A new bill introduced to the U.S. House of Representatives by Rep. Keith Ellison (D-Minn.), would provide a federal tax incentive for manufactured home community owners who are looking to sell the community, with a catch.
That incentive will occur only if they sell their community to residents or to a non-profit developer, which in turn uses the property for manufactured home residents for at least the next 50 years.
“I’m … heartbroken for the thousands of families who were evicted from their communities when the land under their homes was sold,” U.S. Rep. Keith Ellison, D-Minn. said in a statement. “My bill gives residents a fighting chance to compete with developers and save their homes and communities.”
As one source told MHProNews, for Ellison – this is in part a ‘home town issue’ that relates directly to his constituents.
A companion bill has also been introduced in the Senate.
The bill proposed by Ellison was introduced following the closure of Lowry Grove, a manufactured home community which was sold for $6 million to a for-profit developer.
Ellison’s bill is being called the Frank Adelmann Manufactured Community Sustainability Act, to honor the resident who took his life days before the Lowry Grove closed.
Proposed Highlights
The bill would give MH community owners a 75 percent federal tax credit for selling to residents or non-profit developers. According to Star Tribune, that could be the difference between paying $150,000 in capital tax gains if selling to a for-profit developer or investor, or paying $37,500 for selling to residents or non-profits.
That example provided is based on a sale of $1 million.
“If I had a dollar for every operator who has complained about the tax implications of a sale, I could offer a tax incentive personally!” So said Paul Bradley, President of ROC USA, which has an affiliate in the state, Northcountry Cooperative Foundation (NCF). NCF is one of eight Certified Technical Assistance Providers (CTAPs) for ROC USA.
Some States have already Responded to MH Community Closures
There are some states – including Washington, Oregon and Montana – that reportedly offer similar tax incentives for community owners who choose to sell to residents or a non-profit developer.
“Offering tax breaks to community owners who sell to their residents is a win/win response from Rep. Ellison,” Bradley said.
Some industry professionals contacted by MHProNews for reaction said they had too little information to comment, or had mixed feelings about the proposal. Those opposed would not go ‘on the record’ at this time.
However, Jay Hamilton, Executive Director of the Georgia Manufactured Housing Association (GMHA) pointed out some of the pros and cons of the proposed bill.
Intentions Can Change When the Federal Government Gets Involved, Pros and Cons
“I think it’s an excellent idea to give community owners a first right of refusal when an owner sells a community. It’s only fair. A federal tax exemption could possibly encourage this alternative,” said Hamilton.
“However, I also believe in the economic freedom to sell your property whenever you want at the highest possible bid,” he said.
Hamilton elaborated, saying in an email to MHProNews that “If the owners right to make a Capital Gain can be accomplished at the same time while giving the residents ownership opportunity that’s great. Both parties achieve their economic freedom, so to speak.”
Minnesota Manufactured Home Association (MMHA) Statement
“Manufactured homes are Minnesota’s largest source of non-subsidized, affordable housing, accounting for nearly 15 percent of all new single-family homes sold. For many Minnesotans, manufactured homes represent the difference between joining the ranks of those realizing the dream of homeownership, versus remaining perpetual renters,” the state’s industry association told MHProNews in an official statement related to the proposal.
With respect to the Lowry Grove issue, “Unlike most states, Minnesota has a dedicated Manufactured Home Relocation Trust Fund, established in 2007, with the support of the industry and advocate groups, to provide reimbursements for relocation costs to displaced homeowners or buyout older homes that may be structurally unable to be relocated, if there is a closure.”
Minnesota Manufactured Home Association puts this into perspective, pointing out that nearly 25 percent of all owner occupied homes considered affordable for families making under the median income in their state are manufactured homes.
“Manufactured homes are Minnesota’s largest source of non-subsidized, affordable housing, accounting for nearly 15 percent of all new single-family homes sold. For many Minnesotans, manufactured homes represent the difference between joining the ranks of those realizing the dream of homeownership, versus remaining perpetual renters.”
Minnesota has also found a way to help residents who might find themselves displaced due to the closure of a manufactured home community, by allocating funds that are specifically used to help residents of these homes relocate or obtain new housing if there is a closure.
“The MMHA appreciates the efforts of Congressman Ellison in addressing the preservation of workforce housing with the introduction of his bill, (H.R. 3296).”
Their statement to the Daily Business News added, “At the state level, in 2017, the Minnesota GOP controlled Legislature and DFL Governor agreed to a bill establishing a Workforce Housing Development program that specifically includes statutory language qualifying new manufactured homes, located on private lots, on leased land, or in manufactured home communities to participate in Minnesota’s new workforce housing program for Greater Minnesota.”
The bill introduced by Rep. Keith Ellison is intended to reduce the likelihood of the circumstances at Lowry Grove from being repeated.
“I also see why homeowner associations are asking for this. They get that the community owner, like everyone in real estate, is looking at the bottom line. It’s an option that will help sellers and buyers alike accomplish their goals,” Bradley said. # #
Related topic: the Daily Business News recent article on economic freedom, here.
Editor’s Note: the full length statements of those who responded will be published soon on the Industry Voices guest blog. Once published, they will be linked up as part of an update on this specific article. Other inputs from industry professionals and investors on this developing issue are welcome.
(Image credits are as shown above, and when provided by third parties, are shared under fair use guidelines.)
