One of the richest men in America may soon get even richer at the expense of thousands of Californians who live in mobile homes. He is chairman and major stockholder in a company waging war on rent control. In this Assignment 7 report, we examine how the company's rent hikes and lawsuits may drive thousands of Californians out of their homes.
The Vincent family has lived in the Contempo Marin Mobile Park in San Rafael for eight years.
"We worked very hard to get our house here. This is what we could afford," says Jessica Vincent.
Like most mobile home residents, the Vincents own their house, but rent the land it sits on. Their lives were turned upside down a few months ago when they got a notice from their landlord almost tripling the rent from $735 a month to nearly $2,000.
Steve Vincent is a boat mechanic on disability. Even when he's working, the family can't afford that kind of rent.
"I'm just really distraught. I don't know what to do," says Steve Vincent.
Contempo Marin is also home to many elderly and disabled people, some on fixed incomes. They're all being threatened with huge rent hikes. They didn't think this could happen because San Rafael has a rent control law to protect mobile home residents.
"It's an important principle because we value enabling people from all walks of life to live in our community and this is important in terms of providing affordable housing," says Damon Connolly with the San Rafael City Council.
However, the owner of Contempo Marin sued San Rafael, and a few weeks ago, a federal judge ruled the city's rent control law for mobile homes is unconstitutional.
In court, ELS lawyers have argued rent control unfairly takes the value of the land away from the park owner and gives it to homeowners. So when sales prices rise, the residents get the money, not the company.
The judge agreed, but the city is appealing. For now, the court put a hold on rent hikes, but it's just temporary. The attorney for San Rafael says the outcome of this case could affect people who live in mobile homes all over California.
"Without a question, there are about a hundred cities and counties with similar laws," says Michael Von Loewenfeldt, attorney for San Rafael.
Contempo Marin is owned by a company called Equity Lifestyle Properties, known as ELS. ELS owns more than 300 mobile home parks nationwide. Almost 30 are in California, many in or near the Bay Area.
At park after park, residents are complaining about huge rent increases.
Ray Newman lives at an ELS park for senior citizens in Modesto where many people have seen their rent soar.
"They have to make a decision as to whether they're are gonna buy food, pay the rent or buy the medication to keep them alive," says Newman.
So who's putting them in that impossible position? The chairman and major stockholder of ELS is a billionaire named Sam Zell. Forbes magazine says with a net worth of $6 billion, he's the 52nd richest man in the United States.
A lot of Zell's fortune came from distressed property and troubled companies he bought on the cheap and then turned around for big profit. Money matters to this billionaire who once nicknamed himself the "gravedancer."
But it also matters to thousands of people who live in Zell's mobile home parks. A homeowners' meeting at Contempo Marin was filled with desperate residents.
"They are gonna steal our equity. They are gonna steal our livelihood. They are gonna steal our life, all for their own corporate greed," said mobile home resident Ben Ludin at the meeting.
It's tough. Many mobile home residents are paying both mortgages on their homes and rent on the land underneath. If rent goes so high they can't afford it, they often can't afford to move either because who would buy their homes with sky-high rent?
We visited one of the homes in an ELS-owned park in Modesto.
"The people who owned it just walked away. They couldn't sell it, couldn't afford the rent on it. So they just turned it over to the bank," says Newman.
Contempo Marin is also filled with homes for sale and just the threat of future rent hikes is scaring off buyers.
"There is no sales happening here anymore. There is no homeowner here who can get away. They are incarcerated in their homes," says Keith Meloney, past homeowners association president.
We tried to talk to ELS about their rent policies for an earlier story. They refused to sit down with us, so when we heard their regional vice president was in town, we tracked him down.
ABC7's Dan Ashley: "I want to take a moment, if you can, to ask you about your companies effort to fight rent control in California. What's that about?"
Peter Underhill: "I regret that I will not be taking any of your questions."
Dan Ashley: "Why is that? I just want to know what you are trying to achieve here."
Peter Underhill: "Well, I'll refer you to our corporate office."
A PR company did send a statement saying San Rafael's rent control has "the opposite effect of the city's stated intention. It created rents that were artificially low, which drove up the sale prices of homes. This serves no public purpose..."
In recent years, ELS has filed a barrage of lawsuits and appeals attacking rent control in four California cities. Most cases have ended with rent control still in place. However, the San Rafael case could change that, and if it does, ELS stands to make a bundle.
"They bought this park for less than $20 million because it was rent controlled. So they paid a rent control price for the park and now they are attempting to get rid of rent control which would make the value of the park some five or six times what they paid for it," says Von Loewenfeldt.
ELS is also fighting rent control at the ballot box. They just donated $50,000 to Proposition 98. That measure on the June ballot would eliminate rent control for both mobile homes and apartments.
If that doesn't work, residents worry ELS will just keep filing lawsuits, hoping local governments will decide it's too expensive to keep fighting.
That's exactly what happened at a senior citizen park in Santa Cruz. ELS tried to raise rents, in some cases as high as $5,000 a month. After years of legal battles, the city gave up before the case ever got to court.
"They said we just can't afford to do this anymore, we can't afford to fight it," says mobile home resident Herb Rossman.
Ultimately, the city made a deal that allows current residents to keep their existing rent with small increases. But when a resident leaves, ELS can raise the rent as high as they want.
"They used to count this as part of their affordable housing stock, and it's gone," says Rossman.
So what happens to the growing number of seniors and others who will need affordable housing in the future? ELS would not talk about that.
Dan Ashley: "I'm here with you now, why don't you just talk to me? You are a corporate officer. You can answer a couple of questions... You know there are a lot of people very nervous about what your company is doing, Can you give them some assurances about what your plan is?"
Underhill offered no assurances. The appeal in the San Rafael case could take a couple of years.
In the meantime, residents are still waiting to find out whether the judge will allow their rent on the land to almost triple while the case proceeds.
"I know I can't pay it. I feel like I'm gonna be evicted. I feel like I'm gonna lose my house and I'm still gonna have a mortgage to pay after that," says Steve Vincent.
They are vowing to stick together, but many are finding it tough.
"This is killing us, just like it's killing all of you," says mobile home resident Sharon Stickel.
Company officials sent us another statement saying they offered to meet with the homeowners association and the city of San Rafael to offer a transition plan. However, the city is not interested in meeting and the two sides have yet to work anything out.
ELS statement from April 24, 2008
"ELS's position remains the same. ELS has offered to meet with the Contempo Marin homeowners association and has suggested that officials from the City of San Rafael also participate. We proposed this meeting in order to discuss the court's decision and a transition plan for Contempo Marin residents. We have yet to receive a response from the president of the homeowners association but we are still receptive to meeting with the group and hope to sit down with them as soon as possible."
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