Mobilehome Parks Report

The Monthly Report Devoted to Investment and Ownership

March 2014`

City-sponsored bill targets long-term leases

California Legislature Update

Assemblyman Roger Hernandez (D-West Covina) introduced AB 2587 at the request of the City of El Monte. The bi adds a ne! subsection to "ection 7#8.$7 of the Mobilehome Residency Law. %enta A&ree'ents that 'eet the criteria of "ection 7#8.$7 are e(e')t fro' oca rent contro ordinances. * +onte ado)ted a 'obi eho'e )ar,s rent contro ordinance in Au&ust 2-$. after a 'easure on the /ove'ber 2-$2 re)ea ed a )rohibition a&ainst rent contro .

AB 2587 !ou d authori0e a cit1 counci to 2)ub ish a notice of )re)aration and )re)are a 'obi eho'e )ar, rent surve134 and to consider3 chan&e3 and a))rove the surve1 at a )ub ic hearin&. Within $2 'onths after the surve1 is a))roved3 the cit1 cou d 2 i'it the base rent4 to an a'ount o!er than the rent that !ou d other!ise be bi ed under the on& ter' ease. 5At east that6s !hat it see's to intend.7 8n a )ress re ease3 Asse'b 1'an 9ernande0 said3 2AB 2587 !i ensure fair

'ar,et va ues for 'obi eho'e renta s)ace b1 surve1in& the re evant 'ar,et area in order to deter'ine a fair base renta rate.4 The bi defines the 2surve14 as 2a !ritten surve1 of renta 'obi eho'e )ar, rent eve s !ithin a &eo&ra)hica 1 re evant 'ar,et area that co')ares and describes the rent eve s in 'obi eho'e )ar,s !ithin the $2 'onths )recedin& the )ub ication of the notice of )re)aration.4 8f 1ou are sa1in& 29uh:4 after readin& that3 1ou are not a one. Before the * +onte cit1 counci ado)ted the rent contro ordinance in Au&ust3

Thomas P. Kerr has four decades of experience in government, politics, and the manufactured housing industry. For seven years, he was executive director of Western Mobilehome Association, the largest business organization of mobilehome par owners. !err has been a consultant to the "alifornia #egislature, the savings and loan industry association, and to developers, par owners, and cities. $e is a mobilehome par owner and property manager himself. A licensed real estate bro er, consultant, and expert witness, %om is editor and publisher of Mobilehome Parks Report and other publications on manufactured housing. $e has instructed seminars and continuing education programs on manufactured housing for the &niversity of "alifornia and the 'lanners( "onference of the #eague of "alifornia "ities..

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the cit1 hired an outside consu tant to do a stud1 of the 'obi eho'e )ar,s there. There are .. 'obi eho'e )ar,s in * +onte3 ran&in& in si0e fro' . to ;2$ s)aces3 inc udin& the a)t 1 na'ed $$s)ace +id&et Trai er <ar,. =n 1 si( )ar,s have 'ore than 5- s)aces. The ar&est is Broo,side +obi e Countr1 C ub *states. >ust as ever1 consu tant earns in Business Deve o)'ent $-$3 the consu tant reco''ended 2further stud13 es)ecia 1 because of the o! nu'ber of res)onses fro' businesses and residents.4 AB 2587 !ou d he ) to oc, in further stud1. The consu tant did understand that there are si&nificant differences bet!een the s'a er3 o der trai er )ar,s in * +onte and those that have 'ore than $-- s)aces. Accordin& 13 the counci e(e')ted )ar,s !ith ess than $-- s)aces. That narro!ed a)) ication of the ordinance to ?ust t!o )ar,s@ Da evie! +obi e 9o'e *states ($75 s)aces) and Broo,side.

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John DeFalco a))eared before the counci on beha f of Da evie!3 e() ained the rent schedu e at the senior )ar, !hich avera&es AB7; )er 'onth3 and as,ed for s)ecia consideration of )ar,s !ith 'ore than $-s)aces but !ith rents ess than A7B)er 'onth. The counci a&reed. The ordinance a o!s )ar,s !ith $-s)aces or 'ore but !ith rents ess than A7B- )er 'onth as of =ctober $3 2-$.3 to ev1 annua rent increases of u) to A5- )er 'onth unti the A7B- cei in& is reached. (The counci can increase the cei in& in the future.) The resu t is that a other rent increases in e(cess of either A5- )er 'onth or above the A7B)er 'onth cei in& in )ar,s !ith 'ore than $-- s)aces are sub?ect to the revie! and a))rova of the cit1 rent revie! board. "o after a the s icin& and dicin&3 * +onte6s rent contro ordinance effective 1 a)) ies on 1 to Broo,side. The surve1 done for the cit1 found s)ace

rents at Broo,side ran&ed fro' A$3.22 to A$3B.. )er 'onth. * +onte6s 'obi eho'e )ar, rent contro ordinance has a one-1ear sunset c ause. Cit1 staff is to 2s)ea, !ith and assist 'obi e ho'e residents and )ar, o!ners to continue to receive fair and reasonab e return of their invest'ents in this co''unit1.4 +an1 of the s)aces at Broo,side are on on&ter' eases so the ne! cit1 ordinance doesn6t i')act the rents at those s)aces or future increases. The thrust of AB 2587 see's to be to &ive the Cit1 of * +onte a too to &et at Broo,side6s on&ter' eases. 8n announcin& the bi 3 9ernande0 said@ 2+an1 of our 'obi e ho'e )ar, residents enter into on& ter'- ease contracts because the1 are afraid of ra)id and si&nificant rent increases. This bi !i )rovide so'e )iece of 'ind to those that are on fi(ed inco'es.4 9o! AB 2587 !i acco') ish that isn6t evident.

2014 by Thomas P. Kerr !nc. POBox 60156 Sacramento, CA 95860-0156 (916) 971-0489 Please respect copyrights. "o# ha$e contracted %or an indi$id#al s#bscription. &eprod#ction is illegal.

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'igh st#dent debt (ill lo(er apartment $acancy rates

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that 'ort&a&e enders no! require.4 2The co d3 hard fact34 A t'an !rites3 2is that risin& student debt !i benefit the a)art'ent industr1 because t!ent1- and thirt1-so'ethin&s !ho are unab e to bu1 ho'es !i have to re'ain in renta housin& on&er than their )redecessors.4 +an1 a)art'ent renters sadd ed !ith bi& co e&e debt )robab 1 !ant to 'ove on and bu1 sin& e-fa'i 1 ho'es3 but the1 can6t. The1 aren6t 2renters b1 choice.4 That 'a1 'a,e the' )ros)ective )urchasers of 'anufactured ho'es and residents of fa'i 1-oriented co''unities. The1 cou d beco'e an infusion of ne! b ood into 'an1 co''unities.

Market opportunity for mobilehome parks?

8t6s an a(io' that 'anufactured housin& does best !hen (a) a)art'ent vacancies are o! and rents are risin&3 and (b) there is a ac, of affordabi it1 in sin& e-fa'i 1 ho'es. "o !e need to !atch the trends in housin& co')etitive to 'obi eho'e )ar,s. 8n ")rin& 2-$;3 the nation6s a)art'ent sector is in stron& condition. /e! renta househo ds are forecast to for' because of the i')rovin& e') o1'ent )icture3 and both +i enia s and e')t1 nesters are enterin& the renta 'ar,et in increasin& nu'bers. Those factors create o)ti'is' for the a)art'ent industr1. "tudent debt is another3 oftenover oo,ed reason the 'u tifa'i 1 sector !i e()erience ra0or-thin vacanc1 rates in the 1ears ahead3 +i,e A t'an !rites in National Real Estae Investor. =utstandin& student oan debt has e() oded over the ast decade3 'ushroo'in& fro' A.B; bi ion in 2--5 to A$.-8 tri ion at the end of 2-$.3 accordin& to a re)ort fro' the Federal Reser e !an" of #ew $or". A))ro(i'ate 1 $$.5 )ercent of student oan ba ances are at east #- da1s de inquent. Data fro' the /e! Cor, Ded a so sho!s the )ercenta&e of 25 1ear o ds !ith so'e eve of student debt rose fro' 25 )ercent in 2--. to ;. )ercent in 2-$23 and the avera&e student-debt ba ance near 1 doub ed E fro' A$-3B;# to A2-3.2B E in the sa'e ti'e fra'e. 2A hi&h a'ount of student debt can ha'strin& a )erson6s abi it1 to bu1 a car3 save for retire'ent3 start a fa'i 1 or ta,e out a s'a business oan34 A t'an e() ains. 28t can a so be a severe i')edi'ent to his or her efforts to bu1 a ho'e3 'a,in& it 'uch harder to save the 'one1 needed for the hi&her do!n )a1'ents

Coming )$ents %or yo#r Calendar

John Pentecost, Amber Monte, and I will discuss Community Closure vs. Renovation at MHIs National Communities Councils Spring Seminar on April 29 at Caesars Palace, Las Vegas. Roderick noll is moderator. Its !art o" the National Manufactured Housing Congress and Expo. #or iin"o$ www.congressande%!o.com&'()*& California Mobilehome ar!o"ners Alli# st ances Annual S$mposium is Ma$ %& st and 'une & at the elegant Mandarin +ri, ental -otel, Las Vegas. .e should ha/e

2014 by Thomas P. Kerr !nc. POBox 60156 Sacramento, CA 95860-0156 (916) 971-0489 Please respect copyrights. "o# ha$e contracted %or an indi$id#al s#bscription. &eprod#ction is illegal.

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+o$ernment isn.t the sol#tion /.
Law of Government Cost Overruns, Federal government owns too mu h property, !ew "ork real estate upended
*a( o% +o$ernment Cost ,$err#ns 9ere in "acra'ento !e are to be )ersuaded that bui din& a ne! do!nto!n arena for the Fin&s bas,etba tea' is a &reat idea. Governor Bro!n !ants to for&e ahead !ith the hi&h s)eed train to no!here even thou&h cost esti'ates continue to s,1roc,et. Govern'ent a 'ost a !a1s underesti'ates the costs of the )ro?ects it invo ves itse f in3 and not b1 a itt e either. This fact )ro')ted Chris *d!ards3 an econo'ist at the Cato %nstit&te3 to for'u ate his Law of 'o ernment Cost ( err&ns. Basica 13 *d!ards sa1s3 ta,e the c ai'ed cost of an1 &overn'ent )ro?ect3 'u ti) 1 b1 23 and 1ou6 be near the fina costH thou&h 'ost i,e 1 sti be o! the fina cost. What is the hidden force behind *d!ards6 Ia!: Are &overn'ents si') 1 ine)t3 or do the1

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nothing would ever be a&&roved. The idea is to get going. $tart digging a hole and make it so big( there*s no alternative to com) ing u& with the mon) ey to "ill it in.+ Based on Bro!n6s insi&ht3 *d!ards sa1s his Ia! can be refor'u ated@ 8f a )o itician sa1s a )ro?ect !i cost A$3 that6s ?ust the do!n )a1'ent. The ba ance due !i be at east another A$.

de iberate 1 o!ba initia cost esti'ates in order to &et )ro?ects a))roved: After readin& about do0ens J )robab 1 hundreds J of such incidents over the 1ears3 *d!ards thin,s the ans!er is both. %e&ardin& o!ba in&3 here6s !hat for'er "an Drancisco +a1or (and for'er Asse' b1 ")ea,er) )illie !rown !rote@ News that the Transbay Terminal is something like $300 million over budget should not come as a shock to anyone. e always knew the initial estimate was way under the real cost. !ust like we never had a real cost "or the #entral $ubway or the %ay %ridge or any other massive construction &ro'ect. $o get o"" it. In the world o" civic &ro'ects( the "irst budget is re) ally 'ust a down &ayment. I" &eo&le knew the real cost "rom the start(

-ederal go$ernment property o(nership The federa &overn'ent o!ns a sta&&erin& .-B3--- bui din&s3 accordin& to the *+,+ 'eneral ,er ices Administration. 8n addition3 the &overn'ent eases 553--- bui din&s3 for a tota of .B$3---. These inc ude offices3 hos)ita s3 !arehouses3 and other sorts of faci ities.

2014 by Thomas P. Kerr !nc. POBox 60156 Sacramento, CA 95860-0156 (916) 971-0489 Please respect copyrights. "o# ha$e contracted %or an indi$id#al s#bscription. &eprod#ction is illegal.

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8n addition to a the bui din&s3 the federa &overn'ent o!ns and eases a re'ar,ab e ;8B3--structures such as )ar,in& ots. The G"A re)orts that the annua o)eratin& costs for a the bui din&s and structures is A.. bi ion. The current 'ar,et va ue of the bui din&s is un,no!n3 but the &overn'ent esti'ated that the re) ace'ent va ue in 2--7 !as A$.5 tri ion. Chris *d!ards sa1s3 2A &ood !a1 to save ta()a1er 'one1 and increase econo'ic efficienc1 !ou d be to start )rivati0in& these assets.4 The &overn'ent itse f sa1s that it has about 773--- bui din&s that are underuti i0ed or unneeded. "!ee)in& a!a1 the red ta)e and )rivati0in& bui din&s and structures !ou d create 'an1 benefits. 2"e in& assets !ou d )ut the' to 'ore )roductive use in the )rivate sector3 !hich !ou d boost econo'ic &ro!th34 *d!ards e() ains. And usin& )ro)ert1 'ore effi-

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cient 1 !ou d save on ener&13 !hich !ou d &ain su))ort fro' environ'enta ists.

doesn6t !ant to raise ta(es.

0e( "or1 City real estate #pended

The e ection of !ill De !lasio as 'a1or of #ew $or" )resa&es tur'oi for rea estate interests. De B asio is s fervent and co''itted ibera !hose ear 1 career inc uded !or,in& as a staffer for for'er +a1or Da id Din"ins. De B asio o!es his e ection to the unions3 es)ecia 1 those re)resentin& )ub ic e') o1ees. 9e ca')ai&ned on a ) atfor' of hi&her ta(es for the !ea th13 and )ut do!n the )ro-rea estate efforts of the )revious ad'inistration. De B asio described +a1or Michael !loomberg6s vision as that of 2to!erin&3 & it01 bui din&s 'ar,eted to the & oba e ite.4 9is soa,-the-rich ) an !as st1'ied b1 Governor Andrew C&omo and state e&isators. Cuo'o !ants to be )resident and

2#ccess no( 3bad4 "te)hen %oss3 inf uentia in /e! Cor, rea estate circ es3 )redicts@ 2There !i be a run of re&u ations3 hi&her costs and other anti-successfu ru es and a!s !hich over ti'e !i ha')er 'a,in& )ro)er returns on invest'ent in /e! Cor,. "uccess is no! considered bad officia 1 and the1 ta , about t!o cities3 the need to redistribute !ea th and an end to u(ur1 housin& deve o)'ent in favor of affordab e housin&.4 !ncrease property ta5es to increase re$en#e <ro)ert1 ta(es is one of the fe! ) aces !here the 'a1or can turn to brin& in 'ore revenue. Ta( assess'ent ro s are due to rise b1 8K be&innin& in >u 13 the second-hi&hest &ain since $##B.
2This sho!s the &a'e that )o iticians ) a134 rea estate bro,er %obert Fna,a !rites on globest.com. 2The1 can sa1 ta( rates !i not &o u)3 but the1 !i rise b1 virture of increasin& )ro)ert1 assess'ents.4

2014 by Thomas P. Kerr !nc. POBox 60156 Sacramento, CA 95860-0156 (916) 971-0489 Please respect copyrights. "o# ha$e contracted %or an indi$id#al s#bscription. &eprod#ction is illegal.

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Mobilehome Parks Report

%he Monthly 1eport on 2nvestment and 3wnership #O$ %&'(% )a ramento C* +(,%&-&'(% .+'%/ +0'-&1,+ e-mail2 mhparksreport3tpkerr-in 4 om Forwarding and *ddress )ervi e 5e6uested

March 2014
Dor fisca 1ear 2-$;-$53 the cit1!ide 'ar,et va ue of )ro)erties increased B.BK to A#$;.8 bi ion. 2The rea estate co''unit1 has been the AT+ for /CC6s bud&et34 Fna,a sa1s. Bet!een )ro)ert1 and transfer ta(es3 revenue)roducin& )ro)erties account for .8K of the cit16s bud&et3 coverin& virtua 1 ever1 service fro' )o ice and fire to correction a&encies. The Minnesota Center for Fiscal E-cellence finds that /CC co''ercia o!ners )a1 a ratio of a 'ost si( ti'es !hat ho'eo!ners )a1. The ne(t 'a?or cit13 Boston3 is under four. Accordin& to a ,t&dley %nc+ re)ort3 /CC office bui din&s have the second hi&hest ta(es )er square foot at A$;.#5 in 2-$2. Washin&ton DC is hi&hest at A$5.5-. "an Drancisco ta(es are A5.-5Lsf. Ta( increases are 'ost 1 )assed on to office and retai tenants. =ffice easin& bro,ers sa1 tenants are oo,in& to 'ove to /e! >erse1. %ea estate ta(es on residentia are a so hot 1 debated. Condo o!ners recent1 suffered a 7.;K increase to an avera&e of A73#87H but co-o)s on 1 increased b1 5.5K to AB32;7. "in& e fa'i 1 ho'es on 1 sa! an increase of ..8K to A;35#8. 9o'es are ta(ed at their rent )otentia rather than their va ue. De B asio )a1s A23#-- a 1ear in ta(es for his to!nhouse va ued at A$.$ 'i ion. The a!suit sa1s that the s1ste' is inherent 1 i'ba anced3 !ith those in a)art'ents )a1in& .7K of the )ro)ert1 ta(es !hi e accountin& for 2.K of tota 'ar,et va ueH and those in ho'es )a1in& on 1 $5.5K !hi e 'a,in& u) ;8K of tota va ue. The i'ba ance is de iberate3 )art of a decades- on& effort b1 state a!'a,ers and Cit1 Counci 'e'bers to ,ee) the cit16s residentia ho'eo!ners - at one )oint3 considered the 'idd e c ass - fro' eavin& the cit1. But the a!suit sa1s the i'ba ance a'ounts to discri'ination3 because ho'eo!ners are dis)ro)ortionate 1 !hite or Asian3 !hi e renters are dis)ro)ortionate 1 b ac, or 9is)anic3 co')ared to the cit16s )o)u ation.
This

Class action la(s#it o$er property ta5es The cit16s )ro)ert1 ta( s1ste' has on& been critici0ed for favorin& ho'eo!ners over renters3 and a bo'bshe c ass action a!suit fi ed in Debruar1 char&es that it discri'inates a&ainst b ac,s and 9is)anics.

This publication is intended to provide accurate and authoritative information about the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting or similar professional services. If legal advice or other expert assistance is required, the service of a competent professional should be sought.

2014 by Thomas P. Kerr !nc. POBox 60156 Sacramento, CA 95860-0156 (916) 971-0489 Please respect copyrights. "o# ha$e contracted %or an indi$id#al s#bscription. &eprod#ction is illegal.