OK of mobile home rent control likely

After Tuesday, Modesto's three-year bid to steady rent increases in the city's mobile home parks could be all over but the lawsuits.

The City Council is expected to approve a measure that would limit rent increases in mobile home parks to 6 percent a year.

It's a move that defies the limited-government principles of the six council members who support it. They maintain they're turning to rent control only as a last resort.

It's also a vote that appears likely to draw a lawsuit from Equity LifeStyle Properties, the Chicago landlord that raised rents by hundreds of dollars a month in Modesto's Coralwood mobile home park over the past few years.

The company advised Modesto City Attorney Susana Alcala Wood on Wednesday that "ELS has incurred millions of dollars in litigation expenses challenging rent control in various cities, including the city of San Rafael. Moreover, if ELS prevails, it will be entitled to recoup its attorney's fees."

Modesto took steps to protect itself from the likelihood of the company's challenge:

It hired a rent control consultant to study the need for an ordinance in the city.

The city's proposal allows park owners to raise rents in keeping with the consumer price index, which tracks average increases in most goods and services. The index was 3.2 percent in 2006.

Modesto's ordinance would let park owners increase rates by the full index, or up to 6 percent. It also allows park owners to increase rent by 10 percent when a tenant leaves.

Modesto created a separate program that exempts park owners from rent control if they offer residents multiyear leases. Those arrangements would allow rent increases of up to 7 percent a year.

"I'm very happy that it's coming to the ending it's coming to," said Councilman Will O'Bryant, who helped guide the rent control measure to this point after hearing of sharp hikes at Coralwood in 2004. "I feel we've helped the seniors and we have a good partnership with the park owners."

Here's a look at some key questions that could surface at Tuesday's council meeting:

Q: Who will benefit from rent control?

A: About 1,400 people live in eight Modesto mobile home parks. All of the parks are reserved for people 55 and older. Nearly 40 percent of them earn less than $20,000 a year, and 67 percent earn less than $30,000 a year, according to a survey conducted by Berkeley attorney Kenneth Baar, Modesto's rent control consultant.

Q: Aren't mobile homes "mobile"?

A: Not really. It can cost thousands of dollars to move a mobile home, and some parks do not accept older models. That means some mobile home park residents can't leave their houses without abandoning their investments.

Q: Will any other cities follow Modesto's lead?

A: Equity LifeStyle owns parks in Ceres and Riverbank. Both those cities are considering rent control measures.

Q: Who will pay to administer this new law if the council approves it?

A: The city expects to spend about $183,283 to get the program up and running. Some of those costs could be passed on to residents in parks that would benefit from rent control. However, parks that offer multiyear leases under city-approved agreements won't be subject to those fees.

That cost could balloon into millions of dollars a year, which is one reason Modesto City Councilwoman Kristin Olsen is leery about supporting it.

"It doesn't seem worth it to spend $200,000 to $1 million on an ordinance that would benefit 50 to 70 people," after the parks that use multiyear leases are taken out of the equation, she said.

Q: Will this proposal hold up in court?

A: Baar told the City Council's Finance Committee this week that Modesto's proposal is "park-owner friendly." He said it likely would withstand legal challenges because it allows parks a fair way to make a profit on their investment.

Equity LifeStyle has blocked San Rafael's rent control ordinance. But Baar said that city did not undertake studies to demonstrate a need to limit the fees park owners can charge. Modesto did, which could help protect its proposal.

Q: Why was Equity Lifestyle singled out as a villain at council meetings?

A: Equity LifeStyle in 2004 embarked on an ambitious plan to bring the rents it charges in Stanislaus County mobile parks up to par with the rising cost of real estate in the region. It sent letters to residents saying it was implementing the increases partly from fear that California would enact tougher rent control reforms.

Ironically, its rent increases of $50 to $100 a month spurred a movement for rent control in Ceres, Modesto, Riverbank and the Stanislaus County Board of Supervisors.

Since then, the company has offered to create a hardship policy for residents and scale back its planned hikes. Policy-makers were not satisfied by the company's offers.

Q: Will the city's other mobile home parks offer long-term leases, or will they be governed by rent control?

A: Representatives from a mobile home industry group believe that seven of the city's eight parks will offer the multiyear leases to avoid the stricter policies in the rent control measure.

Q: If the parks offer multiyear leases, why is rent control necessary?

A: Modesto officials say park owners would have less incentive to adhere to the terms of the city-approved leases if they're not subject to rent control.

The multiyear leases are "a good solution, but it's going to take a combination of the memorandum of understanding plus the rent stabilization because this company will never stop," O'Bryant said, referring to Equity Lifestyle. "They just gouge people."

Q: Does the ordinance call for a rent rollback?

A: That's up to the council, but Wood said it would be appropriate and legal for the city to set rents to April 30. That's the day the council formally signaled its intent to pursue rent control.

Bee staff writer Adam Ashton can be reached at aashton@modbee.com or 578-2366.

This story was originally published August 13, 2007 at 7:05 AM with the headline "OK of mobile home rent control likely."