Mobile Home Rent Control doesn’t work

Steve Gramm Steve Gramm 5 Comments

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A follow up to Greg Larkin’s post yesterday about today’s Oceanside City Council meeting

Mobile Home Rent Control doesn’t work
by Steve Gramm

It didn’t work in Cuba, or behind the Iron Curtain, but some politicians in San Diego County still think the government should be setting prices for one form of housing—mobile home parks.

It will come as no surprise to my conservative friends that mobile home park rent control has created all kinds of unintended consequences, including expensive litigation, unnecessary bureaucracies, and mobile home park closures. All in all, it’s a complete failure for everyone impacted.

With one exception of course – the politicians who run on a platform of “protecting” mobile home park residents. They’re able to maintain a system of dependency that produces a loyal block of votes for their reelection campaigns.

It’s a cynical bargain. Pro-rent control politicians provide an entitlement that mobile home residents come to expect and rely on. Mobile home residents organize and turn out the vote for these politicians, who then commit the public’s resources to defend the endless lawsuits and bureaucracy resulting from these policies. Park owners, frustrated by government interference in their business and investments, eventually look at other development options for their land, resulting in less housing supply and the disappearance of a housing option that many would otherwise benefit from.

Even worse, politicians allow their hand-picked appointees to sit in judgment, deciding how much a property owner can charge for rent, instead of letting the free market set prices through competition.

And how about taxpayers? Of course they foot the bill for all of this (NEWS FLASH).

It’s almost enough to conclude … wait …. ready for this? … that the government shouldn’t be interfering in the relationship between a landlord and a tenant in the first place.

Shocking, I know!

You would think so if you’ve watched the Oceanside City Council over the past few weeks.

Oceanside is once again ground zero in an epic struggle pitting free market principals and property rights against costly, invasive and ideological government policies promoted more to increase dependency and win votes than they are to serve any public good.

And like any good epic struggle, the battle over mobile home rent control in Oceanside has a super hero and a villain.

Once again, Councilmember Jerry Kern has taken on the good fight, backed up by Councilmembers Gary Felien and Jack Feller. Jerry Kern is standing in his cape with the flag waving behind him, telling a packed house of 300 angry mobile home park residents (aka high propensity voters) that city government neither can nor should require property owners to subsidize their rents. Talk about a profile in courage!

Specifically, Jerry Kern proposed — and Felien and Feller joined him in approving — vacancy decontrol, a reform which would phase out mobile home spaces from rent control as current residents move. Existing residents would continue to receive these benefits for as long as they live in the park.

And then we have Esther Sanchez. To conservatives and folks who believe in free markets, she’s the villain straight from Central Casting. Renowned for promoting her ideological no-growth agenda as an Oceanside Councilmember and member of the California Coastal Commission, Esther tells the crowd what they want to hear: Yes we can! (Make property owners subsidize your rent so you can live two blocks from the ocean for $166/month, regardless of your wealth or income levels.) Yes we can! (Spend another $575,000 on a referendum election to reverse this outrageous vote, just like we were forced to do with the unsuccessful recall of Jerry Kern in 2009.)

I know what you’re thinking … “If rent control benefits don’t end until folks move, then why are they so upset?” For Esther the answer is clear: who is she going to “save” if rent control gets phased out? Vacancy decontrol makes Esther Sanchez less and less relevant over time, and more vulnerable come election season.

But what about the residents who she will rely on to collect referendum signatures? Why are they so upset? In order to explain their motivation, we need to explain more about the unintended consequences created by mobile home rent control (aka “messing with the market”).

In Oceanside, a mobile home coach that was purchased 25 years ago for $2,500 may sell for $25,000 today. Why? A new buyer will pay a premium for the coach because of its location in a rent controlled park. Effectively, under rent control, the value of the underlying property gets transferred from the property owner to the value of the coach. Again, it’s almost as if … wait … price fixing has consequences and rent control doesn’t work!

In case you missed it, that was a teaching moment for politicians and students of economics.

The whole issue is a real study in the danger of entitlements. While a coach owner will always be able to sell his or her coach for its actual value, when you take away the artificial and unintended windfall created by rent control, it’s fodder for the revolution, especially in the hands of an expedient politician like Esther Sanchez.

Yep, another teaching moment provided by rent control!

The truth is that history provides endless teaching moments for those willing to listen and learn. None is clearer than this: Rent control doesn’t work, and we applaud the brave efforts of Councilmembers Jerry Kern, Jack Feller and Gary Felien to right a long-standing wrong.

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Comments 5

  1. I understand both positions and would have no problem if the park owners paid for moving services (for those who want to leave) or offered to buy at reasonable market prices (where they can charge actual rent rather than space rent) but that is not the case from personal experience trying to sell for 15k less than appraisal value and 40k less than what it was purchased at. However it is a great way to force people out and convert/sell the land by making owning coaches unattractive to anyone but actual park owners.

    I know a rebuttal would be “why should park owners pay” so to answer that off the bat, the agreement made was under the rent control guidelines not only for short term but long as well. Which means selling off. Owners can already raise rent each year, just not absurdly so.

    And where in Oceanside is a park that has only $150 or are you fudging the numbers to make your argument?

  2. Free market theory is great if you assume that people are rational, fair, and good business minded.

    At the Summit Park in West Hills California there is no rent control so the owner is free to lure people into the park with low rents and then jack the price up until it is unaffordable and homeowners are forced to walk away. Better still, the owner has made the park unfriendly to investors so loans to buy in the park are non-existent requiring buyers to come in with cash. Buyers, in large park retirees on fixed incomes often dip into their life-savings on a promise that rents will increase by 5% a year.

    After the lease expires, the owner often raises the price of the space rent to more than 20% squeezing out the homeowners. On my cul-de-sac, we have 10 homes and 4 are vacant being taken over by the park owner to resell and lure new buyers in. It is a sad situation for those who become trapped in the scheme to plunk down their life-savings only to have it forfeited to the park owner.

    Rent control came in to being because of these kinds of atrocities perpetrated on unsuspecting families. Our government’s role is to aid in the protection of its citizenry against just such a scenario when greed can rob people of their hard-earned money and it is legal to do so.

    The argument that people don’t have to stay is a moot point given that trying to sell a home in this situation comes up against the fact that the park owner has the right to approve new owners and can choose to cancel a sale making the owner eventually have to give up the home to the park owner who then retains all the equity and improvements made by the owner. People are leaving, yes and having to move in with family because they’ve lost their homes. Some go homeless, others commit suicide.

    Free market principles work as long as all parties are moral, ethical and fair. It is logical that intelligent people would follow these principles but not all people act logically. A property owner who ends up with empty homes and no rent coming in would logically lower rents to attract new buyers. Instead, he raises rents even higher. His purpose is unclear. It looks like he wants to empty the park.

    A moral owner would offer to buy out each homeowner rather than raise the rents until they must walk away from their homes. Logically, it is cheaper to steal the property than to buy it. It may be legal, it’s just not ethical to do so.

    There are those whose consciences have been overridden by greed and it is those people who need to be reined in by society and that means government intervention in most cases.

    Giving owners free reign over their properties is a good principle in theory. They bought the land and should be able to do what they will. In practice, such as in the Summit Mobile Home Park, it is a license to steal. It is a license to destroy families by bankrupting people who have worked all their lives and can no longer start over because of age or health.

    It looks like half the homes in the park are now owned by the Summit and vacancies are higher than it’s been in the 8 or more years we’ve lived here.

    Every month we lose another neighbor who can no longer hang on financially to the ever-increasing rents.

    General principles must give way to practical application if they are going to have any real meaning and need modification when predators find loopholes to legally defraud the public. That is the purpose of government and government should act when needed.

    There are no safeguards like rent control at the Summit in Los Angeles County. We have no representatives acting on behalf of us. We are at the mercy of the free enterprise manipulators unencumbered by conscience or decency.

    So while I agree that property owners have a right to use their own property as they see fit in principle, I cannot overlook the reality of what consequences it delivers to people who are sucked into a situation by deception and unethical practices possible under an unmonitored free enterprise system.

    Where is the protection against predators who harvest the rich crop of honest, hardworking people? What do citizens do when they are powerless against the rights of the owner’s fiefdom? Who will come to the aid of people stuck in the desert of deception where vultures prey on the financial carcasses of those who dared to trust them?

    Your article clearly supports the fact that rent control doesn’t work. Under some circumstances, free enterprise doesn’t work for everybody — just the one’s with the power to use it. For those who have that power, the temptation to abuse it needs to be tempered by the rule of law.

    So where does that leave this argument?

    In the quagmire of differing perspectives.

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