CDF Forum White Paper DRAFT with EQ additions

							         Forum on “Cooperative Solutions for Affordable Rural and Senior Housing”
                          Cooperative Development Foundation
                                     March 19th, 2012
                                   National Press Club

The economic wellbeing and financial security of many rural Americans is in peril. Though the
nation as a whole continues to grapple with economic uncertainty, the housing challenges plaguing
rural seniors and residents of mobile home parks predate the Great Recession. Across the United
States, 17 million people live in mobile home parks, including many rural seniors, and
manufactured housing is the largest source of unsubsidized affordable housing in the country.
People living in mobile homes – which despite their name are not mobile – are in the precarious
situation of owning their homes but renting the land their homes are on. Not only does owning the
home but renting the land make it nearly impossible to build equity like owners of site-built homes,
but if the park owner raises the rent or sells the park, residents could lose both their homes and
their financial investment in them.

Many mobile homes, especially those constructed before 1976, are very energy inefficient. In some
parks, residents spend up to 80% of their income on energy. Especially for seniors on fixed
incomes, this drain on residents’ resources makes retrofitting, much less replacing their homes,
beyond their means. They are trapped in substandard housing.

On March 19th, 2012 government officials, financial representatives, non-profit leaders, and
community developers joined the Cooperative Development Foundation (CDF) at the National Press
Club in Washington, DC to discuss “Cooperative Solutions for Affordable Rural and Senior
Housing.” Topics discussed were meeting the housing needs of rural seniors and communities, the
importance of affordable housing, the case for cooperative housing, the benefits of manufactured
housing, manufactured housing as a new co-op housing option, how cooperatives provide economic
stability, how to expand rural cooperative housing - especially for seniors, the challenge of energy
efficiency in the nation’s rural housing stock, and how to finance rural cooperative housing.

The Forum showed how housing cooperatives of energy-efficient manufactured housing can
strengthen communities throughout rural America and provide economic security to their
residents.
                                From Manufactured Homes to Housing Co-ops

What’s in a Manufactured Home? Pros
Manufactured housing is a significant source of home ownership that should be expanded. Owners of
manufactured homes are disproportionately low-income and manufactured housing is the largest source of
affordable unsubsidized housing in the country. Since 1989, manufactured housing has accounted for 21%
of all new single-family homes sold. As of 2010, the average cost per square foot for a new manufactured
home was $41 compared to $84 per square foot for a new site-built home. In the late 1990s manufactured
housing represented 60% of new affordable housing produced and the demand continues.

Manufactured homes are often misrepresented and overlooked as a source of affordable housing due to
outdated stereotypes of “trailers” and “mobile homes,” but manufactured housing that is well built and
maintained can be attractive and more energy efficient than some site-built homes. The life expectancy of
modern manufactured housing is equivalent to comparable site-built housing. Properly installed
manufactured housing under HUD’s construction code is as safe and storm resistant as any other home.

What’s in a Manufactured Home? Cons
Although must “mobile” homes are never moved, about two-thirds of them are titled as personal property
rather than as real estate. This makes it difficult for the owner to build equity or obtain mortgage financing
and these owners do not benefit from many of the consumer protections offered to buyers of site-built
homes.

Manufactured home owners own their homes but not the land beneath them and so are subject to their parks
being sold out from under them, leaving them without any affordable option.

Why Manufactured Homes?
The affordable housing situation has worsened for low income renters and owners and manufactured
housing is the largest source of unsubsidized affordable housing in the country.

Rich Haughey, Director of Affordable Housing Alternatives, Corporation for Enterprise Development (CFED),
described CFED’s “I’m Home,” a manufactured housing program that it the center of CFED’s affordable
housing initiative. New manufactured housing can be energy efficient; in fact, many are Energy Star homes.
The challenges of manufactured housing are limited asset building for the owner and a limited refinancing
market.

Andrea Levere, President, Corporation for Enterprise Development (CFED) advocated transforming the
manufactured housing marketplace: use policy to change how markets work for lower income people; use
housing as an asset building strategy. Affordable housing has worsened for low income renters and owners.

The Housing Assistance Council’s Rural Senior Housing Initiative supports affordable housing development
for low and very low income rural seniors. Its two aims are to advocate for better and better-funded
programs and to increase the capacity of senior home builders and create such capacity in new groups. The
Initiative has a small grants program, gives training and technical assistance, makes loans to senior housing
projects, and does research and advocacy on low income rural housing for seniors.
The Cooperative Connection
Terry Simonette, President & CEO, NCB Capital Impact, said that public policy makers are looking for new
and innovative ideas and he urged the audience to make the public policy argument that co-ops can be
championed and supported as an alternative to the usual solutions proposed for affordable housing. While
housing co-ops of under 20 units are difficult to underwrite, housing co-ops can play in important role in
providing home ownership for those who cannot afford another alternative.

Many seniors prefer to stay in their homes as long as possible but would welcome the opportunity to give up
their too-large single family home if they felt they had an affordable option that was different from
traditional senior facilities. They might find cooperative housing attractive, as might the residents of the
43% of manufactured homes that are sited on land that they do not own. Rent increases, especially for
seniors on fixed incomes, jeopardize the affordability of manufactured housing and the sale of the land may
leave them with no practical or affordable options. Cooperative housing, specifically energy-efficient
cooperative housing for seniors, can help solve these issues. Conversion of mobile home parks from rental
property owned by a landlord to cooperative ownership by the residents is a new and growing source of
affordable housing.

By enabling manufactured homeowners to own the land beneath their homes, housing cooperatives also
allow rural seniors to remain in their communities as they age. This benefits both the seniors and their
communities: seniors have security of home and land ownership; seniors’ bank accounts, charitable
donations, and taxes remain in the community; they shop in their community and the local area, keeping
dollars and jobs in the area; they get ownership equity and ownership and control over their homes; they
govern their community and can contract for services, thereby preserving or creating jobs; monthly housing
payments often go down; and property values often go up.

Cooperative ownership has rewards, rights, and responsibilities. The cooperative is a business owned by its
members and individual homeowners own not the land their home is on but a share in the cooperative. The
cooperative has member-approved by-laws and is democratically governed on the principle of one-member-
one-vote. Member/owners elect a board to carry out the day-to-day running of the business.
Member/owners have control over decisions such as electing the board, fees, and amending by-laws and
rules. Benefits of living in co-op housing include control of monthly fees, lifetime security against unfair
evictions, repairs and improvements done as soon as they are needed, liability protection, any extended
services that members agree to, and a strong sense of community.

Energy Boost
More than three tons of carbon emissions would be removed annually if just 10% of dilapidated
manufactured homes were replaced. 1.5 million of these homes were built before federal regulations were
established for manufactured housing in 1976. Upgrading these homes would simultaneously improve the
cash flow of occupants by increasing their cost savings.

Electric cooperatives have 10% of retail electricity sales but are responsible for 20% of actual peak
reduction. 96% of electric cooperatives have an efficiency program in place. 70% of electric cooperatives
offer financial incentives to promote greater efficiency. 73% of electric cooperatives plan on significantly
expanding existing efficiency programs in the next two years. The National Rural Electric Cooperative
Association (NRECA) has joined with national efficiency advocates and experts to make energy efficiency a
national priority and electric cooperatives have tried a variety of programs and approaches to promote
energy conservation to keep members’ bills low, but most have met with limited success. They continue to
consider how best to achieve large-scale energy efficiency in rural areas as well as quality of life for
residents.

High electricity use by customers living in manufactured homes is a chronic problem for many rural electric
cooperatives. The cost to heat and cool manufactured homes with leaky air ducts, ill-suited or poorly sized
HVAC systems, shoddy construction, or deteriorated building components often result in a larger share of
high bill complaints from this housing segment than from site-built homes, even for electric co-ops that have
far more of the latter on their systems. Electric cooperatives are more likely to be impacted by these
challenges than other utilities because they serve many rural and lower-income areas.

Rural electric cooperatives also want to promote energy conservation as a means of keeping member costs
low and there are considerable energy savings to be had by upgrading older manufactured homes. In South
Carolina, for example, many manufactured homeowners spend up to 70% of their monthly take home
income on energy costs alone during peak heating and cooling months. But retrofitting manufactured houses
for improved energy efficiency is problematic as many owners lack the resources and would not qualify for
conventional loans and many landlords are unwilling to invest in greater energy efficiency. Mike Couick,
President & CEO of The Electric Cooperatives of South Carolina (ECSA), explained how ECSA has been
addressing this problem by retrofitting and auditing older manufactured homes in order to meet energy
efficiency benchmarks and therefore save energy, cut household utility bills, and reduce greenhouse gas
emissions. This work also creates stable, high-skilled jobs and keeps dollars in the local economy. ECSA
devised the Rural Energy Savings Program, whereby the co-op uses a new idea known as on-bill financing to
provide low-cost financing that is attached to the electric service account, not the tenant or the property
owner. This program aims to retrofit more than 200,000 homes and save co-op members an estimated
$280m a year. It will also reduce greenhouse gas emissions by 6.7m metric tons over 10 years.

Rep. James Clyburn of South Carolina introduced the “Rural Energy Savings Program Act” to bring programs
like this to a national scale. H.R. 4785 was introduced in 2010 and is in the Senate awaiting consideration.
This Act will authorize the Secretary of Agriculture to make loans that will be used to make loans to
consumers to implement energy efficiency measures involving structural improvements and investments in
cost-effective technologies to reduce home energy use. To Rep. Clyburn, achieving energy efficiency for
America’s rural populations transcends racial, geographical and partisan lines. Promoting better performing
manufactured homes ensures that all low-income, rural seniors do not lag behind the rest of the nation in
benefiting from livable, sustainable communities with energy efficient homes.

Next Step, a national affordable housing provider, is working to replace all old manufactured homes with
Energy Star homes over the next 30 years. Stacey Epperson, President & CEO of Next Step, said her
organization’s goals are affordable and energy efficient housing and wealth creation. Aging mobile homes
are the worst housing stock and many families are trapped in them as they cannot afford retrofitting or a
new home. Many are not energy efficient and making them energy efficient would cushion owners’
mortgage payments. Next Step’s work on energy efficiency resulted in a significant decline of energy usage;
this was noticed by the local rural electric co-op and they asked Next Step to do more.

Supporting and Financing Cooperative Rural Housing
While $7.4 trillion was lost in real estate equity in the recent foreclosure crisis, not a single cooperative loan
has entered foreclosure. Land and home ownership through the cooperative model promote asset building
and community development for rural seniors as they age in place. However, there are significant challenges
to the financing of rural cooperatives:
         - housing co-ops of under 20 units are difficult to underwrite
         - the poor housing market has made it difficult for seniors to sell their single-family
         homes to move into a housing cooperative
         - the lack of understanding of the cooperative model is widespread

The following can support and finance cooperative housing:

   1. State laws can provide significant support to the creation of manufactured housing cooperative
      communities. For example, since 1988 New Hampshire has had a law that provides mobile home
      park residents with a 60-day right of first refusal to the land when it is put up for sale. So far, at least
      five other states have adopted legislation to help with the establishment of housing cooperatives.
      Landowners in Montana, North Carolina, Oregon, Washington, and Vermont receive tax breaks to
      form cooperatives when they sell the land to residents.

   2. Financing support and technical assistance has to be available to seniors in order for them to
      capitalize on land purchase opportunities. For this reason, social enterprises are instrumental in
      spurring the formation of housing cooperatives. For example, when a landowner places the property
      on the market, ROC USA and its network of technical assistance providers, helps rental communities
      form a cooperative and purchase the land. ROC USA has already converted 30 rental communities to
      resident-owned communities since its founding in 2008. The financing that ROC USA makes
      available is for land acquisition and infrastructure improvements. ROC USA also provides ongoing
      support to cooperative owners throughout the tenure of their loans.

   3. Innovative loan options for manufactured homes and housing cooperatives ought to be a ‘sweet spot’
      for credit unions and community banks. The challenge is that not enough lenders are familiar with
      these products or their superior performance. The National Federation of Community Development
      Credit Unions (NFCDCU) provides first mortgage loans for manufactured homes on cooperative land.
      This is a noteworthy improvement from the personal chattel loans that are typically available to
      these homeowners. However, this does not address a large segment of manufactured homeowners
      whose loans need to be restructured.

   4. Community and other loan funds can contribute greatly to the founding and purchasing of housing
      cooperatives. The New Hampshire Community Loan Fund has made financing available for housing
      cooperatives for over twenty years and has worked with lawmakers to create a political climate that
      supports cooperative housing. Homeward, Inc. in Iowa provides manufactured home buyers with
      down payment and closing costs support. Assistance in this manner serves to make homes more
      affordable while promoting small towns as attractive places to live. The Housing Assistance Council’s
      Rural Senior Housing Initiative supports affordable housing development for low and very low
      income rural seniors through its grants program and its loans to senior housing projects. The
      Institute for Community Economics is a federally certified CDFI that makes loans for permanently
      affordable housing across the U.S.
Maximizing the Benefits of Housing Cooperatives
Seniors across the United States make meaningful contributions to the fabric of this country. Rural seniors,
in particular, ought to have a supportive network that preserves affordability and financial security as they
age. Given the substantial portion of rural seniors living in manufactured homes, housing cooperatives offer
a promising way to better integrate these homes with the rest of rural society. Housing cooperatives can
also strengthen the social ties that already exist among these homeowners as a result of their shared
experiences.

   1. A targeted regional strategy is needed to identify rural communities with large stocks of
      manufactured housing. 55% of manufactured homes are in the South, 19% are in the West, 18% are
      in the Midwest, and 9% are in the Northeast.

       Clearly, location matters. Areas characterized by a prevalence of manufactured homes makes
       determining the appropriate geographical size for NORCs easier in that they are usually located on
       the periphery of existing communities. Identifying already existing manufactured housing
       communities can facilitate the transformation of NORCs into housing cooperatives.

       Seniors in these jurisdictions should be mobilized to advocate to local leaders on behalf of housing
       cooperatives. It is important for elected officials to hear from their constituents and for rural seniors
       to actively partake in outreach efforts. Building political support for housing cooperatives in
       geographic regions that favor manufactured homeowners and rental park communities is an
       innovative way to maintain long-term community stability.

   2. Rural communities struggling with the outmigration of younger and more educated populations, in
      addition to the growing populations of retiring seniors, ought to preserve local jobs through
      cooperative conversions. As business owners and property managers, housing cooperative members
      encourage a form of business development that strengthens their personal assets while also
      preserving local businesses. The services that senior housing cooperatives rely on (i.e. landscaping,
      construction, electrical, and other related services) create or preserve jobs and help local economies.

       The national focus on job creation, necessitated by the current economic times, should be broadened
       to examine how to hold onto existing jobs in rural communities. Housing cooperatives are a source
       of untapped potential for a stronger and more stable Rural America.

   3. Fostering multi-stakeholder cooperative relationships is a pioneering approach to leveraging scarce
      resources. Electric cooperatives, such as The Electric Cooperatives of South Carolina, illustrate the
      value of partnerships between cooperative sectors to achieve common goals. Collaborating with
      other cooperatives such as home health care cooperatives would maximize the benefits of housing
      cooperatives for rural seniors by increasing access to crucial services that they need to securely age
      in place.

Not enough community development initiatives are associated with manufactured housing issues or
cooperatives even though these organizations often work to support the same or similar populations.
Coordination with community development entities, such as developers of affordable housing, bolsters
support for housing cooperatives as a tool for affordable housing provision among rural seniors.
Next Steps from Forum Participants’ Discussion
Increased awareness is the first step in capitalizing on the benefits that cooperatives bring. Rural
stakeholders, political officials, public officials, regulators, community organizations, economic and
community development organizations, non-profits, real estate professionals, attorney’s general, bankers,
and financial institutions, among others, need to be educated on what cooperatives are and the benefits that
housing (and other) cooperatives can have for their locales.

Manufactured homes must be transformed into assets that provide the same equity and economic security
available to traditional site-built homes. State governments and local financial institutions should expand
options for low-income owners of manufactured homes to own the land their property is situated on through
changes or additions to state laws and innovative financing.

A bigger market needs to be created that encompasses all manufactured homeowners despite the nuances of
their individual circumstances. Alongside this, more credit unions and local financial institutions should
strongly consider loan offerings for the building of and conversion to housing cooperatives. There is also the
opportunity for credit unions to finance senior housing (NORCS). NORCS offer better collateral. Find credit
unions that do this and take their examples to other credit unions.

Use the instrument of single family finance, i.e. mortgages secured by single-family homes, condos, or
individual share loans.

Connect rural senior cooperative housing, including NORCS, and rural home and health care co-ops.
Consider what other services rural seniors need or will need. Explore an intersection of ROC USA’s
conversions and home health care co-ops.

Combine the energy efficient program advocated by Rep. Clyburn with replacing inefficient mobile home
stock. Focus on the way for replacement housing to get into some of these programs.

Technical assistance is crucial to taking mobile home park conversions to scale. Educate the
CooperationWorks! members who do not have this capacity to develop it.

Engage the rural electric cooperatives and credit unions to explore how they can improve not only electricity
efficiency but the quality of life, especially where most residents are seniors.

Do not forget about the possibility of multi-stakeholder co-ops.

Be aware of possible funding sources:
      - CFED’s main source of funding is the Ford Foundation is main source of funding.
      - HUD’s 202 program provides extremely affordable housing for urban seniors
      - USDA has funds for energy efficient, green, sustainable features of projects (more on the
      multi-family side)
      - Housing Assistance Council has loan funds for senior housing
      - Atlantic Philanthropies funds housing but proposals are by invitation only; it is giving
      away all its money

How do we get rural senior cooperative housing to scale?
Make the connection between manufactured senior housing co-ops, home and health care co-ops, rural
electrics, and credit unions.

Next Steps from CDF

See if there is interest in senior housing cooperatives to start service cooperatives like that in Glens Falls, NY.

Make a list of and get on the agendas of participants’ meetings and conferences. Follow up with HAC’s
suggestion of talking to their housing developers

These are the needs: education, financing, partnerships, multi-stakeholder model, changes in laws,
combining senior housing and home care, energy efficiency, cooperatives working together.

These are the suggestions: expand housing conversions in the South, combine Clyburn law with replacing
energy efficient mobile housing stock, connect USDA-credit unions-rural electric co-ops for short-term
funding opportunities, connect housing and home care, broaden the discussion to include jobs and good
asset management and seniors staying in their communities, partner with credit unions, engage the rural
electrics and credit unions, new market tax credits, talk with HAC developers, replace as well as retrofit and
build new, one description for shared ownership, improve financing including the share loan, put
manufactured housing communities on the periphery of existing communities, and strengthen collaboration
among organizations at the Forum.

Recommendations and Next Steps from Consultant
Moving Forward

CDF’s March 19th, 2012 forum on ‘Cooperative Solutions for Affordable Rural and Senior Housing’ initiated
an important conversation on the function of housing cooperatives in stabilizing the financial uncertainty of
low-income, rural seniors. Revitalizing the manufactured housing market to allow for more cooperative
conversions will help:
     promote quality energy efficient homes
     maintain housing affordability
     enable land tenure
     encourage asset-building strategies

It is imperative that strategic and tactical measures are taken to make the most of these benefits. Pioneering
legislation has permitted the creation of more housing cooperatives in at least six states. Innovative financial
instruments and community enterprises have mobilized senior members to take ownership of their futures.
Credit unions continue to define their role in supporting housing cooperatives and their member needs.
Improving on these efforts will ensure that rural seniors are able to overcome their unique housing and
economic challenges.

Housing cooperatives is the conduit through which financial permanence can be achieved for rural seniors.
Context
Be mindful of the sensitivity surrounding the issues of housing affordability and home ownership,
particularly for lower income population. CDF must maintain that:
- it is not pushing home ownership on low income populations
- the populations it is advocating for are already home owners living in manufactured housing communities

Message
Identify jurisdictions such as congressional districts, states, or other areas with high concentrations of rental
communities. Mobilize and educate key decision makers there on the impact of housing cooperatives on
residents, jobs, and the community. Do outreach to community development organizations and non-profits
that work there to see if there are opportunities to work together.

Do not encourage the formation of new housing communities. Make it clear that these are conversions or
one-for-one replacements and that CDF wants to strengthen the existing community by improving on what is
already there.

Energy efficiency is the “buzz word” to capitalize on when enhancing the stock of older manufactured homes.
The green building and environmental sectors may be interested. CDF could develop an issue brief to
approach energy efficiency in manufactured homes from the perspective of ensuring that older, poorer, rural
populations and MHP residents are not left out of the green movement.

To Consider
The discussion on how to finance housing cooperatives needs clarity. Financing needs to be considered for
both the individual purchase of a manufactured home and the collective purchase (conversion?) of a housing
cooperative. The fact that 80% of rural seniors own their homes and would use this equity to purchase a
share in a housing cooperative detracts from the argument that seniors need help financing such a purchase.

While ROC USA gives a solid understanding of how to convert a mobile home park from private to
cooperative ownership, a solid understanding of what it takes to finance the creation of a housing
cooperative was not articulated. Focus on credit unions and local community banks to see why they do not
do much of this type of lending. (Started to explore this with Richard Dines, Ashley St. Gelais at
Opportunities Credit Union in VT, Dennis Johnson, and Tom Pierson.) Find ones that do it, CUNA, and San
Antonio C.U.

Explore whether there are options to activate residents of mobile home parks who might be interested in
converting to resident ownership before the community is put up for sale.

Bear in mind Terry Simonette’s points:
- policy makers are looking for new and innovative ideas
- think strategically and tactically about how to promote the benefits of co-op housing
- a clear case has to be made for public dollars
- access to credit is a challenge
- anti-corporate sentiment and the stay local movements suggest that the timing is right for cooperatives
- use technology to the advantage of the cooperative community
- well managed cooperatives are stewards of public investments that can ensure long-term benefits
- must be willing to get the co-op outcome without the co-op label
Finally, market the value of senior housing cooperatives. Build relationships with elected officials, green
organizations, local financial institutions, and community development organizations.