Wed, Jul

Affordable Housing Getting Crunched


AFFORDABLE HOUSING POLITICS - Maybe you have noticed that across SoCal and all over the great Golden State, a new state law is taking effect in an effort to increase the state’s affordable housing stock.

Predictably, many of the cities that originally opposed the new, denser housing laws got busy building legal barriers around their communities. From declaring special districts to other restrictions, the intent was to protect local control over residential growth and to restrict affordable housing options at the local level. 

It turns out that State Attorney General Rob Bonta is having none of it. A KTLA TV consumer news story  noted last month that AG Bonta was challenging one SoCal city because "... less than a month before the state law took effect, Pasadena, a Southern California city of roughly 140,000 people, passed an ordinance that among other restrictions allows officials to exempt eligible areas by declaring them ‘landmark districts.’ … but no such exemption exists under the law.”

KTLA explained that "... The new California law allows homeowners to build up to four residential units on a single-family lot, a measure that Bonta said is needed to address the most populous state’s chronic housing and homelessness problems by increasing supply and affordability." 

It also turns out that the Pasadena move was Bonta's second such action, KTLA notes that "... after proponents of denser housing said more than a dozen communities across California had been hurrying to adopt restrictions before the law took effect Jan. 1. More than 150 cities opposed the law as it was being considered in the legislature last year." 

Let's be honest. The California housing crisis is hardly new and it becomes easy to take recent events as same old, same old. What makes these events important is that state officials seem to be taking dramatic actions to try to offset the obstacles, but it is unclear whether they will succeed in growing the housing inventory. 

Ominously, there are competing forces in housing around the United States as institutional investors take an expanding role in acquiring residential real estate, especially mobile home parks, depleting the available inventory even further. 

The accelerated housing demand and the resulting crunch are, of course, contributing to a rise in litigation as residents seek relief, particularly when institutional investors enter the market.  

An example: One of the nation's biggest mobile home park lawsuits is playing out in the federal courts in Los Angeles. A Newport Beach investor named Robert Brine is suing some of the nation's most high-profile mobile park investors, Ryan and Jamie Smith. The couple has long touted institutional mobile home park investments via YouTube and other media, and several presentations include famed attorney and economist Ben Stein (yes, the one from Ferris Bueller). 

The Smiths may not be very active in California mobile home parks, but are almost famous in parts of Florida, especially in investor-rich areas like The Villages. Stein is certainly well-known there and made headlines when he went on the political stump supporting President Donald Trump.  Jamie Smith is also the author of "Trailer Cash," one of the more prominent books in a surprisingly robust how-to market for real estate investment. 

Brine, in his side of the civil lawsuit, says the Smiths and their related entities (including companies they control) defrauded him of several hundred thousands of dollars in a recent fund that was created to purchase, manage, then resell mobile home parks. Brine also alleges that the defendants used "elements" of a Ponzi scheme like using incoming investor money to pay current investors and offered misleading information on their role in previous deals. The lawsuit is in its early days, but may well offer a sign of things to come as more investors move into the affordable housing sector. 

For example, a New York Times story headlined "Why the Road is Getting Even Rockier for First-Time Home Buyers" reports that "... recent [home] price surges, in the neighborhood of 20 percent, have attracted new institutional investors." Citing a recent Redfin real estate company study, the NYT said investors purchased a record 18.4% of homes sold nationwide in the fourth quarter of 2021.That last one is a number worth crunching: That means something like one of five U.S. homes went to investment entities. 

That trend is not just contained in traditionally built homes. Our colleagues at Random Lengths News in San Pedro spent much of last year covering the trend for mobile home parks falling prey to institutional sharks. This trend can leave current residents scrambling for solid ground. In fact, coverage of one park attained the newspaper's highest readership last year. 

The RLN year-end recap noted that "... two new apartment buildings are set to begin construction in Carson, one with 300 units and the other with 19. Unfortunately, to build these developments, mobile home residents are being forced out of their homes. Residents of Imperial Avalon Mobile Estates were given 12 months to leave after Faring Capital bought the land to convert it into a mixed-use development. More than 400 residents are seniors on a fixed income." 

Mobile home communities, which many see as affordable housing's last stand, may really be the canary in the affordable home coal mine. The institutional investment trend has been instrumental in mobile home parks for several years and has attracted in-depth reporting for outlets ranging from The New Yorker to Comedy Central. 

For Los Angeles and other SoCal communities, from preserving mobile home parks to enforcing new state housing density laws, the trends all point to an uptick in litigation. We already see some law firms starting to ramp up their expertise and marketing to deal with a largely unregulated market that is dramatically altering the supply and demand of available residential real estate. 

We can be sure that none of these factors are likely to solve our affordable housing crisis and will merely exacerbate it. 

(Sara Corcoran is publisher of the National Courts Monitor and writes for CityWatch, Daily Koz, and other news outlets.)