Did you know that an estimated 20 million people in the United States live in mobile home or manufactured home communities? These communities make up a significant component of the nation’s affordable housing stock. Manufactured homes can be an intermediate step for some individuals and families between apartments and owner occupied housing such as condominiums and detached homes. And, while individuals with sufficient income and cash for down payments typically prefer to buy traditional homes, there are many manufactured home communities – for example retirement communities in Florida and California and communities located near the ocean – with tenants of all income levels.
Historically, manufactured home communities were owned primarily by for profit entities and developers. Recently, however, many such communities have been purchased or developed by nonprofit entities, municipalities and tenant cooperatives. These nonprofit owners may be unaware that their acquisition of a manufactured home community can be financed with the proceeds of tax-exempt bonds. In addition, nonprofit owners of older communities may be unaware that they can finance improvements to their communities with tax-exempt bond proceeds.
The tax requirements for issuing tax-exempt bonds to finance the purchase and/or improvement of a manufactured home community are similar to the requirements for financing a multifamily housing development. The nonprofit owner is required to, among other things, set aside a certain number of spaces in the community for lower income households.
Investor demand for tax-exempt bonds secured by manufactured home communities has steadily increased over the last decade. In the past, rating agencies were not as comfortable rating these types of bonds, so the bonds that were issued were often either unrated or credit enhanced by bond insurance companies. Today, investors and rating agencies are more comfortable with a bond issue backed by a manufactured home community. They recognize that manufactured home communities have a stable tenant base because it is costly for tenants to move their homes. Recently, bonds secured solely by a manufactured home community and its rental revenues have been rated as high as “A” by S&P.
The current economic environment could potentially provide nonprofit owners with an opportunity to use tax-exempt bonds to finance or refinance the acquisition and/or improvement of their manufactured home communities at historically low interest rates.