Resolution Number 05-02-16-06RESOLUTION NO. 05-02-15-06
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN JUAN
CAPISTRANO DENYING PETITION FOR RENT INCREASE BY
OWNERS OF SAN JUAN MOBILE ESTATES MOBILE HOME PARK
WHEREAS, the owners of San Juan Mobile Estates Mobile Home Park filed a
petition for a rent increase for certain coach spaces with the City of San Juan
Capistrano ("the City") pursuant to the City's rent control regulations under Municipal
Code section 2-2.903(a), and
WHEREAS, the rent increase petition proposes an increase in space rents for
three designated spaces, i.e., spaces 101, 153, 166 (Ex. L-1, Vol. 1) so that the new
rent will be $1,000 per month for each respective space, and
WHEREAS, any mobile home park space within a park is subject to the increase
limitation provisions of Municipal Code sections 2-2.902 et seq., subject to the exception
of section 2-2.903(h)(2)(i)[long term leases], and
WHEREAS, the proposed increase exceeds the maximum annual allowable
-- increase of 2.4 percent for the present applicable year as established by the consumer
price index set forth in Municipal Code section 2-2.902(d), and
WHEREAS, Municipal Code section 2-2.902(d)(4)&(5) permit a park owner to
petition for a rent increase approval for one or more spaces within the park beyond the
CPI limitation at any time during the year subject to the rent review hearing procedure of
the Municipal Code, and
WHEREAS, the City has accordingly instituted the appropriate rent review
hearing procedure required under Municipal Code section 2-2.903 et seq. as to whether
the proposed increase is fair and reasonable, and
WHEREAS, Municipal Code section 2-2.901(c) provides that one of the purposes
of mobile home rent control is to "...protect the residents of mobile homes from
unreasonable space rent increases, recognizing the need of mobile home park owners
to receive a fair, just, and reasonable return", and
WHEREAS, the City Council appointed a highly qualified hearing officer (Michael
Lowy) to conduct the hearing officer rent review hearing, and
WHEREAS, the hearing officer conducted three days of administrative hearings
and has rendered a 57 page recommendation for denial of the proposed rent increase,
and
02-15-2005
WHEREAS, the Housing Advisory Committee in review of the hearing officer's
recommendation voted unanimously to accept the hearing officer's findings, and
WHEREAS, the City Council conducted a review hearing on February 1, 2005 to
consider further argument by the parties in this matter, and
WHEREAS, the City Council has carefully considered the administrative record,
hearing officer recommendation, and final arguments presented by the parties to the
City Council at its meeting of February 1, 2005,
NOW THEREFORE, the City Council of the City of San Juan Capistrano does
hereby find and conclude as follows:
Section 1. Conclusions.
The City Council concludes that the proposed rent increase for spaces 101, 153,
and 166 is not fair and reasonable in light of the whole record, and therefore, the
proposed increase is denied. The hearing officer recommendation is incorporated
herein by reference in support of the Council's conclusions. The City Council makes the
following findings below.
Section 2. Findings.
a) The proposed increase exceeds the maximum allowable rent increase
permitted and is therefore to be evaluated under the non-exclusive criteria
provided for in the City's rent control regulations. The hearing officer found
that there was conclusive evidence that the owner is making at least a 14%
annual return on investment.
b) The park owner based his rent increase request on a premium transfer
theory which is based upon assumptions that rents at the park are below
market and that the city's rent control regulations caused the purchaser of a
mobile home on space 166 to pay a exorbitant premium for the home.
The hearing officer found that the park owner assumed, without proving, that
rents at the park were below market, and secondly, that the weight of the
evidence indicated that, in fact, purchase prices were paid for mobile homes
in California coastal areas well over book value in non -rent controlled mobile
home parks as well. One study showed that rents in a mobile home park in
the coastal city of Carlsbad were comparable to the rents charged at this
park. The hearing officer further found that the likely cause of the premium
values occurring in coastal mobile home parks arose from a "hot" housing
market affecting the single family home market with its ripple effects on other
housing such as mobile homes.
2 02-15-2005
In conclusion, the City Council concludes that the park owner has not proven
his contention that city rent control regulations caused: a) below market rents
at the park; or, b) a so-called premium to be paid for mobile homes.
c) The federal cases relied upon by the park owner do not dictate that the
requested increase must be granted here. The hearing officer noted that the
Cashman v. Cotati Ninth Circuit opinion is awaiting an en banc review
Determination. Further, it, and the Richardson case, were facial challenges to
rent Control regulations, wheras this rent increase petition is the subject of an
administrative "as applied fact finding hearing review" to determine whether
under the City's Ordinance criteria the proposed increase is fair and
reasonable.
In conclusion, the City Council finds that it is apparent that the park owner has
done well to earn a 14% annual return on investment after adjustment for
inflation. However, as found by the hearing officer, the park owner has not
shown convincingly that rent control has necessarily caused an appreciation
of mobile home coach market value, or that the park's existing rents are
below market. It is therefore necessary to deny the rent increase in order to
protect residents from what the Council deems to be an unreasonable rent
increase by the owner, while at the same time determining that the need of
this park owner to receive a fair, just, and reasonable return on investment
has been satisfied as shown by financial analysis in the record.
Therefore, the conclusions of the hearing officer are accepted by the City
Council for the reasons stated herein.
PASSED, APPROVED AND ADOPTED on this 15th day of February 2005.
ATTEST:
t2
R. MONAHAN, CITY CLERK
3 02-15-2005
STATE OF CALIFORNIA )
COUNTY OF ORANGE )ss -
CITY
ss.CITY OF SAN JUAN CAPISTRANO )
I, MARGARET R. MONAHAN, appointed City Clerk of the City of San Juan Capistrano, do
hereby certify that the foregoing Resolution No. 05-02-15-06 was duly adopted by the City
Council of the City of San Juan Capistrano at a Regular meeting thereof, held the 15`h day of
February 2005, by the following vote:
AYES: COUNCIL MEMBERS: Allevato, Bathgate, Soto, Swerdlin, & Mayor Hart
NOES: COUNCIL MEMBERS: None
ABSENT: COUNCIL MEMBERS: None