Congress Is Considering Legislation to Support Resident Ownership of Manufactured Housing Communities
There is movement in Congress to make it easier for owners of manufactured homes to purchase their manufactured housing communities. Early last week, Rep. Omar (D-MN-5) reintroduced the Manufactured Housing Community Sustainability Act in the House with seven co-sponsors.
The Community Sustainability Act provides a significant tax credit to landowners who sell community land to residents (and cooperatives or mission-driven nonprofits). The tax credit is equal to 75% of the gain on the sale of the property. For example, if the profit from the sale is $1 million, the seller would pay $37,500 on the gain rather than $150,000. This amounts to savings of more than $110,000, a significant financial boon that is large enough to realistically encourage sales to residents.
Why Does Resident Ownership Matter?
Privately owned communities are where residents own the home but not the land it occupies. Today, about 40% of manufactured homeowners live in these investor-owned or private communities.
While there are far fewer cooperatively owned than investor owned communities in existence, the cooperatives that do exist are very beneficial to residents. Research indicates that homes in cooperatives sell faster and for more money than those located in privately owned communities. The wealth-building potential that comes from this type of shared ownership model is particularly beneficial for the low-income, elderly and disabled families who often purchase and occupy these homes.
Research Also Shows that Resident Ownership Leads to Lower Lot Rents
In privately owned communities, the land is rented out by landlords much like apartments for rent. And much like rental units, landlords have considerable leeway to determine when and how much to raise rents on these lots when there are no rent control regulations in place. While many owners of manufactured housing communities are small, local and interested in the well-being of their residents, an increasing number of large private equity firms are buying these communities and raising lot rents to boost firm profits.
Manufactured homes are often described as mobile, which could not be further from the truth. In fact, manufactured homes are often on more permanent foundations which can cost thousands of dollars to move from a lot. Predatory community investors and owners know this and take advantage of just how immobile these homes actually are, making homeowners choose between paying hefty fees for relocation or abandoning their homes outright.
Resident ownership is an effective way to protect manufactured housing residents from getting squeezed like this, and a generous tax credit, such as that provided in the Community Sustainability Act, would help them get there.
The creation of additional shared ownership communities would also provide advocates with even more information about the advantages of resident ownership as well as an understanding of which resident-owned structures are the most effective.
What Manufactured Housing Brings to the Table
According to the Joint Center for Housing Studies (JCHS), more than 38 million Americans are housing cost burdened, meaning they spend more than 30% of their income on housing. At the same time, the supply of affordable housing is well below the need.
Manufactured homes are much less expensive than typical site-built homes. The average sales price of a new manufactured home in 2018 was $78,600, while the price of a new site-built home was $379,317. Moreover, there is a commonly held perception that manufactured homes are poorly made. This is not true at all. Since 1976, manufactured homes must adhere to Manufactured Home Construction and Safety Standards (the HUD Code), which were enacted in legislation two years earlier.
Given all of this, it’s no wonder that more than 17.5 million people live in manufactured homes.
While Prosperity Now does not think manufactured housing is the only solution to addressing the shortage of affordable housing, we recognize it plays an important role, and want to make sure owners of manufactured homes get the most out of their purchase. This brings us back to the Community Sustainability Act. The wealth building opportunities and increased control and security that come from resident ownership are worth investing in, and the Sustainability Act does this by providing landowners with a meaningful incentive to sell to residents.
Take Action: Ask Congress to Support the Community Sustainability Act
Now here is the most important part.
While the reintroduction of the Community Sustainability Act is great news, this bill is yet to become a law. That happens by getting a critical mass of bipartisan support to bring the bill up for a vote. You can help make this happen by contacting your representative and asking them to cosponsor the Sustainability Act. By taking this step, you are investing in the safety and financial security of manufactured homeowners and giving them greater say over the future of their communities.