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Mobile Home Community Sparks Rent Control Conversation

By Guy Rotstein

The Plaza del Rey mobile home park has historically provided cost-effective housing for the Sunnyvale retirement community. In close proximity to the newly constructed Apple and Google headquarters, the park is situated on highly sought-after real estate. Three years ago, a massive private equity firm, The Carlyle Group, purchased the lot for $151.1 million and, in its first year, raised the costs of space-rent by 7.5%. In response to the largest space-rent hike in the park’s history, residents have begun raising money to fund a campaign toward instituting rent control in the city of Sunnyvale. The struggle between The Carlyle Group and residents of Plaza del Rey raises the question of whether rent control is really the answer to Sunnyvale’s housing affordability crisis. 

The Carlyle Group’s motives for raising space-rent are twofold: to encourage short term profitability and, more importantly, to raise the resale value of the lot in the future. However, residents allege that The Carlyle Group has a third and more nefarious incentive for increasing the yearly cost to occupy the park’s space. The increase in space-rent, the residents argue, is a ploy by the private equity firm to put pressure on mobile home owners to sell for cheap. This strategy is predicated on the fact that mobile home owners do not actually own the land their house is on. Essentially tenants, residents of these parks are obligated to pay a monthly fee as rent for the space that their home occupies. As the cost of living becomes increasingly more difficult to bankroll, owners are incentivized to cut their losses, sell cheap, and move elsewhere. This opens the door for firms such as The Carlyle Group to purchase their homes for below market value. After driving out all the residents, the park owners are free to bulldoze the houses, redevelop the lot for permanent homes, and sell the property at huge profits. 

Somewhat ironically, many mobile home owners have a tough time relocating. The cost of disassembling, transporting, and reassembling a mobile home can cost upwards of tens of thousands of dollars which effectively dissuades many owners from moving. Because of this, mobile home owners are often precariously tied down to their property and as a result, financially trapped. This makes mobile home owners more sensitive to rent hikes when compared to the conventional apartment tenant. A rent control policy would have the effect of capping rent increases at a more sustainable level, giving struggling Plaza del Rey residents some breathing room. Due to the recent influx of tech giants such as Apple, Google, and Facebook into the Sunnyvale-Cupertino area, many consider rent control to be a rational response to rapidly increasing home values. 

However, opponents to rent control claim that the policy will actually exacerbate the housing affordability crisis instead of eliminating it. Although rent control may appear enticing in the short term, critics argue that it creates long-term threats for housing markets. For example, rent ceilings can decrease a landowner’s capacity to repair or refurbish their property. By reducing the profits generated by rent, landowners have fewer resources to improve the physical condition of their property.

While this claim is valid, the risks of rent control are not as pronounced when applied to mobile home owners. Although rent ceilings may discourage landowners from repairing or refurbishing their property, the residents of Playa del Rey are technically owners of their homes and are not entitled to any maintenance by The Carlyle Group. 

Still, mobile homes do not completely absolve the negative effects of rent control on the local housing market. Rent ceilings can also discourage landowners from developing new property by reducing the economic incentive to do so. And, if fewer homeowners built by developers, a housing shortage can develop, forcing people to seek residence elsewhere. In theory, rent control can actually compound the problem that it is trying to address.  

The battle rages on in Plaza del Rey, pitting struggling mobile home owners against the colossal private equity firm, The Carlyle Group. Rent control would tremendously aid residents of the park in continuing to reside in the city of Sunnyvale. However, such a policy ought to be carefully implemented in order to deter its drawbacks. While well intentioned, a blanket rent control bill could have dangerous implications not only for landowners but also for the tenants and mobile homeowners it is trying to protect.

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