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Do you own a detached single-family home? Do you own the land underneath your home? For most Americans, homeownership without question includes landownership. But for roughly 2.7 million U.S. homeowners in manufactured home communities (MHCs), or “mobile home parks,” landownership is not the norm.1 They rent the land from a third-party investor.
With 50,000 communities nationwide, the MHC market segment is bigger than most people realize. Pennsylvania has 2,200 MHCs, New Jersey has 250, and Delaware has 175.2 Some of these communities are small two or three homes on the same parcel in most states qualify as an MHC. Other communities have thousands of homes.
A 2003 Consumers Union study on asset appreciation confirmed that homes in MHCs tend to depreciate. The study recommended that, in order to improve home values, it is important for homeowners to gain ownership or control of the land and have access to decent single-family loans.3 Having ownership or control of the land is vital to the value and security of these homes.
About 59 percent of all types of manufactured housing is owned by households earning $39,999 or less per year.4 These homeowners are at risk due to land rent escalation, physical upkeep of the community’s systems, and community closure and ensuing displacement, which generally occurs due to change of land use.
For the past 25 years, homeowners and private and public players in New Hampshire have targeted two market dynamics for change: land security through resident ownership and access to decent single-family financing for homeowners in resident-owned communities. The impact of this work on the security and value of homes in MHCs has been statistically significant. Today, 95 MHCs in New Hampshire, which are home to over 5,300 homeowners, are resident-owned cooperative communities. Loan performance of these co-op borrowers has been very strong; there have not been any payment defaults on bank, public agency, and community development financial institution (CDFI) financing totaling over $150 million.
In 2005, a Carsey Institute study on resident-owned communities documented several findings:
The demand for community training and financing from homeowners, community owners, nonprofits, and public officials led to the formation of ROC USA, LLC in May 2008 to “make resident ownership viable nationwide.” Four nonprofits NCB Capital Impact, NeighborWorks America, CFED, and the New Hampshire Community Loan Fund sponsored the nonprofit ROC USA. Significant investments from the Ford Foundation and Fannie Mae have been instrumental in launching this initiative.
ROC USA operates two subsidiaries that focus on solving the two basic problems homeowners face when they seek to purchase their community as a democratic resident corporation:
To date, the results indicate robust demand and proof of concept for the New Hampshire-tested limited-equity co-op model. In its first two years, the Resident Ownership Network’s technical assistance providers have supported homeowners in purchasing 16 communities, thereby preserving 1,182 homes in eight states.
A PathStone-supported project in Elbridge, NY typifies why homeowners want ownership. “We made a choice to become a resident-owned community to help secure our children’s futures and for all the families who will flourish in this community for years to come,” stated Wayne Husted, the president of Champion Park Homeowners Association in Elbridge.
Resident Ownership Capital has provided senior mortgage loans totaling $10.9 million in four communities in Delaware, Connecticut, New York, and Texas. Certified as a CDFI in late 2009, it originates and services whole loans and sells senior and pari passu participating interests in its loans as a means of leveraging its balance sheet. Participation loans have been arranged with several types of lenders, including banks, housing finance authorities, and CDFIs. Participating lenders enjoy its risk mitigation system, which includes experienced underwriting, retention of junior interests in loans, and ongoing technical assistance support for borrowers for the life of the loan. Borrower post-purchase technical assistance is provided by a technical assistance provider certified by the Resident Ownership Network and paid for by borrowers in their loan payment.
One core element of the ROC USA model is affordable membership shares in the resident corporation. While the low “down payment” puts emphasis on securing high LTV commercial loans, the impact on communities is what’s important: Every homeowner in a ROC USA community can afford to become a member. ROC USA’s model creates whole communities of owners and members; it does not create communities of members and nonmembers in which nonmembers simply cannot afford the member share price. Expensive membership shares can create bifurcated communities and negative consequences because members and nonmembers are treated very differently. Resident Ownership Capital solves this problem through high LTV first mortgage loans on the land and improvements, credit enhancement to manage LTV risk, and senior position financing from private and public lenders.
ROC USA is focused on finding “for sale” communities and providing homeowners with an opportunity to become community owners. All purchases start with a willing seller. Once a seller is found, ROC USA has demonstrated that it can bring a community from investor owned to resident owned in 90 to 120 days. To operate successfully in the commercial market, with sellers’ expectations for expediency and dependability, ROC USA has readied the resources for an efficient path to resident ownership when homeowners choose to seek ownership of the land on which their home resides.