This evening Anaheim City Council takes up Councilman Jose F. Moreno’s request for an emergency freeze on mobile home park rents. Moreno’s request was made at the previous council meeting, ostensibly in response to a large rent increase facing Rancho La Paz mobile home park residents stemming from a change of ownership.
The city council ought to reject the rent freeze in any form.
For one thing, there’s no emergency. Within a few days of Moreno’s emergency rent freeze request, Mayor Harry Sidhu and Councilmembers Steve Faessel and Trevor O’Neil facilitated a meeting between the new Rancho La Paz owner and residents. As a result, the owner rescinded the rent increase and pledged no increases for at least six months. During that time, the owner and residents During that time, the new owner will work with residents to fashion a fair resolution to that balances residents’ desire for affordable rents with the owner’s right to not operate the park at a loss.
Furthermore, a rent freeze does nothing to stimulate an increase in the supply of housing that is affordable for lower-income families and folks on fixed incomes. Indeed, it can have the opposite effect.
Even though the Rancho La Paz emergency has passed, Moreno wants to press on with his mobile home park rent freeze. No surprise there: the ranch La Paz situation was a pretext for bringing forward a rent freeze ordinance, which forms part of Moreno’s broader political agenda.
Rent control/Stabilization Doesn’t Work
Rent control is a species of price control, and price controls tend to retard, rather than increase, the supply of products subject to them.
Take the city of West Hollywood, for example. It has had rent control and inclusionary zoning laws for years. Yet it has a dearth of affordable housing:
“At the same time, the City of West Hollywood is suffering from a dire shortage of affordable housing. According to the city’s Human Services and Rent Stabilization Department, only 491 units of housing were added in the City of West Hollywood during the period 2013-2015, an increase of only 2% of the total housing stock, which is less than the city’s population growth over the same period. Of the units added, 400 were market-rate units and another 18 were single-family homes. Without increased housing development, and especially the creation of affordable housing units, many West Hollywood residents will be priced out of their city.”
That’s from Councilman Moreno’s political powerbase, UNITE-HERE Local 11.
West Hollywood is no outlier. There’s no empirical reason to think capping rents will result in the increased production of affordable housing of any kind in Anaheim, which everyone agrees is the goal.
Supporters of Moreno’s rent freeze might counter it is temporary and only applicable to mobile home parks. Moreno himself conjures the specter of “rent gouging” and “extreme rent hikes” to justify pushing forward with his rent freeze ordinance – he characterizes as a “simple common sense policy fix to that hazard.“
It’s more simplistic than simple, and definitely not common sense.
It’s helpful understand how the Rancho La Paz situation came about.
Prior its recent purchase by Saunders realty o the recent change of ownership, rents paid by Rancho La Paz residents were 50% or more lower than nearby mobile home parks. The previous owner, for whatever reason, chose not to operate it like a business and charged significantly below-market rents. Obviously, a good deal for the residents and a bargain while it lasted.
In fact, the rents were so low that even if the proposed rent increase had gone through, they would still be somewhat below market.
However, the change in ownership triggered a re-assessment of the park’s value – and the annual property tax skyrocketed by $800,000. The new owner has to pay that bill.
The change in ownership and subsequent re-assessment triggered a large, unavoidable increase in the cost of operating Rancho La Paz. The owner has to cover that cost somehow. That reality is impervious to governmental edict. The city cannot compel someone to operate a business at a loss. That would be unjust and unconstitutional.
In any case, Saunders has pledged publicly that “no existing long-time tenant will be forced from the park due to an inability to pay all or any portion of the rent increase.”
Not quite the villainous Simon Legree being demonized by Moreno – who accuses him of putting “profit over people” – and allies such as OCCORD, which falsely maligns him as a “Newport Beach billionaire” plotting to evict the residents in order to bulldoze the park and development condos.
It’s no wonder he chose to work with Sidhu, Faessel and O’Neil. They were interested in finding a solution. Moreno and his coalition are more interested in using him- and Rancho La Paz residents – as political organizing tools.
Moreno argues his rent freeze protects mobile home park residents from being displaced by “extreme rent hikes.” In fact, a rent freeze could have the contrary effect by making it less likely owners will continue to operate their properties as mobile home parks and instead seek to sell them to developers for re-development as for-sale housing. Blocking or severely limiting to charge fair rents reduces a mobile home park’s value as a mobile home park -and depresses the incentive to continue operating it as a mobile home park. Not exactly a strategy to increase the supply of affordable housing.
Furthermore, it would be a disincentive to invest in park maintenance, repairs or upgrades.
Supporters of Moreno’s proposal object the rent freeze it is only “temporary.” That’s disingenuous. Moreno wants to use a now-rescinded rent increase in a single mobile home park as an excuse to impose a rent freeze on Anaheim’s 27 mobile home parks. Those parks have a combined total of 3,483 spaces. Surely, Councilman Moreno is aware that ending even a “temporary” rent freeze is politically painful. Once a rent freeze is in place, the occupants of those spaces have a strong incentive to organize politically to make it permanent. Moreno’s rent freeze functions as a tool to recruit campaign volunteers for his endorsed council candidates in 2020.
Supporters argue the freeze is moderated by a provision allowing mobile home park owners to petition for exemptions if it prevent them from earning a fair return. Who is to decide what that is? Moreno and his allies may have a very different opinion from the property owners as to constitutes a “fair” return. This provision also puts the city into the business of making those judgments. The recently-passed “living wage”initiative already puts the city manager in the position of settling labor disputes at a number of Resort businesses. Is it wise to add referring rent disputes to that list of responsibilities.
Then again, progressive like to politicize such economic interactions. It increases government power and broadens the pool of people who feel it necessary to make nice with the political and governing class.