why on earth would you not want the same for the Oceanside renters?
    At the end of the day, if you don’t like living in a mobile home park, move. Sell your home or put a new set of wheels under the one you and your mom live in now and move. The effort and grief you and your fellow residents put your communities through are tiring and in the end will be rejected.
    Good luck!

  3. It is refreshing to see Republican city council folks standing tall for the free market. Maybe their motives are not pure (whose are?), but it’s the right thing to do — even in the tepid form adopted.

    It has always been amazing to hear conservatives and even a few libertarians(!) justifying this DE FACTO confiscation (via rent control) of the value of the mobile home parks from the owners. I understand the greed, but there is no moral or economic basis for such theft.

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