Paul Bradley with ROC USA Gives Keen Exclusive Insights on Manufactured Home Communities (MHCs) Market ‘I Know You Haven’t Forgotten’ SF MH Mortgage in Land Lease, MHC Sales Slow-PE Players Grow
An evidence-based case can be made that one of the best reputations in the manufactured home industry for an organization involved with the Manufactured Housing Institute (MHI) belongs to ROC USA. As newcomers should understand, ROC is an acronym for resident owned communities (ROC). A common theme for PBS, NPR, and other mainstream news and public officials’ reports about what can be done to protect residents from the ravages of “predatory” private equity (PE) consolidators operating in the manufactured home community (MHC) sector is that residents can be organized to purchase their communities into ROC style cooperatives or co-ops. ROC USA is routinely mentioned in that context because of their leading role in that process in recent years (see evidence provided further below). Interviews with residents who live in an ROC often illustrate a greater sense of security that comes with their owning their home but also having a stake and realistic say about how life in their manufactured home ROC operates (referred to by Freddie Mac as MHROC). That theme among researchers and mainstream media touting the benefits and “solution” of ROCs to “predatory” community operators often point specifically to ROC USA led by the award-winning Paul Bradley. Bradley is president of ROC USA and sits on the organization’s board of directors. Bradley is thus an obvious source to ask specific questions such as this one. How realistic are those media and other research observations about ROCs as a solution to predatory behavior in the MHC sector may be?
More specifically. How many family-owned manufactured home communities (MHCs) or other forms of investor-owned MHCs could be converted annually into ROCs? MHProNews recently reached out to Bradley to get answers to those and other questions. Bradley provided the following replies in a timely, professional, and cordial fashion.
The following Q&As were conducted via email, so the accuracy is top notch.
> MHProNews to Paul Bradley, ROC USA:
Paul,
Hypothetically speaking. What would be the maximum number of conversions to resident ownership that ROC USA could support in a year under its current structure and in the current economic environment?
ROC USA’s Bradley’s reply to MHProNews.
We have averaged 19 co-op purchases over the last 4 full years. Our [ROC USA’s] highest total in one year was 25 [MHC conversions in 2019]. The potential is greater than what’s realistic given high prices and declining number of sellers selling in 2023. We [ROC USA’s] are larger (number of staff and capitalization) today than 2019, so the potential is greater than 25.
But hypothetically, a lot more is possible because we are seeing extremely strong interest among homeowners when we can present a viable purchase opportunity. That’s really picked up as we and resident ownership has become better known and excessive rent increases are making front page news across the country.”
MHProNews to Paul Bradley, ROC USA:
Then related, what is the actual projected number of ROCs conversions that ROC USA will likely achieve in 2023?
ROC USA’s Bradley to MHProNews.
Too early to tell but more than 12 and less than 18 I would say. Below average.”
> MHProNews to Paul Bradley, ROC USA:
What explains that distinction between potential and reality?
ROC USA’s Bradley to MHProNews.
High prices [for manufactured home communities] are the biggest issue – finding viable opportunities that don’t require big value add just to make the numbers work. Stubbornly low CAP rates despite higher interest rates – defies traditional economics. Number of PE [private equity] players in the market only seems to grow.”
Note that Investopedia explains that a cap rate is defined as follows. “The capitalization rate [cap rate] is the rate of return on a real estate investment property based on the income that the property is expected to generate.”
In the next question, GSE is an acronym for Government Sponsored Enterprises (GSEs), which are sometimes referred to as Enterprise or Enterprises, which are typically a reference to commercial or single-family mortgage giants Fannie Mae or Freddie Mac. Bankrate notes that: “As of 2023, Fannie Mae and Freddie Mac support around 70 percent of the mortgage market, according to the National Association of Realtors. As to commercial real estate lending, left-leaning Axios said on 4.12.2023 that: “Regional banks hold just 14% of outstanding loans. Fannie Mae and Freddie Mac also make a lot of these loans as do life insurance companies.”
> MHProNews to Paul Bradley, ROC USA:
What role could the GSEs – or others – play in facilitating more ROCs annually?
ROC USA’s Bradley to MHProNews.
Low-cost debt providers could line up behind ROCs. That would help make more purchases more affordable.”
MHProNews encouraged Bradley to elaborate on the above. In response, Bradley said the following.
Two answers to true scale:
Co-ops: Interim ownership for portfolio purchases that can be de-consolidated through sales to co-ops. That’s in the works.
2. True land lease communities: Conventional residential mortgage loans or more cost effective personal property loans on homes in MHC [manufactured home communities] with meaningful long-term leases. That, the GSEs, FHA, VA, USDA, banks, CUs [credit unions], HFAs [state Housing Finance Agencies or HFAs], ROCKET Mortgage (for land/home real estate transactions) could deliver today but it will take several of them getting on the same page with a long-term lease.
That latter has been self-evident for 20 years and it got more talk back then! Everyone has amnesia! I know you haven’t forgotten.
Paul”
Additional Information with More MHProNews Analysis and Commentary in Brief
Frequently missing from mainstream media and other publicly available discussions of ROCs are what ought to be obvious topics. For example, how many ROCs in total are there in the USA? But hold that thought, which will be addressed further below. Because an array of other interwoven topics will begin to take shape as more information about the ROC sector of manufactured home community sector is explored in this report and analysis.
Mortgage giant Fannie Mae’ DUS (Delegated Underwriting and Servicing or DUS) webpage provides this definition for manufactured home communities (MHCs). Per Chapter 6 of Fannie Mae’s DUS guide: “An MH Community is a residential real estate development with lots on which Manufactured Homes are located, together with amenities, utility services, landscaping, roads, and other infrastructure.” In a footnote of a document cited further below from another mortgage giant, Freddie Mac, which is another Government Sponsored Enterprise (GSE or Enterprises) that provides access to the secondary market, said the following about the definition for a manufactured home community, citing the Federal Housing Finance Agency (FHFA).
FHFA defines an MHC as, “a tract of land under unified ownership and developed for the purpose of providing individual rental spaces for the placement of manufactured homes for residential purposes within its boundaries.”
As then Harvard Joint Center for Housing Studies (JCHS) fellow Eric Belsky noted years ago, “Credit is the lifeblood of housing.” Bradley and ROC USA grasp that reality quite well. Thus, Bradley’s remarks about the usefulness of low-cost debt lining up with ROCs in order to make more conversions possible.
Challenge: A structural disadvantage of manufactured homes, often referred to as trailer parks or mobile home parks, is that the homeowner typically owns the built property rather than the land on which it sits. In fact, the land can be owned by a separate entity that can either be a smaller “mom and pop” operator, a regional operator, or, increasingly, a private equity investor like Blackstone or the Carlyle Group. The owner will lease the land to the homeowners and charge “lot rent” monthly via a lease agreement. This type of lease structure is typically short term and can expose the homeowners to sudden swings in the lot rent and creates a lack of certainty in the long term. However, one of the largest issues with this type of rent structure is that, without ownership of the land, homeowners effectively own a depreciating asset and lose out on the ability to build equity and generate wealth through homeownership.
Solution: This investment will help further scale ROC’s model by providing equity-like capital (through Prudential as an intermediary) to ROC USA. Beyond the merits of this specific investment and alignment with RWJF programmatic goals around community power, this transaction has two additional goals:
Pilot a new guarantee-vehicle that utilizes the Foundation’s newly rated guarantee to crowd in capital from insurers for community development; and
Pilot a new vehicle for delivering equity-like capital to the community development finance system—a recurrent and stubborn problem that limits growth and lending volume.”
The Robert Wood Johnson Foundation (also known by its abbreviation, RWJF) was named after its founder, Robert Wood “General” Johnson II, son of the co-founder of Johnson & Johnson.2 RWJF has been called, “America’s largest philanthropy devoted to health.”3”
Influence Watch, which is affiliated with the Capital Reseach Center (CRC), further said this about the RWJF.
Other notable grantees of RWJF include the Clinton Foundation to regulate soda consumption in public schools and the Tides Foundation to direct money to politically left-leaning causes and organizations.5 At the end of 2014, the foundation’s assets were $10.5 billion.6”
Influence Watch cited several left-leaning nonprofits and causes that RWJF is involved in. Among those they detailed was the foundation’s interest in healthy communities. “In 2010, the RWJF partnered with regional Federal Reserve banks on the Healthy Communities Initiative to support developers, investors, ad bankers that promote healthy lifestyles.20″ Certainly, while ROCs are non-governmental organizations, there are touchpoints. The desire of RWJF to support ROC USA in “flipping the script” in the manufactured home community sector is notable, and arguably commendable.
Those points noted, RWJF said this.
About This Investment
This investment supports ROC USA, a nonprofit aimed at expanding economic opportunities for homeowners in manufactured home communities across the nation by making quality residential ownership viable. Manufactured housing, commonly referred to as mobile homes, makes up a sizable portion of the housing stock in the United States and is commonly cited as the largest source of unsubsidized affordable housing in the country. Given the socio-economic make up of owners of manufactured homes, and the fact that these homeowners typically only own the built property, rather than the land, these homeowners are typically deprived of the ability to accumulate wealth through homeownership. ROC USA wants to flip the script and give power back to the homeowner by providing residents the opportunity to form a cooperative association and borrow the money required to purchase the land, thus granting them the ability to build equity and generate wealth through homeownership.”
Intended Impact of Guarantee
The intended outcomes from this transaction include:
Empowering residents of manufactured homes to form a cooperative association and borrow funds to purchase the land on which their built property sits;
Providing needed funds to help further scale ROC’s model; and
Building equity and wealth by allowing residents to purchase the actual land, thus creating an appreciating asset in which they own.”
Under “About the Borrower” RWJF said the following.
Founded in May 2008, ROC USA, LLC (ROC USA) is a social venture with the mission of making quality resident ownership viable nationwide and to expand economic opportunities for homeowners in manufactured home communities (MHCs). Rather than remain beholden to a third-party landlord, ROC USA offers residents the opportunity to form a cooperative association and borrow the money required to purchase the land. The residents can become members of this new resident organization, establish a board comprised of residents, and make collective decisions on how the MHC should be operated, including setting a budget, determining lot rents, and prioritizing capital improvements.”
Under the tab of Key Partners, RWJF expressed this.
Acting as a key partner in this investment is Prudential. Prudential serves as an intermediary in which RWJF will provide a 100 percent payment guarantee to Prudential, who will then act as the lender and will make a $4.75M, 15-year loan to ROC USA. Although the Prudential investment is structured as debt to ROC USA, the unique structure should provide an immediate and sizable impact on ROC USA Capital’s net asset position.”
A download related to their support for ROC USA is found at this link here.
The ROCUSA.org website sheds additional light on the ROC sector, and their own organization’s role in it. Under the heading of “history” is the following, per ROC USA.
There are a few instances of homeowners buying mobile home parks in the 1970s, but not much earlier. Beginning in the 1980s, two principal types of co-ops were being used to bring resident ownership to the community – market-rate co-ops and limited-equity co-ops. A third type, with individually owned sites and association-owned common land, was also taking place in limited instances.
Limited-equity co-ops have low-cost shares and were initiated in New Hampshire beginning in the 1980s by the nonprofit New Hampshire Community Loan Fund and in California, where a state program supported low-cost share co-ops. That’s typical. If share prices in the co-op are low, then either nonprofits or state programs are providing loans to fill the equity gap between what a bank will lend and what homeowners can afford.
In the 1990s, New York and Massachusetts began promoting low-cost share co-ops. Minnesota followed in the early 2000s. ROC USA® developed its national Network of nonprofits and national source of capital to make limited-equity co-ops viable nationwide, launching in May 2008.
Individually owned sites with some type of association-owned common land is highly dependent on local zoning and is challenged by limited financing options when it’s not developed as such from the start. Such communities do exist largely in California.
Today, roughly 1,000 communities or 2 percent of all manufactured (mobile) home communities are resident-owned in one of these three basic structures.”
So, ROC USA states that there are “roughly 1,000 communities” or about “2 percent of all manufactured (mobile) home communities are resident-owned in one of these three basic structures.”
A CDFI is a “community development financial institution” per the CDFIfund.gov website. That website said this in a case study on ROC USA.
Seventy-five percent of the 2.7 million owners of mobile and manufactured homes in the country’s 50,000 MHCs are low-income. Since 1984, NHCLF has provided technical expertise and loans to cooperatives so homeowners could jointly buy their communities and operate them on a not-for-profit basis as a way to preserve affordable housing and improve communities. In New Hampshire, 20 percent of all MHCs (more than 100 of the 450 in the state) are now owned by homeowner cooperatives. To bring this successful New Hampshire-based financing and technical assistance model to a national scale, NHCLF formed ROC USA, LLC in 2008. ROC USA helps homeowners overcome the three barriers to resident ownership – the lack of opportunity, expertise, and financing – through two subsidiaries, a Network of local TA affiliates and a national CDFI. ROC USA, a social venture, also offers national programs, including leadership development, online peer networking and education, aggregation, and marketing.”
While there is an array of insights in the above, note that CDFIfund.gov said there are some 50,000 MHCs in the U.S.
That 50K total MHCs in the U.S. estimate is similar to the count provided by George McCarthy of the Lincoln Institute for Land Policy. McCarthy earlier this year told MHProNews the following. “Yes, based on new FEMA data, there are 50,393 MHCs in the US.” That revised a prior estimate given by McCarthy which was useful in the controversy over how many Manufactured Home Communities or MHCs there are in the U.S. McCarthy reportedly had a position on the board of ROC USA. Per ROC USA’s current listing of board members is Doug Ryan, who is the Interim Vice President for Policy and Applied Research at Prosperity Now. More on Ryan further below.
ROC USA and Freddie Mac Provide Some Similar Remarks
Like ROC USA, Freddie Mac provides a similar number about the total count of resident owned communities or ROCs in the U.S.
In an undated download from the Freddie Mac website is this statement. “Out of the approximately 45,600 MHCs in the United States, we found that only 1,065, or 2.4%, are resident-owned, representing an estimated 0.09% of households in the country.”
That undated Freddie Mac download provides the following statements and datapoints.
Since the launch of Freddie Mac’s Manufactured Housing Community Loan offering in 2014, we have successfully completed three MHROC refinances. Two occurred in 2016 and one in 2018. All three deals were in California. In each case, our financing provided a lower cost of capital to the cooperatives, allowing them to save money and replenish their reserves.”
Note that Freddie Mac, in seeking to understand the ROC segment of the manufactured home community market, spoke with ROC USA.
As part of our research, we spoke to various industry participants including brokers, originators, attorneys, ROC USA, resident-owned community board members and MHC investors. Our goal was to understand their unique perspectives, including challenges and benefits associated with this niche market.”
Freddie Mac’s research indicated the following.
Exhibit 1: Manufactured Housing Statistics
Residents
Homes
Communities
Resident-owned Communities
22,000,000
8,500,000
45,600
1,065
Sources: Freddie Mac, MHI, 2017 5-Year ACS, HILFD
In the above from Freddie Mac, “MHI” – of course – is the Manufactured Housing Institute.
Then note the disconnect between Freddie Mac’s data point on how many MHCs there are in the U.S. with the 50,000 estimated by ROC USA and the “50,393 MHC” that the Lincoln Institute’s McCarthy said FEMA research has identified.
In stark contrast, for whatever reasons, MHI has consistently underreported the number of MHCs for years, per several fact checks by MHProNews/MHLivingNews. Unlike Bradley and McCarthy, MHI has declined comment to MHProNews on questions about their data, or other curiosities. For a recently documented example, see the report linked below.
By May of 2022, an MHI “Quick Facts” claimed that the total MHC count was 43,000 plus.
Another MHI produced infographic previously said 38,000 MHCs, then “almost” 40,000, and a year ago 43,000 plus.
For the sake of researchers, newcomers, and those who have not yet grasped the problematic pattern of MHI’s demonstrably errant or paltering/posturing ‘research.’ That shifting MHC count isn’t because there are a growing number of MHCs. Rather, the MHC count has reportedly been shrinking for some twenty years, because in the 21st century, more such communities close than open.
That noted, ROC USA and Equity LifeStyle Properties (ELS) each have stated their estimate of the total U.S. communities total around the 50,000 MHCs mark and have for some time.
ELS has long had an MHI board position. That begs the question. Does ELS’ senior official not look at what MHI produces in the way of ‘data’ for the manufactured housing industry? That’s not just an oddity. Sun Communities – which also holds a board seat with MHI – previously noted that there is no “national repository of information” while stressing the “scarcity of available manufactured home communities.” Sun (SUI) is a prominent publicly traded member of MHI. “Corporate officers, auditors and audit committees all work towards ensuring US publicly traded companies provide accurate…” information, per the Baker Tilly law firm website (italics added). So, it is more than curious that Sun would say there is no reliable source for such information on MHCs. Note that ELS, Sun, Flagship or others that are corporate officers who sit on the MHI board apparently fail to correct information produced by that trade group, which their respective firms may later reference themselves in their own corporate investor pitches and other reports.
That noted, pivoting back to insights on ROCs, Freddie Mac said something similar to what Sun’s officer expressed on information about manufactured home communities. Specifically, Freddie stated the following.
In our early conversations with MHROC market participants, we heard speculation that the total MHROC universe ranged from 500 to 1,500 communities across the nation, but there was no unified data source identifying MHROCs. We undertook a national search to identify MHROCs and created a single dataset of their locations. Through our efforts, we located a total of 1,065 MHROCs in 41 different states. As shown in Exhibit 2, this means that only 2.4% of all MHCs are resident-owned.”
So, Freddie Mac indicated that there was a range of claims that didn’t agree. In response to that, Freddie Mac “undertook a national search to identify MHROCS and created a single dataset of their locations.” Elsewhere in that same document, Freddie Mac said this.
Out of the approximately 45,600 MHCs in the United States, we found that only 1,065, or 2.4%, are resident-owned, representing an estimated 0.09% of households in the country
Total 45,642 1,065 138 $1-$499 $100-$199 12% $600+ 58%
Sources: Freddie Mac, HIFLD
ROC USA provided this video introduction to ROCs and their services, with the video available in English and Spanish.
More MHProNews Analysis in Brief
So, per the ROC USA website, there are some 309 MHC properties that are part of their network. Based on the Freddie Mac assertion that there are about 1065 ROCs nationwide, and mindful that Paul Bradley asserted there have been dozens added in recent years, there may be around 1100 total ROCs nationally. So about 28 percent of all ROCs in the U.S. are part of the ROC USA network. Given that the organization launched in 2008, that is a notable achievement.
Bradley alluded in his remarks to MHProNews how people tend to forget what has occurred in the past.
As MHProNews periodically notes, commercial real estate in dozens of states, perhaps all of them, witness buildings built on land that is leased. There are also states and locales where conventional site-built housing is built on a land-lease. There are known examples of single-family housing built on land lease in the Chicago metro, Hawaii, Maryland, and in Florida at The Villages land-lease retirement community, the later of which (The Villages) features manufactured homes as well as conventional housing.
Bradley also noted the point that MHProNews/MHLivingNews are well aware of the potential for doing mortgage loans in a land lease. With an apparently lighthearted comment quoted above, Bradley remarked: “…but it will take several of them getting on the same page with a long-term lease. That latter has been self-evident for 20 years and it got more talk back then! Everyone has amnesia! I know you haven’t forgotten.” Per informed sources, Bradley and others at ROC USA are routine readers of MHProNews, so those points may be understandable in the light that he and his colleagues are regular readers here.
That interest in doing mortgages in a land lease was not only studied by MHI members, but numbers of such loans in MHCs were originated too. Without elaborating, Bradley’s remark appears to be a reference to the point that MHProNews/MHLivingNews have raised that opportunity from time to time for years. Why? Because, per reports, it is a proven method for obtaining lower cost single-family manufactured home financing in a land lease. All of that was true years ago. It should still be true today too.
That said, it is also true that Fannie Mae and Freddie Mac are ironically producing detailed research reports on an array of manufactured housing industry connected topics. The research by the GSEs referenced herein are just the tip of the iceberg to illustrate that point. Their respective research is either overtly or subtly connected to their “Duty to Serve” (DTS) mandate under the Housing and Economic Recovery Act (HERA) of 2008.
As a coalition of nonprofits that included ROC USA, Prosperity Now, and others shown below asked FHFA to push the GSEs to actually launch a chattel (home only) manufactured home lending program. Politics aside, that coalition apparently wants to see more affordable manufactured home lending. Which begs the question, why wasn’t MHI involved in that coalition? Why has MHI partnered with nonprofits that are the competitors of manufactured housing?
Bradley is obviously correct. Lower cost loans could yield more manufactured home sales. That is an area that the Manufactured Housing Association for Regulatory Reform (MHARR) reform has also advocated for strenuously for some years (see second linked report below). While MHI claims to want that, Doug Ryan with Prosperity Now publicly pointed a finger at MHI and asserted that DTS chattel financing has been subverted by MHI on behalf of Clayton Homes. For more on those issues, see the linked reports. Note that Ryan is an ROC USA board member.
Bradley suggested in his exclusive remarks above that: “portfolio purchases that can be de-consolidated through sales to co-ops. That’s in the works.” That could indeed be good news for untold numbers of residents in MHCs that may now be operated by so-called predators. It is possible that some community operator(s) are considering selling multiple MHCs to their residents, presumably through ROC USA. Of course, as Freddie Mac noted in their research, there are others who are operating in the ROC conversion space too.
Some might think, in the light of such facts, that the number of ROCs are insignificant and that some two dozens conversions per year by ROC USA in recent years is a drop in the ocean of properties that have been acquired in recent years by private equity. That would arguably be errant thinking from the viewpoint of the residents in those ROCs. They are well aware of the advantage that they have over residents in hundreds of other properties owned by “predatory” brands. For more examples on that view, see the reports linked below.
This report began by taking note that Bradley led ROC USA has one of the better images at MHI and arguably in the manufactured housing industry, perhaps particularly so in the manufactured home community sector. On a gonzo journalistic personal note/disclosure, having visited ROCs and having interviewed ROC residents, there is an evident pride of homeownership and a sense of community that is often superior to what someone would find in a private equity owned firm. ROCs are already part of the solution for thousands of their residents. By contrast with ROC USA, some MHI members are apparently part of the problem.
ROC USA’s banner “We Own It!” is representative of the positive emotions and thinking of their network of properties residents.
But as Bradley and ROC USA point out, there is more work to be done.
Among the items that could be mentioned under “more work to be done,” there is a need to develop new manufactured home communities at a far faster clip than has occurred in the 21st century. One reason that cap rates are compressed is precisely because there are a shrinking number of such properties and a growing demand for them. In the world of supply and demand, that spells higher prices and compressed cap rates. The report linked below, while it now needs to be adjusted for inflation, nevertheless accurately represents the research by public officials from the major political parties that illustrate how competitive manufactured home living can be.
There are federal programs that appear to be part of the “amnesia” that Bradley’s jest could be applied to which ought to be revived.
New manufactured home communities could be developed with special financing that at least on paper already exists. Where is MHI and their dominating members on those programs?
Given that a key factor in the contraction of manufactured housing performance is both zoning/placement and financing has often been identified as a factor throttling the industry’s performance, one might think that if MHI leaders were sincere, that they would be pressing to have HUD and others working on encouraging developing with such programs. For more on related issues, see the Q&A linked above with Mark Weiss, J.D., of MHARR and other reports linked herein, from those other interconnected reports, and below. It is time to end the “amnesia” and to press for an “all of the above” approach to move manufactured housing into a brighter future for the benefit of current and potentially millions of more residents. ###
Trade media can and should be a ‘cheer leader’ when it is appropriate to do so. But authentic trade media also holds the powers that be to account. Who says? The American Press Institute. Click here to subscribe to the most complete and obviously most read manufactured housing industry news in seconds. Enter your desired email address, press submit, confirm in your inbox. Then You’re All Set for x2 weekly emailed news updates! To report a news tip – either ON or OFF the record – click the image above or send an email to iReportMHNewsTips@mhmsm.com – To help us spot your message in our volume of email, please put the words NEWS TIP or COMMENTS in the subject line.
Our son has grown quite a bit since this 12.2019 photo. All on Capitol Hill were welcoming and interested in our manufactured housing industry related concerns. But Congressman Al Green’s office was tremendous in their hospitality. Our son’s hand is on a package that included the Constitution of the United States, bottled water, and other goodies.
Tony earned a journalism scholarship and earned numerous awards in history and in manufactured housing.
For example, he earned the prestigious Lottinville Award in history from the University of Oklahoma, where he studied history and business management. He’s a managing member and co-founder of LifeStyle Factory Homes, LLC, the parent company to MHProNews, and MHLivingNews.com.
This article reflects the LLC’s and/or the writer’s position and may or may not reflect the views of sponsors or supporters.
