SENATE BILL REPORT

SB 5766

BYSenators Smitherman, Warnke and Bender

Establishing a mobile home park purchase fund.

Senate Committee on Commerce & Labor

Senate Hearing Date(s):February 17, 1987; February 27, 1987

Majority Report:  Do pass and refer to Committee on Ways & Means.

      Signed by Senators Warnke, Chairman; Smitherman, Vice Chairman; Tanner, Vognild, West, Williams.

Senate Staff:Dave Cheal (786-7576)

                  March 2, 1987

AS REPORTED BY COMMITTEE ON COMMERCE & LABOR, FEBRUARY 27, 1987

BACKGROUND:

As a result of not owning the land under their mobile homes, mobile home park residents face a good deal of uncertainty.  The park may be sold at any time resulting in changes ranging from different managerial practices to increased rents to park closure.  These uncertainties could be reduced significantly if the tenants owned the park.  A few parks have been converted to tenant ownership in Washington and other states.

Tenants are frequently financially capable of handling monthly maintenance and mortgage costs, but often unable to assemble the capital needed for a down payment.  Tenants often lack the expertise to form the required legal organizations such as a coop or condominium owners' association, that would enable them to convert to resident ownership.  The required legal and planning services are a significant expense in the conversion process.

In 1984 the California State Legislature established a mobile home park purchase fund to facilitate mobile home park conversions to resident ownership of the real estate.  This bill is patterned after the California legislation.

SUMMARY:

The mobile home park purchase fund is established in the office of the Treasurer.  A general fund appropriation of $5 million is provided, to be repaid from the interest generated by the loans.  At the time when the loan is repaid, interest from loan repayments augments the principle fund.  The Department of Community Development is in charge of administering the program.

Loans are made to tenant organizations for conversion costs for a period of no more than three years at 8 percent interest.  The loan is to be for the minimum amount necessary to enable the organization to purchase the park, not to exceed 50 percent of the approved conversion costs.

Eligible resident organizations are defined as mobile home park residents who have formed a nonprofit corporation or other legally recognized entity for the purpose of acquiring the mobile home park in which they live.  It must include at least two-thirds of the households residing in the mobile home park at the time of the application for assistance.

The Department may also make loans for a longer period, up to 30 years, to individual low-income residents or to resident organizations for the purpose of reducing monthly housing costs for low-income residents to an affordable level.  Loans under that program are for the least amount necessary to reduce the borrower's monthly housing costs to an affordable level, up to a maximum of 50 percent of the acquisition costs of individual interests in mobile home parks.  "Individual interests" include ownership of a park space, shares in a stock cooperative or comparable entity, or some lesser interest that allows the holder to occupy a space for at least 15 years or the life of the holder.

An affordable level of housing costs is defined as 30 percent of the monthly income of the low-income resident.

Local governments are encouraged to participate as a result of instructions to the Department to take into consideration whether or not the loan would complement implementation of a local housing program to preserve or increase the supply of low-income housing.

The Department is encouraged to distribute funds geographically throughout the state, including not less than 20 percent to rural areas. 

The Department is instructed to provide technical assistance to resident organizations, short of actual preparation of documents. 

The act terminates after four years, July 1, 1991.

Fiscal Note:      requested

Senate Committee - Testified: Len Bouge, Washington Mob. Park Owners; John Woodring, WMPOA; John Jensen, MHOA