As everyone but Rip Van Winkle knows, home prices in California are on a gallop. In Orange County, they’re up as much as 14% over last year. The need was never greater for housing alternatives for people whose bank accounts aren’t bulging.
One option worth promoting is manufactured housing. Many of today’s mobile homes are built with an eye to style, privacy and comfort not found in typical apartments.
Mobile homes are real homes, except that the owner usually doesn’t buy the land on which the home sits. It’s only rented. That’s what makes manufactured housing affordable in comparison with traditional homes.
Precisely because mobile home parks are an important affordable-housing resource, it is good news that rent control on mobile homes has been successfully challenged this year in federal court, in a lawsuit brought by Pacific Legal Foundation representing the mobile home park owners in the city of Cotati, in Sonoma County.
In a ruling finalized several weeks ago, U.S. District Judge William Orrick of San Francisco struck down a key plank in Cotati’s mobile home rent control law. He branded it a “taking” of private property in violation of the Fifth Amendment. this was a landmark ruling for property rights, because it is one of the few times that a court in California has voided any kind of rent control as unconstitutional.
Specifically, Judge Orrick struck down the “vacancy control” plank in Cotati’s law. This provision bars park owners from raising rents when a resident sells his or her coach and a new occupant moves in. It’s a formula essentially for keeping rents artificially low forever, by making it next to impossible for the park owner to get rents back to market levels.
The implications of Judge Orrick’s decision are sweeping, because mobile home rent restrictions are widespread in California.
About 40% of the spaces in the state’s thousands of mobile home parks are under rent control. In Orange County, only San Juan Capistrano imposes mobile home rent control, but there has been lobbying for it in other cities. The issue is being debated in Santa Ana right now.
Some readers might ask, why does striking down rent control help people who need affordable housing? Because price controls create shortages. This iron law of economics doesn’t stop at the boundary of a mobile home park. Capping what park owners can charge is a recipe for shortages in sites for mobile homes.
Indeed, UCLA economics Professor Werner Hirsch found that, as rent controls proliferated in California during the 1970s and 1980s, the number of mobile home parks decreased, as did the number of new mobile homes shipped into the state. Hirsch’s statistical analysis merely confirmed common sense. A landowner’s incentive to offer space for housing goes down as government micromanaging goes up.
Ironically, mobile home rent controls can also jack up prices,the sales prices, that is, of mobile homes located in rent-controlled parks. Sellers of such homes can charge more because a buyer is purchasing not just the coach but also protection from market-level rents. In some cases the price increase is dramatic. The Wall Street Journal reports that in coastal Santa Cruz County, a 1971 mobile home coach in a rent-controlled park sold last year for $85,000, about 16 times its blue-book value of around $5,000.
Because the Cotati law can boost sales prices in this way, it undermines its supposed aim of helping people who need affordable housing. This is why it was ruled, at least in part, to run afoul of the Constitution. The U.S. Supreme Court has said that when a land-use regulation impinges on a property owner’s interests without just compensation, it must “substantially advance” a legitimate state interest; otherwise, it’s a “taking” barred by the Fifth Amendment.
The Cotati ordinance does not advance the creation of affordable housing. Indeed, no mobile home rent control law can do so, because such laws make manufactured homes not just scarcer, but more expensive.
The city of Cotati has appealed Judge Orrick’s ruling to the Ninth Circuit Court of Appeals. In turn, Pacific Legal Foundation will ask the appellate court to broaden the judge’s decision and strike down all of Cotati’s rent-control law on the grounds that all of its restrictions on rent increases, not just the vacancy control plank, have the impermissible effect of spiking mobile homes sales prices.
If the Ninth Circuit upholds even Judge Orrick’s partial invalidation of the Cotati law, the impact will be substantial. Mobile home rent control up and down California will be vulnerable to constitutional assault.
For policymakers, in Orange County and around the state, the lesson goes beyond constitutional law to matters of economic common sense: If expanded housing options are a priority, mobile home rent control is something we can’t afford.
Hubbard and Johnson are attorneys with the Pacific Legal Foundation, a Sacramento-based public-interest law firm. PLF’s Web site is www.pacificlegal.org.
