Wednesday, October 07, 2009

Los Altos El Grenada Investors v. City of Capitola (9th Cir. - Oct. 7, 2009)

It's been a very good couple of weeks for owners of mobile home parks in the Ninth Circuit. Last week the Ninth Circuit reversed the district court's dismissal of a takings claim that challenged Goleta's mobile home rent control ordinance. And today the Ninth Circuit reverses the district court's dismissal of a takings claim that challenged Capitola's mobile home rent control statute.

Which makes me think that I perhaps should invest lots of money into mobile home parks. Given the amount of money at stake, maybe this is the next dot com.

One of the big upsides for the mobile home park owners has, quite frankly, been the panel's they've drawn. Conservatives, as you know, are big "regulatory takings" fans, and are far from sympathetic towards old-style rent control ordinances (which are prevalent in the mobile home industry, which generally caters towards retired and/or very-low-income folks). For example, here, both opinions are written by Judge Bybee -- hardly someone who's going to go overboard about how great rent control statutes are.

So last week, for example, Judge Bybee held that even though the relevant rent control statute permitted park owners to make a healthy profit -- and one approximately equal to the returns that investors in real estate generally made over the same period -- the takings claim was still quite viable since park owners could have made even more (indeed, much more) absent controls on rent. He lost Judge Kleinfeld, who dissented, but was able to persuade Judge Goodwin. And today Judge Bybee holds -- in a case all about procedure and federal/state comity -- that a park owner has a cognizable takings claim even though they had litigated very similar state challenges in state court. A holding that persuaded both Judges Wallace and Thomas.

I'm fairly sympathetic towards today's holding, though think that last week's is quite a bit more iffy (if only for the reasons identified by Judge Kleinfeld). Regardless of the merits, however, it's beyond doubt that it's a good era to own mobile home parks in the Ninth Circuit. You make a bit of money -- a fair piece, actually -- on the rent. And you've got big-money takings claims that at least the conservatives like a lot that give you both (1) the possibility of millions of dollars in your pocket as damages, and (2) the potential ability, if you win, to double or triple your rents (and hence make massive future profits) as well.

So not a bad thing to get in on. Conversely, probably not a great time to own a mobile home in the Ninth. 'Cause the possibility that you're about to be hosed is assuredly non-trivial.