How Resident-Owned Communities Can Create Mass Affordable Homeownership

Creating and preserving quality affordable housing is notoriously difficult, with the number of available units declining each year as landlords raise rents ever higher. An underappreciated tool for closing this gap—potentially benefitting millions of US households—involves resident-owned manufactured housing communities.

Roughly 22 million Americans live in manufactured homes, often misleadingly called “mobile homes”—misleading because moving these homes is not a viable option for most manufactured home owners. About 60 percent of people who own their individual manufactured homes do not live in communities commonly known as mobile home parks, while roughly 40 percent (three million households or about eight million people) have homes sited on land in these manufactured housing communities. A Freddie Mac Multifamily survey conducted in 2019 estimated 45,000 manufactured housing communities operating across the United States.

Roughly 22 million Americans live in manufactured homes.Residents in these communities typically own the manufactured home but rent the land underneath the home. While siting a home in a community ensures access to services, such as water and electrical power, it also makes residents vulnerable to rent increases, eviction, or having the land literally sold from under them.

Despite their shortcomings, these communities represent a major source of unsubsidized affordable housing for low-income people. Is it possible to preserve the best features of this form of housing while eradicating the worst? The short answer: it is—through resident land ownership.

The Value of Resident-Owned Communities (ROCs)

Opportunities for landlord exploitation of manufactured housing residents remain high….There is another option—a cooperative option.As noted above, the biggest shortcoming of the typical manufactured housing community is that the land underneath the housing is owned by a landlord, ranging from families to private equity firms. The homeowner pays to rent the site from the landlord to access and use the homesite and its related infrastructure. Increasingly, costs for services such as trash, water, and sewer are being passed through to the renters, which historically was included in the cost of rent. Under this arrangement, residents encounter a higher risk of 1) sharp rent hikes; 2) the sale of the land underneath the home for another purpose; and 3) inadequate investment in aging infrastructure.

Of course, “mobile homes” theoretically can be moved. However, the cost to move is not trivial. One source notes that “moving a double-wide mobile home or triple-wide manufactured or modular home can cost $15,000 or more,” while even single-wide homes cost $3,000–$9,000 to move (for a move of less than 50 miles)—money, in short, that most low-income families do not have. As a result, opportunities for landlord exploitation of manufactured housing residents remain high, as comedian John Oliver illustrated in a Last Week Tonight episode a few years ago.

There is another option—a cooperative option. Resident-owned communities (ROCs) are distinguished from third-party or investor-owned manufactured housing communities because residents collectively own the land underneath their homes, meaning residents get to vote on certain issues impacting the community and build home equity on secure, affordable land that they collectively own. 

Rather than pay rent to a landlord, the residents pay site fees to a co-op that they own. Because the co-op owns the land, resident ownership is secure; this enables residents to qualify for a lower interest home mortgage loan, rather than a higher interest, personal asset chattel loan. In short, ROCs offer a powerful tool to secure housing affordability through collective ownership, one that is growing in popularity.

How are ROCs Created?

As of 2019, there are approximately 1,000 ROCs—that’s about 2 percent of the national market, which is significant but still an admittedly modest share. While ROCs are becoming more common, their reach remains limited because specific things must fall perfectly into place for them to form, such as: 

1. The landowner must be willing to sell
2. Residents must become aware of the sale
3. The residents must be afforded time to rally the support of a sufficient number of them to pursue the purchase
4. The residents must secure the necessary financing and successfully navigate the financing requirements
5. The residents must outbid for-profit investors and convince a patient seller that they can close the transaction

Many of these challenges can be overcome with the help of nonprofit organizations like ROC USA. Founded in 2008 with backing from the Ford Foundation, NeighborWorks America, New Hampshire Community Loan Fund, Capital Impact Partners, and Prosperity Now, ROC USA and its affiliates have assisted 22,000 residents in over 300 communities in 21 states to collectively purchase and manage their ROCs. In other words, ROC USA is responsible for the formation of about three in 10 resident-owned cooperatives nationally. To date, none of the ROCs that the network has supported have been foreclosed upon. 

ROC USA’s ability to close these transactions often depends on state regulatory requirements. For example, if a state requires that residents be notified of a proposed sale in advance and afforded the time to assemble an offer to purchase, ROC USA and its affiliates can assist with conducting due diligence, organizing the residents, establishing a cooperative, securing financing, and setting up management processes to ensure long-term viability. 

The organization also pursues a limited equity model in which most residents agree to purchase membership interests in a newly formed cooperative. The residents elect a board of directors consisting of members of the cooperative to direct the purchase effort and manage the community post-purchase. The cost of the membership interest is very low, enabling broad participation. However, this also means that residents contribute very little equity to reduce financing costs. As a result, financing costs can run as much as 110 percent of the purchase price. The reason this can exceed 100 percent is because often additional money is needed to finance improvements.   

In short, the model can work for (typically low-income) residents because the amount of money that must be fronted is low. But this increases the cost of servicing the resultant larger loans. ROC USA can make this work because it can extend financing via its community development financial institution (CDFI) subsidiary. It can also tap into philanthropic funds and an increasing number of public sources of low-cost debt and community development grants. Members of the ROC network remain supported after purchase, with access to ongoing technical assistance and peer-sharing opportunities with fellow network members.

An Example from Lakewood, Washington

How does this work in practice? There are hundreds of examples, but here I will focus on the experience of Gadiel Galvez and his fellow residents in Lakewood, WA, a suburb in the Seattle–Tacoma region located about 12 miles southwest of Tacoma. 

In 2022, residents of this largely Latinx community, consisting of 63 homes and two apartments, learned that the landowner was considering a sale to a new owner who would likely build a warehouse on the community site. Fearing eviction, the residents decided to organize to buy it. With the assistance of the ROC network, the residents formed Bob’s and Jamestown Homeowners Cooperative (the “BJH Co-op”) to purchase the land. 

The BJH Co-op is owned by the residents and led by its elected board of directors. The board of directors, consisting solely of residents who bought membership interests, manages day-to-day operations. ROC USA helped the co-op secure $5.25 million in financing necessary to purchase the land. The rent paid by the residents is now paid to the co-op to service the debt and fund management and maintenance. These residents not only staved off eviction but now own real property and are building equity that comes with homeownership.

Barriers to Expansion

Despite hundreds of successes, there are significant barriers to creating and scaling up the development of ROCs. One major obstacle is fierce competition from deep-pocketed, for-profit investors. As detailed in a 2020 Financial Times article, large institutional investors such as private equity funds and real estate investment trusts are seeking to buy manufactured home communities for the rental income they generate. 

State and local governments can…pass laws…extending a right of first refusal to the residents to match any competing offers to buy the land.

Second, there is considerable expense associated with acquiring and managing manufactured housing communities. Supporting a greater scale of resident land purchases and access to lower-cost capital would require more capital—and more capital available at a lower interest rate.

Third, a consistent nationwide regulatory framework that facilitates residents’ ability to compete for land purchases when manufactured housing communities are up for sale does not exist. Some states require that each resident be notified when a community is offered for sale, and some do not. Some states require that residents are given an opportunity to match the purchase price of a prospective buyer, and some do not. More states need to provide the opportunity for residents to purchase the land beneath their homes.

How ROCs Can Prevail

Barring federal adoption of “opportunity to purchase” laws, thousands of communities nationwide may continue to miss out on the security and wealth-building benefits of resident ownership of manufactured home communities. But even in the absence of federal action, state and local governments can contribute significantly by supporting efforts to pass laws mandating notification of residents when a seller seeks to sell a community and extending a right of first refusal to the residents to match any competing offers to buy the land. In 2023, Maine and Connecticut were the latest states to adopt “opportunity to purchase” laws. Similar laws, some stronger than others, presently exist in roughly half of all states nationwide. 

Philanthropy can also increase its support. One specific need where funding would be particularly valuable involves raising flexible, unrestricted funds to pay for infrastructure improvements—a vital tool to improve the financing terms for residents seeking to buy their communities. As noted above, ROC USA can finance some infrastructure improvements, but its ability to do so is limited. Removing the need to finance infrastructure improvements both reduces residents’ financing costs and debt burden and increases the ROC’s reach, thereby making more resident purchases viable.

One last challenge is the stiff competition from deep-pocketed for-profit investors who can move quickly to buy these communities. In this area, one strategy is being tested by Integrity Community Solutions, Inc. (ICS), a social enterprise subsidiary that ROC USA founded last year. The idea is to create a vehicle through ICS that can accept equity investment from philanthropy and impact investors. In this manner, ICS would have a fund available to purchase land directly, manage communities on an interim basis, and then exit by selling the land to residents. In short, having a fund that can acquire land quickly can help even the odds when competing against private equity and others who can move faster than cooperatives.

Much work remains to be done. But the movement is gaining ground. The number of residents in ROCs with the ROC USA network has increased in the last five years by 8,000 people (from 14,000 in 2018). Nearly 100 new resident-owned communities have been added to the national network since 2018. 

Behind every conversion to cooperative ownership, there are many stories of lives transformed. As one manufactured home owner told a reporter a few years ago, “It’s our property now, so that’s a good feeling. You’re not at the mercy of someone.”

The views expressed in this article are those of the author alone.