About Opt In

Posted on June 20, 2016

The following information was presented by the Housing Department to the HCDC – Housing and Community Development Commission – on June 9, 2016. Please note that twice the HCDC has voted NOT TO PROCEED with any further exploration of Opt In. However, because the City Council, by majority vote, approved such further exploration, the Housing Department will be attempting to set up a Committee of Park owners and Park residents to come up with a “compromise.”

HCDC AGENDA: 6/9/16

ITEM: (0

CAPITAL OF SILICON VALLEY

TO: HOUSING AND COMMUNITY

DEVELOPMENT COMMISSION

FROM: Jacky Morales-Ferrand

SUBJECT: SEE BELOW DATE: June 2, 2016

SUBJECT: DRAFT WORKPLAN FOR THE DEVELOPMENT OF A MOBILEHOME

PARK “OPT-IN/STAY-IN-BUSINESS” PROPOSAL

RECOMMENDATION

It is recommended that the Housing and Community Development Commission accept the staff report and provide feedback on the draft workplan for the development of an “Opt-In/Stay-In- Business” Proposal

BACKGROUND

During the public discourse in late-2015 and early-2016 regarding the Mobiiehome Park (MHP)Conversion Ordinance, several MHP owners proposed an “Opt-In/Stay-In-Business” option as an alternative to a mobiiehome park conversion/closure ordinance. In summary, the proposal is intended to incentivize MHP owners to stay in business for a set period of time in exchange for increased financial returns and certainty. The initial proposal included being able to pass along to tenants the costs of capital improvements without having to go through the regular petition and hearing process set forth in the Mobiiehome Rent Ordinance. Additional incentives would allow limited vacancy decontrol when mobilehomes are sold to new owners. The most recent draft ofthe Opt-In/Stay-In-Business Framework, dated February 5,2016, is attached

In late 2015 and early 2016 City Staff planned two stakeholder meetings with park residents and two with park owners to gather feedback on the Opt-In/Stay-In-Business framework. On February 23,2016, the City Council considered the Opt-In/Stay-In-Business concept and the feedback that had been received by staff. The motion approved by the City Council at that time is summarized below: –

Accept the staff report on the Opt-In/Stay-In-Business concept for mobiiehome parks

(copy attached to this memorandum).

Direct the Housing Department staff to continue to work with stakeholders, including mobilehome owners and mobilehome park owners, to identify and seek compromise on resolving the economic issues that will advance the Council direction to further the protection to mobilehome parks in the City of San Jose.
If needed, bring in an outside mediator to be paid for by the mobilehome park owners.
Include the following direction in the further consideration of this issue:

Explore some element of consent by the residents of the mobilehome park where the park owner is proposing to utilize Opt-In/Stay-In-Business.
Capital improvements that are passed through to tenants should be capped and possibly tied to the Consumer Price Index (CPI).
Vacancy decontrol could result in lost equity for the owner for a mobilehome, so there should be a way to compensate that owner for that loss of equity.
For those mobilehome owners with a mortgage term that extends beyond the proposed 20-year Opt-In timeframe, recommend that the mobilehome park owners buy those mortgages out.

ANALYSIS

Attachment 1 provides a workplan to implement the City Council’s direction which relies on an Ad Hoc Staff Advisory Committee to discuss and refine the Opt-In proposal. Thes representatives would be evenly divided between MHP owners and residents selected fromapplicants by a committee comprised of three City staff members. Staff is recommending that a neutral facilitator be retained to chair the meetings of the stakeholder committee.

The workplan includes a process for interested parties to apply for the Ad Hoc Staff Advisory committee. The City would notify the public through email and website posting. In addition Park Owners would be asked to circulate flyers to all mobilehome park residents. Attachment 2 provides additional details on the application process. Staff anticipates that the application form would be a simple one that would have boxes to check off and a simple, “typical” week calendar to indicate the nominee’s availability.

In order for the Ad Hoc Staff Advisory Committee to move forward in an effective manner,thediscussions will be private. In order to avoid potential conflicts of interest and Brown Actviolations as well as to encourage diversity of opinion, City employees and sitting members of any City Commission will not be considered for selection as stakeholder representatives. As structured, the Ad Hoc Staff Advisory Committee is consistent with limitations of the Brown Act and state and local conflict of interest laws and policies. The results of the committee’s discussions will be brought to HCDC for input and recommendation prior to going to City Council.

Clearly, there is no guarantee that park owners and residents will come to a mutually acceptable version of the Opt-hi/Stay-In-Business concept. However, staff shares the City Council’s desire to see whether the two sides can come to an agreement on this issue. This workplan assumes the utilization of a neutral facilitator in order to provide the best opportunity to reach consensus.

The City Council indicated that the mobilehome park owners should pay for the costs of the facilitator. At this point, the Housing Department has not been able to obtain commitment from the mobilehome park owners to pay for this service. The Department does not have unrestricted funds to contribute to the cost of the facilitator. Staff will continue to work with the owners to attempt to resolve the funding issue. If this issue is not resolved, the schedule and/or end product may be negatively impacted.

/s /

JACICY MORALES-FERRAND

Director of Housing

Attachments:

Draft Workplan for the development of a Mobilehome Park Opt-In/Stay-In-Business Proposal
Selection Criteria for Stakeholder Representatives
February 2,2016 Revised Draft of “Mobilehome Park Stay-In-Business Ordinance Framework”
January 13,2016 Staff Report to the Community and Economic Development Committee (CEDC) of the

City Council on “Mobilehome ‘Opt-In/Stay-in-Business’ Concept”

ATTACHMENT 1

Draft Workplan for Development of a

“Mobilehome Park Opt-in/Stay-In-Business” Proposal

Date Event Comments

June 9, 2016 Review of Draft Workplan by Housing and

Community Development Commission (HCDC)

June 12, 2016 Complete revisions to Workplan based on

HCDC feedback.

June 15,2016 Issue announcement of upcoming 30-day

period for application of Ad Hoc Staff

Advisory Committee representatives

Housing Department issues e-mail blast
Ask MHP owners to distribute paper flyers to residents
Housing Department posts notice on webpage on

July 1-31,2016

Applications submitted to the Housing Department. Input from HCDC representatives

August 10,2016 Selection of up to 14 stakeholder representatives by Staff, with:

owners; and

residents

below

September -December 2016 Meetings of Staff Advisory Committee:

« 1 st Meeting – Select neutral facilitator from list of at least two options and set future meeting dates.

January 2017 . Report results of stakeholder discussions to HCDC HOUSING AND COMMUNITY DEVELOPMENT COMMISSION

February 2017 Report results of stakeholder discussions and HCDC recommendations to City Council

ATTACHMENT 2

Selection Criteria for Stakeholder Representatives (Ad Hoc Staff Advisory Committee)

Mobilehome Park Residents (5 to 7 representatives!
Must be a current mobilehome park resident (homeowner or renter)
Must have an open mind regarding the discussion of Opt-In/Stay-In-Business
At least one representative must be over the age of 55
At least one representative must be between 18 and 55 years of age
No more than two representatives from any one mobilehome park
Mobilehome Park Owners (“5 to 7 representatives’)
Must own at least one mobilehome park within the San Jose city limits
Must have an open mind regarding the discussion of Opt-In/Stay-In-Business
No more than two representatives from any one mobilehome park ownership

entity

In order to avoid potential conflicts of interest and Brown Act violations and to encourage diversity of opinion, sitting members of any City Commission will not be considered for selection as stakeholder representatives.

Selection Process for Ad Hoc Staff Advisory Committee Representatives

The Citv seeks stakeholder representatives from the nubile through email and

website posting.

HCDC representatives provide input on applications submitted for Ad Hoc Staff

Committee

® Mike Graves, Mobilehome Landlord Representative on HCDC

Citv Staff Charged with Selection of Ad Hoc Staff Advisory Committee

® Adam Marcus, Acting Policy and Planning Manager, Housing Department

« Jenny Nusbaum, Supervising Planner, Ordinance and Policy Team, Department of

Planning, Building and Code Enforcement

® Theresa Ramos, Mobilehome Program Administrator, Housing Department

Role of the Housing Department

® Coordinate outreach for applications for stakeholder representatives

® Accept applications, consider feedback, and select representatives

® Set agenda for all stakeholder meetings

® Facilitate first stakeholder meeting

® Provide staff support for stakeholder meetings including equipment setup and notetaking

Prepare minutes for each meeting
Prepare final reports for HCDC and City Council

Role of Neutral Facilitator

Ensure all items oh each meeting agenda are discussed in the time allotted
Ensure all representatives have, an opportunity to speak on each agenda item
Set and enforce ground rules to ensure meeting participants are respectful of each other
Probe for possible solutions and compromises ‘

Attachment #3

MOBILEHOME PARK STAY-IN BUSINESS ORDINANCE FRAMEWORK

Revised: February 5, 2016

PURPOSES:

To protect and preserve Mobilehome Parks as a source of affordable housing.
To protect Mobilehome Parks from conversion to other uses for a fixed period of time.
To recognize that owners of Mobilehome Parks have the right to go out of business.
To encourage owners of Mobilehome Parks to remain in business.
To provide owners of Mobilehome Parks with the incentives to make capital improvement investments in their Mobilehome Parks.
To provide a mechanism to assist residents who have insufficient resources to pay the cost of capital improvement pass-throughs.

DEFINITIONS:

The definitions for the following identified items as used in the proposed Ordinance shall have

the same meanings as provided in the Mobilehome Rent Ordinance commencing at Chapter

17.22.050 of the San Jose Municipal Code:

Affected rental unit, Anniversary Date, Base Rent, Dealer Pullout, Landlord, Mobilehome,

Mobiiehome iot, Mobilehome owner, Mobilehome park, Mobilehome resident, Owner, Party,

Rent, Rental Agreement, and Rental unit (For purposes of simplicity and convenience we are

using the terms “park owner” to mean either the owner or operator of the Mobilehome Park,

and “resident” to mean the persons holding a rental agreements covering both the home and

the lot upon which it sits.)

The definitions of the following shall have the meanings below in the proposed Ordinance;

CapitaI Improvements) are those Improvements which materially add to the value of the property/appreciably prolong its useful, life, or adapt it to new uses> and which are required to be amortized over the useful life of the improvement pursuant to allowed depreciation provisions of the Internal Revenue Code, and issued pursuant thereto or as to comply with all applicable local code requirements imposed by the City affecting health and safety and improvements undertaken (this is essentially the definition out of the 1979 Rent Control

Ordinance, Section 5702.2).

Rent increase shall mean any rent demanded or paid by a Mobilehome owner in excess of rent paid for the Rental unit of space immediately prior to such demand or payment

Stav-ln Business means that the Owner has agreed for a fixed term of the sooner to occur ofeither: (I) December 31,2036 or (ii) 20 years from its Opt-in to remain in business and hasagreed contractually to 1) not process a change in use of a Mobilehome park under Part 4 of,Chapter 20.180 of San Jose Municipal Code and 2) not process a closure understate Law.

Opt-in refers to the fact that a park owner has agreed to Stay-in Business. An Owner may Opt-In at anytime at Its sole option.

Capital Improvement nass-throuah(s) shall mean and include Capital (mprovement(s) that have been approved consistent with the provisions of the Ordinance.

Fair Return on Capital Improvement Investment, which is a new investment in the park, shall be allowed, and shall be at the then prime rate as determined by the San Francisco Federal Reserve plus 2% at the time the work on the improvement commenced.

in-Place Transfer means the sale of a home by an existing Mobilehome owner to a ParkQualified Applicant.

In-Place Transfer Fee means the amount the Base Rent may increase as a result of an In-Place Transfer. The In-Place Transfer Fee shall be limited as follows: ,

® An amount equal to the ten percent (10%) of the then current monthly Base rentamount, not to exceed One Hundred Dollars {$100.00} per month in the year that the Mobilehome park qualifies (as defined beiow In #2) for an In-Place Transfer Fee, with the $100.00 per month cap indexed to inflation from adoption of the Ordinance.The limits stated above shall not apply in the following cases;(l) The Mobile home owner has voluntary removed it or caused it to be removed from the space and has terminated his or her tenancy in the park; (2) Owner has terminated Mobilehomes Owner’s tenancy pursuant to one or more of the stated reasons contained in California Civil Code Section 798.56; (3) The Mobilehome subject to an In-Place Transfer has been foreclosed upon by a financial institution or private lender; and (4) a Dealer pullout. There is a no limit on the amount Owner may increase Base Rent in these cases

In-Place Transfer Fee “QualificationIt is the intent of the Ordinance to encourage owners of Mobilehome parks to invest in their communities with new Capita! Improvements that benefit their residents and improve Mobilehome parks.

It is also the purpose to preserve and protect Mobilehome parks for a long period of time, all intended to balance the interests and desires of Mobilehome park residents and owners of Mobile home parks. An Owner may achieve the In-Place Transfer Fee in the event it has demonstrated a cumulative investment of at least Five Hundred Dollars ($500.00) in Capital Improvements per Mobilehome Park space multiplied by the total number of spaces in the Mobilehome Park (If the $500 qualification has not been met within the first year after theOrdinance has been enacted, then the $500 cumulative qualification shall adjust annually for inflation thereafter until met).

In the event that a Mobilehome Park owner invests less than the qualification amount, the Mobilehome Park owner would then not be entitled to any In-Place Transfer Fee until it has spent the qualification amount.

Provisions:

In consideration of an Owner agreeing to Opt-In to the provisions of the Ordinance; the Cityagrees that an Owner or Operator shall have:

li the right to increase Base rent defined in Chapter 17,22.080 and 17.22.450; and

The right to pass-through Capital Improvements; and

3, The right to increase Base rent by imposition of an In-Piace Transfer Fee when incompliance with the ordinance. •

The right to receive a pass-through for Capital Improvements is not subject to economic qualifications as applied in the “In-Place Transfer” section. Rather the right to receive Capital improvement pass-throughs is subject to;

An administrative review procedure undertaken by a City official qualified to evaluate the cost of Capital Improvements and has experience in all aspects of construction including contracts/ change orders and bidding. Such official shall use IRS amortization schedules in order to determine the proper period of time to set for recovery of the costs of the improvements. This official shall be appointed by the City Manager’s Office. The official shall professionally evaluate and be charged with making determinations based on an Owners Submittal For Reimbursement of Capital Improvements (“Owner’s Submittal”). Any Owner’s Submittal, the standards applied to them, and the decision of the City official in charge of the process shall be made available on the City’s website. In the event that an Individual Capital Improvement costs in excess of the lesser of either (i) $1,000 per Mobilehome park space multiplied by 100% of the spaces within the Mobilehome park; or (ii) $50,000, then the Owner’s Submittal shall include third party estimates of at least 2 bids from State licensed contractors with at least 10 years’ experience in the construction of such Capital improvements. This will give concerned Residents and other parties the opportunity to provide written input to the city official. Such input shall, however, be directly related to the standards for approval or denial, not simply to voice opposition to the intended Capital Improvement. The Owner Submittal shall be reviewed by the City official and all residents for 30 days. The, City official shall submit all questions andcomments regarding the Owner Submittal to the Owner withjn the 30 day review period.

The standards shall include:

Capital Improvements eligible for a cost pass-through must primarily benefit the residents.
The amortization period shall conform to |RS amortization schedules. In cases where the

Improvement is not specifically Msted, then the IRS schedules shall be used for guidance as to appropriate amortization period for the reimbursement of the Capital improvement cost.

Each approved Capital Improvement shall include a Fair Return on a Capital improvement Investment.
All approved Capital Improvement pass-throughs shall appear on the monthly billing for each space as a separate line item from Base rent Annual increases In Base rent do not apply to pass-throughs. A pass-through shall be dropped from the pass-through total when the payoff period has ended, and new pass-through’s shall be added to the total when they are approved,
A capital improvement pass-through attaches to the Mobilehome lot. Therefore any purchaser of the home becomes responsible for paying the pass-through(s),
Upon filing of the Owner’s Submittal, each Mobilehome resident in the Mobilehome Park shall be mailed a copy of the Owner’s Submittal for a Capital Improvement costing in excess of $50,000.00. The Owner’s Submittal and all supporting documentation shall be made available for review at the Park offices and on the City’s Website.
All Capital improvement pass-throughs, in aggregate, shall not exceed Fifty Dollars ($50.00)per space per month, indexed to inflation, at any time during the term of the Ordinance.

The Ordinance shall also Include the following provisions:

A Capital improvement Assistance Program: In order to address those limited cases where very low income residents cannot afford either all or a portion of the pass-throughs; the Park Owners have identified an independent assistance program through which they will cover such Capital Improvement pass-throughs for those residents who qualify for such assistance.
Ordinance Administrative Costs: All administrative costs incurred by the City of San Jose inits execution of the Ordinance shall be borne by owners of mobilehome parks that Opt-In to the Ordinance. Costs shall be recovered by the City on or before March 31 of each calendar year after a full and complete accounting of same is provided to each participating mobilehome park owner for the immediately preceding calendar year. Administrative costs shall be allocated based upon number of spaces.
Notification to Purchaser of Mobilehome: Consistent with State law, the Landlord shallprovide a purchaser who has been approved for tenancy in the Mobilehome Park {the”Qualified Applicant”) with a statement showing the Base rent the Qualified Applicant will bepaying. The Owner shall also provide the Qualified Applicant with information as to the total amount of approved amortized capital improvements the Qualified Applicant will be obliged to pay as a separate line Item on the monthly bill. If the Qualified Applicant so requests in writing, the Qualified Applicant may receive a list of the authorized Capital Improvement passthrough^} included in the total and their ending dates. The Mobilehome owner and his agent must be provided with the monthly Base rent and pass-through total and shall have the right to file a complaint with the Housing Department if the Qualified Applicant believes the in-Place Transfer Fee is in excess of the amount allowed under the Ordinance.

Attachment #4

CAPITAL OP SILICON VALLEY

TO: HONORABLE MAYOR AND ” FROM: Toni J. Tata, CMC

CITY COUNCIL ” City Clerk

SUBJECT: SEE BELOW DATE: January 29,2016

SUB JECT: Mobilehome “Opt-in/Stay in Business” Concept

RECOMMENDATION:

As recommended by the Community and Economic Development Committee on January 25, 2016, accept the report on the Opt-in/Stay in Business concept for mobilehome parks andprovide input as to whether the Housing Department should continue to work with stakeholders to further refine and analyze this concept or if the Department should cease work on this item.

CED AGENDA! 1/25/16

ITEM: D (6)

CITY OF San Jose

CAPITAL OF SILICON VALLEY

TO: COMMUNITY & ECONOMIC

DEVELOPMENT COMMITTEE

FROM: Jacky Morales-Ferrand

SUBJECT: SEE BELOW DATE: January 13,2016

SUBJECT: MOBILEHOME «OPT~IN/STAY IN BUSINESS” CONCEPT

RECOMMENDATION

It is recommended that the Committee accept the report on tire Opt-in/Stay in Business concept for mobilehome parks and provide input to the full City Counril on February 9,2016 as to whether the Housing Department should continue to work with stakeholders to further refine and analyze this concept or if the Department should cease work on this item.

BACKGROUND

The City Council has recognized mobilehome parks as an important source of housing for families, seniors, and other low and moderate income residents. To further the protection of mobilehome parks in the City of San Jose, the City Council directed staff to research and recommend possible policy changes. On June 22,2015 staff presented a proposed work plan on the Mobilehome Park Preservation Policies/Conversion Ordinance Update to the CED Committee. The workplan recommended three land-use related policy and ordinance changes:

text amendments to the Envision San Josd 2040 General Plan (General Plan), amendments to Title 20 of the San Jose Municipal Code (the Zoning Code) including the MobilehomeConversion Ordinance in Chapter 20.180, and a new City Council Policy on the Conversion of Mobilehome Parks to Other Uses.1 The Committee accepted the work plan and directed staff to meet with MHP owners and operators to include their input into the work plan prior to presenting it to Council for discussion and action,

Staff facilitated two locus group meetings with MHP owners and operators on July 16 and 23, 2015, In addition, two focus groups with residents were held by staff on July 30 and August 6,2015, The CED report and the work plan that staff proposed was presented at a Council hearing held on August 11, 2015. In response to recommendations made by Coimcilmembers in two separate Councilmembers1 memoranda submitted prior to the hearing, the City Council adopted two motions as follows:

The report was accepted, including the joint memorandum from Mayor Sam

Liccardo, Vice Mayor Rose Herrera and Councilmembers Chappie Jones, Manh

Nguyen and Tarn Nguyen, dated August 7,2015, to (1) accept staffs report and work

plan to further the preservation of mobilehome parks; and (2) direct staff to return in

two weeks with an urgency ordinance, and with a standard ordinance to establish a

moratorium on mobilehome park conversions for six months,

Acceptance of Councilmember Johnny Khamis’ recommendations including: (a)

direct Housing staff to meet with stakeholders and MHP owners; to discuss then

“Opt-In; Stay in Business” proposal regarding alternative methods of maintaining

mobile home inventory, and (b) return to Council with a review of the 2040 General

Plan to examine MHPs with Urban Village designations and the implications for

MHP residents with respect to conversion.

The “Opt-in/Stay In Business” concept was proposed by Brandenburg, Staedler & Moore inconsultation with other park owners. These owners indicated that another ordinance, the City’s Mobilehome Rent Ordinance (Chapter 17.22 of the San Jos6 Municipal Code), was too onerous and made repair or replacement of aging infrastructure in their parks difficult to do while also operating their parks as a profitable business. Other park owner stakeholders have commented that although their parks do make a fair return they have no reason to make new investments because those investments do not yield additional financial returns. Park owner stakeholders also commented that the amount of the annual increase on rents remains the same regardless of the level or type of new investment. Generally speaking, the Opt-in/Stay In Business concept would provide mobilehome park owners with additional financial incentives in exchange for making needed capital improvements and keeping their parks operating for a certain period of time. The current proposal requires a twenty year time period or through the implementation timeframe of the current General Plan.

Under the current Mobilehome Rent Ordinance, automatic annual space rent increases are limited to 75% of Consumer Price Index, with a 3% floor and a 7% ceiling. Park owners are allowed to “pass-through” capital infrastructure costs to park residents in the form of space rents above the annual allowable space rents. In order to obtain a pass-through, the owners must file a petition for a hearing at which a Hearing Officer will review the capital costs and determine the associated rent increases that may be charged to the residents. To he eligible to receive the pass through, the owners must show that they are not able to maintain the inflation-adjusted level of financial return that they received before the imposition of rent control. The Housing Department administers the Mobilehome Rent Ordinance through the Rental Rights and Referral Program.

Staffing for the Mobilehome portion of the Program is funded through fees paid by park owners, of which 50% can be passed onto residents.

In the Fall of 2015, a group of park owners met with City staff several times to refine the Optin/ Stay in Business concept sufficiently for further discussion with stakeholder focus groups, A draft summary of the concept was posted on toe Housing Department’s webpage on November 23,2015. It is included with this document as an attachment.

The objectives listed in the Opt-In/Stay In Business concept summary were (a) to encourage mobilehome park owners to stay in business by providing them with economic incentives, (b) to facilitate capital infrastructure improvements in aging mobilehome parks, and (c) to provide housing stability for existing mobilehome residents for twenty years. The proposed economic incentives included an alternate capital improvement pass-through process in lieu of the existing petition process described in the Mobilehome Rent Ordinance. The process currently in use requires park owners to substantiate capital expenses, to show that they are not able to maintain the inflation-adjusted level of financial return, and a hearing officer to determine how much of the costs can be passed through to park residents in the form of space rent increases. Thishearing also provides the only opportunity for residents to obtain relief for service reductions.

The park owner’s concept would make it significantly easier for owners to pass through capital improvement costs as no review of the owner’s books or determination of resident benefit would be required. The park owners’ concept also includes a Capital Improvement Assistance Program . whereby a portion of a park’s low-income residents would not have to pay for an additional capital improvement pass-through.

In addition, the Opt-In/Stay In Business concept proposes allowing an increase to the rent (to market rate or a lesser amount) when a mobilehome owner sells their home to another owneroccupant and the home remains at its current space. This is not allowed under the Mobilehome Rent Ordinance. The Opt-In/Stay In Business concept proposes that implementation of their proposal would be overseen by the Housing Department and funded with full cost recovery through fees paid by mobilehome park owners.

Stakeholder Input

In December 2015 and January 2016, City staff conducted two focus groups for park residents and two for park owners. The goal of the stakeholder outreach was to receive input from mobile home residents who either represented mobile home communities or who were already involved in the preservation discussions. The outreach was limited to allow for more focused discussion and to further develop the concept before conducting more extensive outreach. The input received in writing is provided as an attachment to this memo. A summary of the input received in writing and at the meetings is provided below.

Mobilehome Park Owner and Representative Input

A total of 24 park owner representatives attended the focus group meetings and several others submitted written comments. The park owners stated that many parks, especially older ones, have aging infrastructure and that it costs more each year to maintain versus replace infrastructure. Some park owners stated that the annual 3% rent increases were insufficient to cover needed maintenance. Another participant indicated that capital improvement pass-through were not an attractive option given the current petition process. Several owners stated they would prefer to replace old infrastructure to lower their operating costs and to write off capital improvements on their income taxes. Attendees supported vacancy decontrol, which would allow rents to be raised to market rate upon transfer or sale of a mobilehome. The park owners indicated this was important because the Mobilehome Rent Ordinance constrains rents well below market value and inflates the market value of mobilehomes in San Jos6. Park owners stated that new mobilehome owners are buying a home as well as the right to live in a rent.controlled park. By allowing limited vacancy decontrol, park owners argued they would receive some of the value that rent control has created.

In a letter to the Mayor dated December 23,2015, a group of park owners who indicated that they represented half of all park owners in San Jos6, stated that they were withdrawing from the “Opt-In/Stay In Business” public process citing concerns with the “draft Council Policy on the Conversion of Mobilehome Parks to Other Uses” that was posted on the Housing Department’s webpage on December 10,2015, No park owners participated in the second focus group meetingscheduled for January 4,2015. As a result, some key feedback was not received that would have facilitated the resident stakeholder discussion. For example, owners agreed to limit the amount of the capital improvement pass-through and the level of the increase when a mobile home is sold.

The owners agreed to return with proposed monthly limits, but this did not occur because the park owners withdrew from the public process. This information would have greatly enhanced the resident discussions because the residents feared the monthly limits would be too high.

Mobilehome Park Resident and Representative Input

A total of 114 mobilehome park residents attended the focus group meetings. The majority of park residents who attended the focus group meetings and who submitted written comments opposed moving forward with the Opt-In Stay in Business concept. Many of these resident stakeholders expressed their opinion that this concept would mostly benefit park owners and offered few advantages to park residents. Attendees representing mobilehome park residents commented that a twenty-year commitment to stay in business as a mobilehome park was not sufficient. They stated that vacancy decontrol would decrease their home values, that the owner’s proposal was complex and that it was clouded with too many unknowns. In addition some participants resented the idea of paying park owners more for maintenance that residents felt should have already been done, and the lack of transparency that an expedited pass-through approval would entail.

Input Summary

The following table summarizes the input received from mobilehome park owners and residents

on the key concepts of the Opt-In/Stay In Business concept.

Opt-In Proposal Park Owners Comments – Park Residents Comments

Owners: The owner is the only party required to make the decision on whether to opt-in.

There was a concern that if park residents were allowed to vote then the Opt-In would never be feasible because park residents would oppose the program. It would be too difficult to obtain their support.

Residents: An affirmative vote by the . majority of park residents must be required. The level of support varied from a simple majority to a super majority to 100% support.

20 year period

Some owners said 15 years was too long, others supported up to 20 years,

Residents: The period should be longer. Many felt 20 years was not long enough for families and recently retired residents

. Easier Capital Improvement Pass-Throughs:

Owners would no longer have to prove they are not receiving a fair return as required by the Mobilehome Rent Ordinance. Park owners supported the proposed process.

Residents: Concerns expressed that many residents cannot afford to pay more rent; Comments that it is unjust to make residents pay for improvements without considering if park owners are getting a fair return as required by the Mobilehome Rent Ordinance.

Capital Improvement increases would be allowed via an expedited administrative approval process.

IRS guidelines are less subjective than the standards in the Mobilehome Rent Ordinance.

Some owners also agreed to limit the amount of the capital improvement increase but did not specify the limit.

Concern that IRS guidelines are too open and that residents should have a say in what gets approved. Some expressed a concern that only a staff review would be needed. One suggestion was to add an owner and resident to the review process.

Resident Assistance to low income tenants for extra pass through costs

Assist up to 10% of homes in a given park by not imposing the additional capital improvement pass through increase.

Residents: 10% is not enough because more than 10% of park residents may be low income.

Should be determined by need.

Increase Base Rent when a home is sold to a new owner occupant. (Limited Vacancy Decontrol) Raise the rent by some amount when an in-place transfer occurs.

Some owners agreed to place a cap on the increase but did not specify the cap.

Concern it would lower the resale value of mobilehomes and make financing difficult.

Concern it would lead to a net loss of relatively affordable housing stock.

ANALYSIS

The City Council directed the Housing Department to meet with park owners and residents to develop the park owners’ Opt-In/Stay In Business concept After several meetings, it is clear that park owners and residents do not agree on many of the key elements of the concept. In particular, the residents want a voice in whether their park participates in any opt-in program.

However, it may be possible to make more progress on the concept if there was additional specificity to the concept – such as a definition of what a capital improvement is and if numbers were added to the limits on increases. Unfortunately, because the park owners withdrew, staff have been unable to confirm what limits the park owners would agree to.

Staff is not aware of any jurisdictions that have an ordinance implementing an opt -in concept that ties changes in rent regulation to an agreement not to seek a discretionary land use entitlement. Thus, staff will need to work with the Attorney’s Office to better understand whether and how the concept might be implemented. Given that it could result in significant changes to the Mobilehome Rent Ordinance and might result in changes to rent regulation in the majority of the City’s mobilehome parks, another key issue is how to ensure that the opt-in period would be enforceable.

Under the existing Mobilehome Rent Ordinance, park owners can obtain many of the benefits listed in the Opt-In Concept by entering into voluntary long term leases with their residents. A space rented under long-term lease is not subject to the Mobilehome Rent Ordinance during its term.

If the Housing Department is directed to continue to work on the Opt-In Concept, then a workplan and timeline would be developed to further refine and analyze this concept. This should be done through the City’s priority setting process. However, without park owner participation, it is unlikely that the staff could successfully develop an Opt-In Program.

PUBLIC OUTREACH

Public outreach was conducted in two phases. The fust phase focused on three land-use related policy and Ordinance changes: text amendments to the Envision San Jose 2040 General Plan (General Plan), amendments to Title 20 of the San Jos6 Municipal Code (the Zoning Code) including the Mobilehome Conversion Ordinance in Chapter 20.180, and a new City Council Policy on the Conversion of Mobilehome Parks to Other Uses. City staff mailed postcards to 10,949 mobilehome residents announcing three large public meetings, providing City staff contact information, and a link to a project webpage for future updates. In addition staff maintained a data base of email addresses and sent email announcements regarding meetings and documents being posted on the webpage. To date there have been twelve focus group, public meetings and hearings relating to this topic.

The second phase of public outreach focused on the “Opt-in/Stay In Business” concept. On November 23,2015, City staff posted information about the Opt-In/Stay In Business concept on the Housing Department’s mobilehome park webpage and sent email blasts to more than 220 residents and letters to park owners. The Housing Department hosted two focus group meetings intended for park owners (12/3/15 and 1/4/16) and two for park residents (12/7/15 and 1/5/16).

This item is scheduled to be heard at the Housing and Community Development Commission (HCDC) meeting on January 14,2016.

COORDINATION

This reported was coordinated with the City Attorney’s Office and the Department of PBCE.

CEOA

Not a Project, File No, PP10-069 (a), Staff Report.

COMMISSION RECOMMENDATION

This item will be heard by the Housing and Community Development Commission (HCDC) on January 14,2016. The Commission’s recommendation will be included in a supplemental memo to this memo.

CEOA

Not a Project, File No. PP10-069 (a), Staff Report.

1st

Jaclcy Morales-Ferrand

Director, Department of Housing

For questions, please contact Adam Marcus, Acting Policy and Planning Manager, at

(408)975-4451.

Attachments

Mobilehome Opt-In Stay In Business Summary DRAFT
Public Correspondence

Attachment #4

CAPITAL OP SILICON VALLEY

TO: HONORABLE MAYOR AND FROM: Toni J. Taber, CMC

CITY COUNCIL City Clerk

SUBJECT: SEE BELOW DATE: January 29,2016

SUBJECT: Mobilehome “Opt-in/Stay in Business” Concept

RECOMMENDATION:

As recommended by the Community and Economic Development Committee on January 25, 2016, accept the report on’the Opt-in/Stay in Business concept for mobilehome parks and provide input as to whether the Housing Department should continue to work with stakeholders to further refine and analyze this concept or if the Department should cease work on this item.

CED AGENDA: 1/25/16

ITEM: D (6)