Case Studies
Affordable manufactured and modular housing strategies from Norwood, CO; Minneapolis, MN; and Halifax, MA
Overview
Across the country, cities, towns, and counties are seeking new ways to address shortages in housing supply and rising housing costs. To address their housing needs, some localities are encouraging the use of manufactured and modular housing — two methods of off-site construction that allow homes to be built faster and often at a more affordable price point.
Manufactured housing is a term for homes that meet the U.S. Department of Housing and Urban Development (HUD) safety codes and were built in a factory after June 15, 1976; they are constructed on a chassis before being transported to their permanent placement.
Modular housing is one of several off-site construction techniques that allow for the construction of homes in pieces that are then assembled on-site. Volumetric modular construction consists of 3-D printed “modules” that can be combined with other modules to make buildings of varying sizes. Other off-site approaches include panelized construction and the construction of self-contained rooms, such as bathrooms and kitchens. Unlike manufactured housing, which is governed by a national building code set by HUD, modular housing is subject to the same state and local building codes that apply to site-built housing.
Manufactured and modular housing have some important features that can contribute to efforts by localities and their partners to achieve their housing goals. Manufactured housing is generally significantly less expensive than site-built housing, partly because of the substantial economies of scale that can be achieved when producing housing in a factory, and partly because manufactured housing units tend to be smaller than site-built ones. Modular construction can also be used to achieve economies of scale, but the production cost savings do not always translate into savings for the consumer, given transportation costs and the lack of leverage that individuals or developers have when purchasing only a small number of units.
Compared to on-site stick-built construction, manufactured and modular homes can be produced faster in a climate-controlled environment protected from unpredictable weather. They also often generate less waste, neighborhood traffic, and noise than traditional site-built homes, and on-site construction activity can move inside the structure more quickly — reducing the negative impacts of noise on the projects’ surrounding neighborhoods.
However, there are often barriers to manufactured housing that need to be overcome, like zoning policies that make it difficult or impossible to site manufactured homes in particular localities. Also, manufactured housing owners residing on leased land in manufactured housing communities (or parks) are vulnerable to rent increases that can jeopardize their housing stability. Special efforts may be needed to translate the economies of scale of modular housing into cost savings for consumers.
This three-part series of case studies explores local policy options to use off-site construction in innovative ways. These include using modular construction of single-family housing to make homeownership more attainable to working families, utilizing modular construction of small multifamily housing to reduce the disturbance of neighbors in single-family neighborhoods, and helping manufactured housing owners living on leased land purchase their park and create a resident-owned manufactured housing community. The case studies cover:
Rural Homes’ Pinion Park in Norwood, CO: Like many other parts of the U.S., some small mountain towns in Colorado, especially tourist areas, are experiencing an affordable housing crisis. Through the Rural Homes Initiative, the Telluride Foundation and its partners are utilizing modular housing paired with low-cost capital and donated land to make affordable housing feasible in multiple localities. This case study focuses on one of the Rural Homes Initiative’s projects, Pinon Park, which provides 24 deed-restricted, affordable, single-family homes for the local workforce. It also shares how coalition-building, multi-sector partnerships, and modular housing can help increase the housing supply and outlines strategies local and state governments can use to encourage similar projects across the country.
Minneapolis Public Housing Authority Family Housing Expansion: While modular housing is most often used for single-family housing, some developers are using it to build multifamily housing and other multi-unit structures. This case study focuses on how the Minneapolis Public Housing Authority is utilizing modular construction to develop 16 buildings that each provide four to six units of deeply affordable housing in residential neighborhoods in Minneapolis and shares ways public housing authorities and localities can work together to pursue shared housing goals.
Halifax Estates Resident-owned Community Conversion in Halifax, MA: Manufactured housing residents who own homes on leased land are more susceptible to housing instability than traditional homeowners; they can be impacted by land rent increases and possibly displaced when a landowner intends to sell. This case study addresses how resident-owned manufactured housing communities can help address these disparities and shares lessons learned from Halifax Estate, a community of 430 units for older adults that became the largest-ever resident-owned manufactured housing community in the country. It also provides ideas for how localities can encourage resident-owned manufactured housing communities and how state policy and third-party technical assistance can help support them.
Telluride Foundation’s Rural Homes Initiative in Norwood, CO
Overview
Colorado rural and mountain towns — especially those with tourism-based economies — struggle to supply enough affordable housing for public service and other workers, which impacts local businesses and the community. Many of these same towns have also seen more remote workers moving there, driving housing prices up and forcing some long-time locals out.
To address these challenges in southwest Colorado, the Telluride Foundation — a nonprofit, community organization operating in Telluride, CO — incubated the Rural Homes: For Sale, For Locals (Rural Homes) initiative in 2015. Launched in three nearby localities (Norwood, Ridgeway, and Ouray), this pilot initiative implemented an innovative approach to building nearly 100 entry-level houses in the region using donated land, low-cost capital, and modular housing construction. Its work was done in collaboration with public and private partners.
This case study focuses on Pinion Park in Norwood, CO, one of the neighborhoods being created through Rural Homes. It also discusses how multi-sector collaboration and modular construction made it feasible. Pinion Park includes 24 deed-restricted, single-family homes for nearby workers earning ≤120 percent of the area median income (AMI). Lessons learned from Pinion Park may help other localities interested in encouraging modular housing to increase housing diversity and supply.
Key takeaways
Coalition-building can spur action to address regional housing challenges. The Rural Homes initiative rallied regional partners to find solutions and jumpstart the development of entry-level housing in southwest Colorado. The result was an innovative approach to developing new entry-level housing in the region and multi-sector partners implementing the strategy in three localities.
Denser housing options are helping address gaps in the market, and modular construction, in combination with other strategies, helps make those homes affordable. By partnering with the Rural Homes initiative, the Town of Norwood and San Miguel County helped create denser housing options to meet the affordability levels and needs of the local workforce, including affordable homeownership opportunities.
All parties involved in Pinion Park’s development worked to keep housing costs down. Pinion Park illustrates how nonprofits, private businesses, government agencies, and other mission-driven entities can increase housing diversity and supply by collectively reducing total development costs through coordinated actions.
Description
In 2022, the Rural Homes initiative collaborated with the Town of Norwood, CO (roughly 580 residents) and San Miguel County, CO (approximately 8,000 residents) to develop Pinion Park, a new neighborhood consisting of 24 single-family homes. The homes are intended to be affordable for essential members of the local workforce, such as teachers, medical professionals, and government workers. The Pinion Park homes are priced between $225,000 and $426,400, with the largest house spanning just over 1,200 square feet. Some units stand physically next to each other and feature three sides of frontage, along with their own porches. To ensure that the initiative’s target population continues to benefit from the homes over time, deed restrictions are in place, including an income restriction requiring households to earn at or below 120 percent AMI. Additionally, a live-work requirement requires at least one member of the household to work in the area, and the home must remain owner-occupied. A limit on future home-value appreciation has been set, which caps the maximum sales price (the original home purchase price plus three percent per year).
The Rural Homes strategy to develop neighborhoods like Pinion Park relies on four critical supports: 1) low-cost capital, 2) donated land and dense construction, 3) low-cost construction, and 4) a community-led design process. It uses low-interest (0.5% and below) construction finance loans funded by public grants and philanthropic donations, land that is either donated or has its costs covered by charitable funders, and a local modular housing manufacturer committed to keeping construction costs low.
From the beginning, the local government worked closely with the Rural Homes initiative. The Town of Norwood helped Pinion Park acquire an energy impact grant to cover its tap fees, totaling $420,000, and San Miguel County donated public land adjacent to the town for the project. Pinion Park also received support from the Colorado Department of Local Affairs, the Division of Housing, and philanthropic foundations, which provided infrastructure construction loans at a below-market 0.5 percent interest rate.
To further reduce costs, the Rural Homes initiative utilized Fading West Development, a local modular manufacturer committed to producing lower-cost housing, to build all homes in the community. Fading West built four types of modular homes in Pinion Park, which reduced the need for on-site labor.
As of 2022, Fading West’s factory can build a home in under 20 days and produces about 200 units annually for middle-income homebuyers (80 to 120 percent AMI). Fading West estimates that the modular structures they build can be produced for 20 to 30 percent less than comparable on-site construction, though they note that this is only one component of total project costs, which also include the costs of land, infrastructure, and site-based construction.
According to the Telluride Foundation’s former President and CEO, Paul Major, the Rural Homes initiative also worked with a local general contractor, Stryker Construction, that deeply discounted its services. Stryker Construction provided on-site labor, including building the neighborhood’s infrastructure and hiring subcontractors to place the modular houses on their foundations.
Knowing that Pinion Park likely wouldn’t be successful if mortgages weren’t affordable, the Rural Homes initiative worked to keep homebuyers’ financing costs low. The Rural Homes initiative partnered with the Impact Development Fund, a nonprofit Community Development Financial Institution (CDFI) that helps underserved communities find affordable homes. Impact Development Fund connects Pinion Park’s homebuyers earning less than 80 percent AMI to First Southwest Bank, another CDFI that can offer a 30-year mortgage with a below-market interest rate. Additionally, the Rural Homes initiative helps Pinion Park’s homebuyers take advantage of a state down payment assistance program that provides up to $25,000. The funds can be paid back in 30 years or when the homebuyer sells the home.
San Miguel County is purchasing one of Pinion Park’s housing units and the Norwood School District is purchasing one home for their new science teacher. The San Miguel Regional Housing Authority selected the rest of Pinion Park’s homebuyers in 2022. Interested homebuyers had to be preapproved for a mortgage before applying. Rural Homes plans to complete an extensive buyer survey in 2023 to better understand buyers’ experiences.
Process and timeline
2015: The Telluride Foundation incubated the Rural Homes initiative to address housing supply challenges for the local workforce.
2021: The Colorado Health Foundation, a philanthropic funder that invests in nonprofits and other entities helping improve Coloradans’ health, contributed a $2 million grant to leverage additional support for a revolving construction loan fund, which will be replenished as the Rural Homes initiative sells its housing units. By September, the fund had secured $5 million in private donations and grants. The Telluride Foundation also published the results of a housing market analysis conducted to help define demand and supportable price points for Rural Homes units.
2022: In February, Pinion Park received final plat approval from the Town of Norwood’s Board of Trustees after a year-long review process. San Miguel County Board of County Commissioners approved the development’s land donation. Pinion Park’s homebuyer lottery process opened in July, and Pinion Park’s homebuyers were chosen in September. The Rural Homes initiative also broke ground on its second community, Wetterhorn Homes (14 workforce units in Ridgeway, CO).
2023: All 24 Pinion Park homes were completed in the factory in January and expected to be transferred to the neighborhood. The Telluride Foundation anticipates Pinion Park will be finished in March, with homebuyers moving in then.
Outcomes
The Rural Homes initiative is currently planning two other neighborhoods with construction partners in Ridgway and Ouray, CO, and philanthropic funding has been offered to support those developments’ land costs. Combined, they will generate over 75 new housing units. All told, the Rural Homes initiative’s projects in Norwood, Ridgeway, and Ouray will contribute nearly 100 new entry-level houses to the region. As of December 2022, the Telluride Foundation also reports that Fading West Development is booked through next year.
While Pinion Park’s success cannot be directly attributed to state policy changes, it is clear that Colorado’s legislators are taking notice of the impact that modular housing can have on supply. In March 2022, the state established the Innovative Housing Incentive Program, which will provide $40 million in state funding for modular housing manufacturers to help increase supply, create jobs, and reduce the cost of affordable housing. The establishment of modular housing factories is capital-intensive and poses risks given the cyclical nature of demand for new construction. Because the state is interested in increasing the growth of modular housing manufacturers, it is providing them with working capital grants, per-unit cash incentives, and factory loans that are important for making these companies less risky to build and operate. The program offers working capital grants of up to 20 percent of operating expenditures, incentives between $1,500 and $6,000 per modular unit installed, and low-interest loans for starting factories.
Policy significance
For entry-level housing developments like Pinion Park, Fading West Development says it is important for all parties to be bought into the goal of keeping costs down across the board. Fading West’s “Contributing Factors” graphic illustrates the various influences contributing to project costs. In their example, the costs of constructing the modules represents only about 38 percent of the total costs, showing the need to work to keep costs down in the other components as well.
Fading West says some of its most significant obstacles to creating more affordable homes through modular housing are related to local zoning and building codes and lengthy permitting processes. Adjusting zoning policies to facilitate communities like Pinion Park through increased density (and other policy changes) is another area where local governments can be helpful in supporting similar communities.
Local and state governments can also implement strategies similar to those used by the Town of Norwood, San Miguel County, and the State of Colorado, such as donating publicly owned land for development; finding ways to help the community cover connection fees; and providing flexible capital to incentivize more modular housing.
Additional information
Housing Lottery: Inside a Manufactured Meighborhood Fighting Colorado’s High Country Housing Crisis. This piece provides more details on Pinion Park and its residents in Norwood, CO.
Using Economies of Scale to Produce Starter Homes. This Bipartisan Policy Center report shares more information for localities interested in creating more certainty and minimizing risks for local modular manufacturers.
Bringing Off-site Construction to Scale in Rural America. A webinar hosted by the Bipartisan Policy Center discussing how modular housing can increase entry-level housing production.
Localities interested in waiving fees and providing public land at no cost to developers can read these Local Housing Solutions’ briefs:
Reduced or Waived Fees for Qualifying Projects. Localities interested in waiving fees can read this Local Housing Solutions brief.
Use of Publicly Owned Property for Affordable Housing. Localities interested in providing public land at no cost to developers can read this Local Housing Solutions brief.
Streamlined Permitting Processes. Localities interested in improving their development approval processes can read this Local Housing Solutions brief.
Zoning Changes to Facilitate the Use of Lower-cost Housing Types. Localities interested in learning more about encouraging lower-cost housing with zoning changes can read this Local Housing Solutions brief.
Minneapolis Public Housing Authority Family Housing Expansion in Minneapolis, MN
Overview
As of 2021, the Minneapolis Public Housing Authority (MPHA) had a waitlist of over 8,000 families in need of affordable housing. To address this demand for two and three-bedroom units, the MPHA decided to build 84 new scattered-site, deeply affordable housing units in residential neighborhoods across Minneapolis. The Family Housing Expansion Project, as this initiative is called, aims to replace single-family or duplex homes, which is now permissible after the Minneapolis City Council implemented the elimination of single-family zoning announced in the Minneapolis 2040 Comprehensive Plan. This initiative helps to advance the Plan’s goals of increasing the supply of missing middle housing and affordable units.
Through the Family Housing Expansion Project, MPHA is using modular construction to create 16 small multifamily buildings, each consisting of four to six two or three-bedroom units. Sixty-four units will be for households earning at or below 30 percent of Area Median Income (AMI), while 20 units will be for residents with incomes up to 60 percent of AMI to help avoid displacement. The buildings are expected to be completed by late summer 2023.
This case study discusses this initiative in greater detail, sharing how the public housing authority and the city are working together to pursue housing goals and outlining how modular construction is helping increase housing density and the supply of dedicated affordable units in Minneapolis.
Key takeaways
Collaborations between public housing authorities and localities can help address pressing housing needs and shared goals. The City of Minneapolis played a significant role in the success of the MPHA Family Housing Expansion Project by rezoning sites for higher density, issuing variances, and providing flexible capital for construction. In return, MPHA is helping the city advance important goals from its comprehensive plan, including supporting innovative housing solutions and increasing its supply of multifamily and affordable housing units.
Modular construction can reduce the on-site time needed to erect new affordable housing. Modular construction has allowed MPHA to significantly shorten the time needed on-site to erect new, deeply affordable multifamily housing; this reduces the adverse impacts on existing and new residents.
Modular construction can help mitigate the impacts of temporary displacement on existing tenants. The MPHA Family Housing Expansion Project involved demolishing existing units to replace them with new, denser housing types. MPHA helped reduce negative impacts on existing tenants by providing them with relocation benefits, finding them comparable temporary housing within MPHA’s portfolio, and ensuring they could quickly return to a new unit once construction is complete.
An innovative procurement process can help establish early collaboration among a project team and mitigate construction challenges. MPHA released a two-part request for proposals to ensure collaborative project design and construction. They paid top RFP submissions for preliminary designs and construction cost estimates. Early collaboration between teams mitigated project risks and fulfilled strict federal procurement rules. Having the architect, general contractor, and modular builder on the same team from the start was extremely beneficial.
Description
Because MPHA does not have enough housing to serve all the families on its waitlist, the public housing authority is building 84 new scattered-site, deeply affordable units, a goal from its 2023-2027 Five-Year Strategic Plan. MPHA’s approach to this project focused on achieving economies of scale and speed while fulfilling the public housing authority’s strict housing quality standards. To implement its approach, MPHA worked with its procurement office to release a two-part RFP for a project design team and a construction team.
After asking teams to submit a first round of proposals and evaluating them, MPHA paid the three highest-ranking teams, which included both traditional and modular construction methods, to create a schematic design and cost estimate for construction to help them further evaluate which strategy was best suited for the project. The RFP process allowed MPHA to compare modular and traditional construction, and it determined that modular construction was the most aligned with the project’s scattered-site approach and goals. MPHA’s design goals for this project were to use innovative building methodology to develop energy-efficient family housing compliant with the Minnesota Housing Finance Agency Multifamily Rental Housing Design and Construction Standards and Minnesota Green Communities certified.
Modular construction was expected to be 33 percent faster than traditional construction, reducing negative impacts on tenants. MPHA anticipated that the modular housing for one site could be set in one to two days, reducing noise and traffic issues. It was also 13 to 22 percent less expensive than the traditional construction proposals and produced less waste. Considering these benefits, MPHA chose a team consisting of modular manufacturer RISE Modular, Frerichs Construction (a general contractor), and DJR (architecture and interior designers).
MPHA anticipated the project’s development to cost around $51 million. Funding sources include $12.5 million in MPHA contribution, a $1.4 million grant from the Metropolitan Council, $4.6 million from the City of Minneapolis’ federal ARPA funds, $1.2 million from the city’s Affordable Housing Trust Fund, $500,000 from Hennepin County’s Affordable Housing Development Accelerator fund, $19.9 million in equity from four percent Low-Income Housing Tax Credits, $500,000 in equity from solar tax credits, and an $8.9 million permanent loan from Citi Community Capital. The project also benefited from a $25 million construction loan from US Bank Community Development Corporation via tax-exempt Housing Revenue Bonds issued by Minneapolis’ Community Planning and Economic Development department.
MPHA and its chosen design and construction team analyzed 22 sites throughout the city for new housing. They considered zoning constraints, parking, potential challenges for modular construction, and more to strategize how to fit 84 units on the smallest, most constrained sites. During the site analysis, RISE and DJR walked all 22 potential sites, assessing their physical barriers for modular construction (e.g., trees, powerlines, and street access). Ultimately, MPHA and its team narrowed those down to 16 final sites for developing 16 small apartment buildings (up to 9,864 square feet) with facades that fit the surrounding neighborhood’s character and include four to six two- or three-bedroom units.
Due to the project’s alignment with land use and other recommendations in the 2040 Comprehensive Plan and public support, all 16 sites could be rezoned to allow for denser housing types. Six sites needed variances regarding the buildings’ placement and yards, and all required standard site plan reviews from the city. The Planning Commission unanimously approved all 16 sites.
MPHA involved the community in the design and construction processes. They met with 12 neighborhood groups and knocked on 96 immediate neighbors’ doors to discuss the project. MPHA also held monthly meetings during the development phase with a Resident Design Advisory Panel (RDAP) comprised of residents impacted by the project and other scattered-site and four-plex tenants. This allowed residents to provide feedback on the project’s design, construction, and temporary relocation processes, directly communicate with the architects, and ultimately select the final interior finishes within the units and common space colors.
MPHA and its team have been responsive to the public and addressed community concerns. For example, stakeholders worried parking might be an issue for the new buildings, so the design team worked to maximize the amount of off-street parking for the sites because the city would only allow three off-street parking spaces at some locations.
The community was also concerned about construction impacts and what would happen to temporarily displaced MPHA residents as their new units were built. Except where the sites are vacant, the project is demolishing existing single-family houses or duplexes and replacing them with four- or six-unit modular buildings. Existing residents temporarily displaced by construction received relocation benefits, and MPHA worked with them to find comparable temporary housing within its portfolio. Existing tenants also have the right to return to a new unit once it is complete or permanently stay in their temporary unit. All other tenants for the new scattered-site housing will come from MPHA’s waitlist of over 8,000 households.
Of the 84 units that comprise the MPHA Family Housing Expansion Project, 16 will be accessible units, and 17 will be high-priority homelessness units with services funded by Hennepin County. All units will have long-term affordability through project-based vouchers for residents who will pay 30 percent of their incomes for the units.
Process and timeline
2020: MPHA established the project concept.
2021: MPHA released Part 1 of its two-part RFP in February and Part 2 in April; MPHA made its final team selection in May. The public housing authority submitted the project’s initial funding applications in the summer and started the entitlement process in the fall.
2022: MPHA completed the entitlement process in January and secured financing for the project by spring.
2023: The MPHA Family Housing Expansion Project broke ground, and construction is currently underway. Tenants are expected to move into the first building in August. MPHA tracks each site’s progress on a website created by an outside consultant.
Outcomes
Once complete, the MPHA Family Housing Expansion Project will contribute 84 new deeply affordable units to the city’s housing supply and help increase neighborhoods’ density. Because the project’s designs comply with the public housing authority’s strict standards, they can also be used for future housing projects throughout the city.
The project also supports the implementation of the Minneapolis 2040 Comprehensive Plan by helping the city make progress toward many of its established goals and recommended actions steps.
The partnership between the city and housing authority reflected in the MPHA Family Housing Expansion Project is consistent with the ongoing collaboration across agencies in Minneapolis to preserve and expand dedicated affordable rental housing. For example, in March 2023, Minneapolis’ mayor convened local leaders to find strategies to address the region’s public housing deficit. The city, MPHA, Minneapolis Highrise Representative Council, the public school district, Hennepin County, Metropolitan Council, Minnesota Housing, the U.S. Department of Housing and Urban Development, state and federal elected officials, and philanthropic organizations were all invited to participate in the Public Housing Preservation and Expansion Convening.
Policy significance
The MPHA Family Housing Expansion Project exemplifies how modular housing can be used to support multifamily housing development and how public housing authorities and localities can work together to address pressing housing needs and shared goals. The local government played an essential role in making the MPHA Family Housing Expansion Project feasible by rezoning for higher density on the project’s chosen sites, providing variances for several buildings, and supporting the project with financing. Other cities and public housing authorities may wish to consider similar collaborations to support their shared goals.
Additional information
Minneapolis 2040 Comprehensive Plan. The city’s guiding document for local decision-making and investment that includes local housing goals and recommended strategies.
Family Housing Expansion Project. MPHA tracks the project’s progress on this website, which includes details for all 16 sites.
MPHA American Institute of Architects Presentation. MPHA’s presentation on the Family Housing Expansion Project from an American Institute of Architects convention in 2022.
Senator Smith and Mayor Frey Join MPHA to Celebrate 84 New Deeply Affordable Family Homes. MPHA’s press release discussing the Family Housing Expansion Project’s groundbreaking and 2022 updates.
Halifax Estates Resident Home Community (ROC) Conversion in Halifax, MA
Overview
In a typical manufactured housing community, residents own their unit but lease the land beneath it from the landowner. Because the land is leased, this tenure provides less security and stability than other forms of homeownership. Residents may experience sudden increases in their rent, if the landowner chooses to raise it, or displacement if the landowner chooses to sell or redevelop the property.
The alternative tenure arrangement of a “resident-owned community” can help promote stability for manufactured homeowners. In a resident ownership model, homeowners form a nonprofit cooperative to purchase the land underneath their homes. This approach gives homeowners direct control over management decisions such as setting rents, establishing community rules, and investing in the maintenance and improvement of the property.
This case study describes the conversion of Halifax Estates, a 400+ unit manufactured housing community in Halifax, Massachusetts. With technical assistance and financing support from ROC USA, a national organization that promotes resident ownership of manufactured housing communities, Halifax Estates successfully became a resident-owned community in 2017. As of late 2022, Halifax Estates is the largest resident-owned manufactured housing community in the country.
Key takeaways
State policy can facilitate resident ownership. Residents of Halifax Estates were able to purchase their community in part due to Massachusetts’ policies governing the sale of manufactured housing communities. The law requires that residents receive notice of a sale and gives them the right to submit their own matching purchase offer.
Resident-owned communities can offer stability and security to community members. Since becoming a resident-owned community, Halifax Estates has remained affordable for homeowners. Any increases in rent must be put to a vote of the cooperative. The property cannot be sold or redeveloped without members’ approval. Through the cooperative, residents can influence how their neighborhood changes over time.
Technical assistance appears to be an important ingredient for success. Halifax Estates has received ongoing technical assistance from ROC USA and its local affiliate, the Cooperative Development Institute. With this support, they were able to navigate the process of forming a cooperative, complete the purchase, and manage the property.
Description
Each year, about one-third of new manufactured homes are placed in manufactured housing communities. In a manufactured housing community, homeowners own the unit itself, but they pay a monthly “lot rent” to lease the land beneath their unit from the landowner. In some manufactured housing communities, rents also cover the cost of services such as sewer and water, electricity, and maintenance of common spaces. Manufactured housing communities provide an affordable homeownership option for many low- and moderate-income households.
However, this tenure arrangement can leave residents vulnerable to displacement. Similar to a landlord who owns an apartment building, the landowner of a manufactured housing community may choose to increase rents, sell or redevelop the property, or implement onerous rules for residents – which can ultimately force residents to leave. While manufactured homes can technically be relocated, this process is costly and, especially for older homes, can damage the structure. Rather than move their home, many residents faced with cost increases may choose to sell their home, forgoing much of the residential stability that long-term homeownership can provide.
Resident ownership is an alternative model that provides more control and stability for residents of manufactured housing communities.
Homeowners form a cooperative to purchase their community, elect a board of directors to manage operations and create financial strategy. Each resident is a member and contributes monthly dues, participates in board elections and major decisions, and continues to own their unit with the ability to sell.
Resident-owned communities offer relatively stable and affordable lot rents, with revenue used to improve amenities and services and fund repairs and upkeeps. Cooperatives usually operate as mission-driven nonprofits committed to keeping the lot rents affordable for residents. Lot rents in resident-owned communities tend to be relatively stable over time, and cooperatives often establish limits on rent increases. Collective ownership protects against displacement, and democratic decision-making gives residents a voice.
Usually, the most opportune time for converting to resident ownership is when the community owner is preparing to sell. Once the owner indicates their intent to sell, residents must act quickly to form a cooperative, a legal nonprofit entity with a specific governance structure. In some cases, the owner may be willing – or required by state law – to sell the property directly to the cooperative if they produce a competitive offer. In others, the owner may list the property on the open market and the cooperative must successfully bid against other outside buyers. In either scenario, the cooperative must secure sufficient financing to purchase the property at a fair market value.
After successfully purchasing the property, the cooperative is responsible for all ongoing management, from developing a sound financial strategy to hiring contractors for repairs. These efforts can require a significant amount of time and effort from resident volunteers. The Board of Directors may need significant technical assistance and training to help them successfully operate the property.
Despite these challenges, the resident ownership model has been successfully implemented throughout the country. Many of these conversions have been facilitated by ROC USA, a national nonprofit network focused on promoting the resident ownership model. Through a network of regional partners, ROC USA provides technical assistance to help residents of manufactured housing communities form cooperatives and build the skills required to manage their property. The organization also operates a Community Development Financial Institution, ROC USA Capital, which provides specialized financing to help cooperatives purchase the land on which their homes sit.
Halifax Estates is a 430-unit manufactured housing community for residents age 55+ located near Plymouth, MA. With technical assistance and financing from ROC USA and its local technical assistance partner, the Cooperative Development Institute, residents of Halifax Estates were able to form a cooperative and successfully purchase the property in 2017. The transaction totaled $27 million, representing the largest conversion facilitated by ROC USA as of that date. Below, we describe how Halifax Estates successfully transitioned to a resident ownership model and their experience managing their own community.
Process and timeline
2015: Halifax Estates residents received a notice in the mail indicating that an out-of-state investor had put in an offer to purchase the property from its long-time owner. This letter was the first time that residents had heard about plans to sell the property.
Critically, Massachusetts law provides residents of manufactured housing communities the right of first refusal to purchase the property if it comes up for sale. By statute, residents must be notified of an impending sale. Within 45 days of receiving notice, residents may submit a purchase agreement. The agreement must be endorsed by at least 51 percent of residents and must be “substantially equivalent” to the third-party offer. If it meets these conditions, the seller must accept the residents’ offer. After the agreement is executed, residents have 90 days to secure a binding agreement for financing and 180 days to complete the transaction.
Shortly after receiving the notice about the impending sale, residents received a letter from the Cooperative Development Institute (CDI), ROC USA’s local technical assistance partner. CDI had become aware of the sale through the state’s Attorney General, which administers regulations governing manufactured housing communities. The letter from CDI explained that residents could exercise their right of first refusal to purchase the property and described the process for forming a cooperative.
After CDI communicated with them, residents of Halifax Estates began exploring the possibility of forming a cooperative. CDI provided resources and literature to explain the process. Residents took an initial vote, and the majority agreed to form a cooperative. Residents each paid a $100 membership fee to join the cooperative.
The newly-formed cooperative began receiving technical assistance from CDI and ROC USA immediately. CDI helped the cooperative formalize their governance structure and become a legally-recognized entity. ROC USA guided the cooperative through pre-purchase requirements, such as an appraisal and a capital needs assessment. These activities were financed using a pre-purchase loan from ROC USA Capital.
2016 – 2017: Typically, a new cooperative would close on their property within about 90 days. However, the original owner of Halifax Estates was not permitted to sell immediately due to an environmental permitting issue. During this period, the cooperative continued to receive technical assistance to prepare for the transaction.
October 2017: The Halifax Estates cooperative successfully purchased their park for $29 million. The cooperative secured a $20 million mortgage from TD Bank, and subordinate financing from ROC USA Capital and the community development financial institutions Boston Community Capital (now BlueHub Capital) and the Leviticus Alternative Fund.
2017 – present: The cooperative will continue to receive technical assistance from CDI for the duration of its ten-year mortgage. With ongoing support and guidance, the cooperative is successfully operating a multi-million-dollar property. Over the past several years, they have addressed capital needs and unexpected repairs, built up their financial reserves, and continued to refine their governance structure.
Outcomes
Since becoming a resident-owned community, Halifax Estates has remained an affordable option for low- and moderate-income seniors. Immediately after the purchase, rents increased by about $100 per month to accommodate the cost of debt financing and deferred maintenance and have remained relative stable since conversion
Five years after the purchase, members of the cooperative pay $636 per month in rent to live in the community. (The rent is in addition to any costs associated with financing the purchase of their individual homes.) Rent includes services such as snow removal, garbage removal, and maintenance of shared facilities and infrastructure.
The Halifax Estates cooperative has also adopted new strategies to help them generate revenue that can be reinvested into their property. In 2021, the cooperative launched a Real Estate Committee to facilitate home sales within the community. Residents who wish to sell their homes may choose to list it with the committee rather than an outside realtor. The committee collects a three percent commission on each sale, a lower fee than realtors typically collect. In its first two years, the committee had raised nearly $100,000 from home sale commissions. These funds have helped to bolster the community’s operating reserves.
Notably, Halifax Estates is protected from future sales or development. A resident-owned community can only be sold if the cooperative members vote to do so; according to ROC USA, not one of the 300 communities they have assisted has reverted to private ownership. This security is particularly important given the development pressures throughout the region.
Policy significance
Resident cooperatives operate without the goal of generating profit, which can lead to a greater degree of stability for residents. While monthly lot rents can go up initially after conversion, they are much less likely to be sharply increased by profit-seeking owners, helping to maintain long-term affordability. The resident ownership model is a way to maintain the natural affordability of manufactured housing, ensuring that the property will not be sold or redeveloped for another purpose.
Halifax Estates serves as an example of the role that state policy can play in fostering resident ownership. Residents of manufactured housing communities in Massachusetts have legal rights to receive notification of a potential sale and have the right of first refusal to purchase the property. This allowed residents of Halifax Estates to form a cooperative and buy their community before it was sold to an external investor.
Forming and managing a resident-owned property like Halifax Estates requires significant time and effort from the cooperative members and Board. Technical support is crucial for success at all stages; ROC USA and CDI have been invaluable partners. Other resources include the National Consumer Law Center and a network of ROC USA affiliated technical assistance providers.
Resident ownership works for many manufactured housing communities in the U.S., with ROC USA overseeing over 300 conversions. Halifax Estates shows it can work on a large scale with proper funding. Financing can come from ROC USA, conventional lenders, Community Development Financial Institutions, foundations, and state or local sources.
Additional information
I’M HOME Network. This initiative, led by Prosperity Now, offers a range of informational and advocacy resources related to resident ownership of manufactured housing. This Resource Guide includes an overview of key state policies that can enable resident ownership, as well as model legislation.
Freddie Mac Multifamily. This report summarizes findings from a Freddie Mac survey of resident-owned manufactured housing communities, provides an overview of these communities’ characteristics and discusses some of the specific financing models that can facilitate resident ownership.
Abt Associates. This brief describes how resident ownership can enhance affordability and stability in manufactured housing communities, and describes policy and financing approaches that can facilitate resident ownership.
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