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COOPERATIVE HOUSING CONVERSION STUDY

FINAL REPORT

This report is the result of a multi-part project to investigate the possibility of creating a suitable

legal, financial, regulatory, and technical assistance environment to facilitate conversion of low-

income rental properties to cooperative housing and to assist with the successful conversion of

low income rental housing to ownership-based cooperative housing.

The study was funded under Cooperative Agreement (NO RD-10-09) between the National

Cooperative Business Association (NCBA) and the United States Department of Agriculture.

This report was funded via a contract between NCBA and LIA Advisors, LLC (Terry Lewis,

Esq., Principal). The research team for the entire project and report consisted of:

Terry Lewis, Esq.

Christina Clamp, PhD

Eric L. Jacobs, ABD, MA

INTRODUCTION

The purpose of this study is to determine whether and how NCBA can support the conversion of

existing housing to cooperative ownership using the resources of various USDA programs. Any

conversion program, to be deemed feasible, would have to meet at least the following criteria:

It would have to be economically self-sustaining, both as to the entity or entities bringing

about the cooperative conversions and the resulting cooperatives; and

It would have to add value in some fashion to USDA, to the residents of the housing to be

converted, and to the cooperative sector generally and/or NCBA specifically.

Economic sustainability invokes the concepts of affordability and of scale, the former often

requiring or depending upon the latter. Affordability to families whose incomes are at or below

(often considerably below) 80% of area median incomes (“AMI”) is a statutory hallmark of

USDA housing programs and a worthy component of any NCBA-supported conversion program.

Cooperative development/conversion entities (be they for-profit or non-profit) require a certain

income stream over and above the cost of each development/conversion project in order to pay

for their continuing operations. Each development/conversion project involves a substantial cost

in terms of staff time on the part of the development/conversion entity (hereafter “developer”)

and the various elements necessary to finance and undertake the acquisition and rehabilitation of

the property to be converted (e.g. appraisals, architectural and engineering work, reserve studies,

legal fees, etc.). Below a substantial minimum, these costs are not scalable. Ultimately, these

costs must be paid as part of each development/conversion project (hereafter “project”).

Imposing even the most minimum of development costs on too small a project will make the

housing unaffordable to the target resident population. Furthermore, the developer must have

access to a steady stream of development projects or go out of existence. Thus, economic

sustainability requires that a conversion program operate at scale.

Even before the current federal budget crisis, USDA program resources were strained to meet

rural America’s affordable housing needs. Simply providing a new user (even a cooperative user)

for existing USDA programs does nothing to add value to USDA. To add value to USDA, a

conversion program must bring in outside resources, increase the efficient use of existing USDA

resources, or do both.

To add value to the residents of housing to be converted, the conversion program must do one or

more of the following:

Increase the affordability of that housing;

Add amenities/usability to that housing;

Provide economic value to the residents by giving them a realizable equity stake in their

housing; or

Enhance the lives of the residents by increasing their control over their individual

housing and/or their housing communities.

To add value to the cooperative community generally, a conversion program must enhance the

profile of cooperative housing in rural America and within the affordable housing and public

policy communities. It must also increase the resources of the cooperative community by

increasing its capacity to create and sustain cooperative housing. To add value to NCBA

specifically, a conversion program must enhance NCBA’s profile while being at least budget

neutral or, at best, provide an income stream to NCBA.

Within the above framework, this report will discuss three potential cooperative conversion

programs:

The conversion of individual §515 multifamily housing properties to cooperative

ownership;

The conversion of multiple portfolios of existing §515 multifamily housing properties to

resident ownership and control through mutual housing associations (MHAs); and

The conversion of existing manufactured housing communities to cooperative

ownership.

It will also describe the results of field research undertaken to evaluate the validity of

preliminary conclusions as to program feasibility and to estimate the workability of the model

program recommended.

CHARACTERISTICS OF THE §515 PORTFOLIO

The §515 rural rental housing program is a USDA direct mortgage program that effectively

creates very high loan to value, 1% interest, 50-year amortization mortgages to finance privately-

owned, affordable, multifamily rental properties in rural areas nationwide. In the context of the

program, rural means: “… any area other than:

i) A city or town that has a population of greater than 20,000 inhabitants and

ii) The urbanized area contiguous and adjacent to such a city or town.”

Original §515 mortgages had a 50-year term as well as 50-year amortization. New §515

mortgages have a 30-year term, leaving a balloon amount to be refinanced. The program is

designed to be affordable to families at or below 80% of AMI. The 50-year amortization and

effective 1% interest rates alone generally make the projects affordable at that level, but §515

projects often have allocations of USDA project-based rental assistance (RA) that make their

already-low rents affordable to extremely low income residents. RA works very much like the

more familiar HUD §8 program, in that individual residents in RA-subsidized units pay no more

than 30% of their monthly income for rent, including utilities. The difference between the

resident portion and the actual unit rent plus utility allowance (if any) is paid from RA funds,

which are committed to a given number of units in the project in what used to be multi-year but

are now single-year renewable contracts.

The §515 portfolio is aging. The housing it provides is generally needed in the communities in

which its projects exist. Replacing it would be economically prohibitive. In order to better

understand the preservation needs of the §515 portfolio, USDA commissioned a study of the

portfolio as it existed as of November 1, 2003. As of that time, the §515 program had

successfully enabled the construction of 15,899 properties, totaling 434,296 dwelling units, in

underserved rural communities across the United States.

The median property size was less than 24 units.

The existing tenant base was 58% elderly or disabled.

74% of households were female-headed.

The average tenant income was $9,075.

A total of 90% of the units received some form of tenant-based assistance –

o 74% of the units were covered by RA.

o An additional 7% of the units were covered by project-based §8.

o A further 9% of resident families had §8 vouchers.

The average property age was 23 (now 31) years.

92% of the properties required additional capital improvements funding in order to meet

rehabilitation needs within either the immediate or the medium-term future.

And, while the portfolio study did not address this issue, many of the properties need

upgrades to meet current market standards (no AC, dishwashers, disposals, etc.).

§515 properties built prior to 1986 (a substantial majority of the portfolio) were generally

financed or refinanced using tax-advantaged accelerated depreciation –

Aging GPs looking to retire would have substantial tax liability if projects were sold.

Existing limited partners are receiving taxable phantom income and badly want to get out

but would have substantial tax liability if projects were sold.

In most instances, §515 properties are not viable outside of the 515 program. Refinancing §515

debt at conventional rates and terms (without any additional rehabilitation or conversion costs)

would both eliminate the availability of RA (statutorily available only in conjunction with §515

mortgages) and increase existing rents by anywhere from 35% to as much as 50%. This would

certainly negate their affordability to existing residents. In most instances, it would also take

rents above levels sustainable in local markets.

Legislation, changes in regulatory policies, and recent litigation has confounded efforts to

develop an effective method to either preserve or permit the sale of §515s before the end of their

mortgage term. Aside from the impact on owner/developers, this also has the potential of

creating a crisis for thousands of low-income, elderly and/or disabled tenants.

The economic and social impact of losing affordable multifamily housing on rural communities

would be dramatic. In many rural communities §515 developments are the only source of

multifamily housing or any type of housing other than homeownership. The absence of some

type of multifamily housing in certain rural areas could lead to further outmigration of people

who are important to both the economic and social fabric of these communities. Workers who

provide skilled labor to agri-businesses (but who are not directly involved in farming) and

seniors and disabled people (who want to live independently but remain close to their support

network) might be more likely to relocate to larger towns or cities.

In considering the possibilities of conversions of properties to cooperative ownership within the

§515 program (i.e. with existing §515 mortgages remaining in place), it must be noted that, while

current program regulations permit such conversions, they also prohibit the accumulation of

equity by §515 residents. Current program requirements also prohibit the use of USDA funds

(e.g. mortgage proceeds) to pay developers’ fees beyond a limited builder profit and severely

limit the price that may be paid to property sellers over and above the assumption of existing

mortgages.

POSSIBILITY 1 -- THE CONVERSION OF INDIVIDUAL §515 MULTIFAMILY HOUSING

PROPERTIES TO COOPERATIVE OWNERSHIP

The need to keep properties within the §515 program and the constraints of the program (as

discussed above) severely limit the possibilities for individual property conversion to cooperative

ownership.

Conversion to market-rate cooperatives would require prepayment of existing §515

mortgages, severely increasing monthly housing costs;

The absence of a §515 loan would eliminate project eligibility for RA, though §8

contracts could be maintained;

Few, if any, existing residents could afford the increased operating expenses let alone any

initial share prices.

Consequently, resident displacement would be close to 100% and the individual properties

would be lost to future generations of low-income residents.

Conversion to limited-equity housing cooperatives (LECs) where the share price for individual

units would be close or equal to zero would be possible within existing legal and regulatory

frameworks, but the small size of individual §515 properties (an average of 24 units) is generally

insufficient to cover a developer’s conversion costs while remaining affordable, even when

developers fees are available through 3rd

party programs such as Low Income Housing Tax

Credits (LIHTCs). Even were USDA amenable to removing all non-statutory constraints, the

small scale of individual conversion projects negates developer sustainability absent considerable

external support or an additional line of business capable of covering overhead.

POSSIBILITY 2 -- THE CONVERSION OF MULTIPLE PORTFOLIOS OF EXISTING §515

PROPERTIES TO RESIDENT OWNERSHIP AND CONTROL THROUGH MUTUAL

HOUSING ASSOCIATIONS (MHAs)

In a housing cooperative, there are two elements of ownership: one for the cooperative

corporation and a second for the individual homeowner. In a traditional housing cooperative, the

cooperative corporation owns all of the real estate (the lands and buildings) while the individual

homeowner owns a cooperative interest (an ownership interest in the cooperative corporation

coupled with a perpetual right to occupy a specific dwelling unit owned and operated by the

cooperative corporation). In a mutual housing association, individual residents have something

less. The MHA owns all of the real estate (the lands and buildings). The residents have no

individual ownership interests in the MHA. Instead, they have perpetual individual rights to

occupy specific dwelling units owned and operated by the MHA plus a collective right to govern

the MHA through democratic processes.

Effectively, MHAs are zero-equity cooperatives:

They operate at cost, reserving net proceeds for the benefit of the properties and their

members;

They subordinate capital to the interests of their user-members; and

They are governed democratically through a member-elected board of directors.

MHAs can also be used to aggregate multiple properties to gain economies of scale. In the

context of the USDA §515 portfolio, resident ownership and control via MHAs makes a great

deal of sense:

The need to continue to operate within the 515 program makes direct resident ownership

with wealth-creation through home equity accumulation impossible.

Most individual 515 properties are too small and isolated to attract or support capable

professional property management.

Most individual 515 properties are too small to assure a sufficient leadership pool to

govern the property initially, let alone provide for leadership succession.

Most individual 515 properties are too small to attract the resources (in terms of both

expertise and financing) necessary for rehabilitation and modernization.

The consolidation of multiple properties within a single MHA can mitigate the isolation, create

economies of scale for financing and carrying out a substantial rehabilitation and modernization

program, for purchasing professional services – especially property management – as well as

ongoing maintenance and rehabilitation items, and provide a resident pool large enough to assure

solid leadership skills for the MHA board.

For the purpose of converting portfolios of §515 properties to resident ownership and control,

this report recommends the use of MHAs as one of four elements to create a feasible conversion

process. The other elements are:

The use of the LIHTC program to provide financing for acquisition and rehabilitation of

MHA portfolios;

Partnership with experienced LIHTC developers to carry out the acquisition and

rehabilitation program; and

The creation of an NCBA-affiliated umbrella organization to support and sustain

individual MHAs.

The LIHTC program was created by the Tax Reform Act of 1986 to encourage private sector

investment in the development of affordable multifamily rental housing. Developers of

affordable multifamily rental housing can sell these tax credits to investors (who use them to

reduce their income taxes) in exchange for equity to assist in the development of a housing

project. There are two types of tax credits: the type that can be generated through the use of

federally tax exempt private activity bonds and the type that can be allocated independent of

bonds. Tax credits generated through the use of federally tax exempt private activity bonds are

often called “credits of right”, because they come of right with the use of private activity bonds

to finance affordable rental housing and do not count against a state’s highly limited annual

allocation of regular (“competitive”) tax credits.

Whether one is using competitive tax credits or credits of right, the LIHTC program entails a

compliance period of at least 15 years – during which the development complies with a rigorous

set of affordability and occupancy restrictions – and a relatively specific ownership structure

throughout that 15-year period. The ownership structure uses a limited partnership (LP) or

limited liability company (LLC) in which the tax credit purchasers (investors) hold 99% or more

of the property ownership without liability beyond their investment while the owning LP or LLC

is controlled by a general partner (in the case of an LP) or managing member (in the case of an

LLC) which holds the remaining 1% or less.

The use of tax credits to finance the conversion of §515 portfolios to MHA ownership is critical

to program feasibility because:

It brings funds into the acquisition and renovation of the portfolios that do not have to be

paid for by residents in their monthly occupancy charges;

It provides a source of payment to portfolio sellers acceptable to USDA; and

It provides a source of payment of developers’ fees for the conversion and rehabilitation

of the properties also acceptable to USDA.

The relative availability of competitive tax credits and credits of right, their price on the

syndication market, and the costs (in legal fees and application preparation) of obtaining them

are variables have been affected greatly by the financial crisis and will be further affected by the

potential of tax reform. Such issues will be examined further later in this report. What can be

said here is that, effectively, the process of obtaining a tax credit or private activity bond

allocation is “rocket science” of the first order, requiring a great deal of specialized knowledge.

Further, current markets make both the experience and the financial assets of the tax credit

developer a critical element in the sale (“syndication”) of tax credits.

To be effective, at least initially, use of tax credits to finance the conversion of §515 properties to

resident ownership and control through MHAs will require partnership with experienced and

financially capable developers – not currently found within the cooperative community. A

critical element of feasibility, to be discussed later in this report, will be the possible means of

adding sufficient value to one or more experienced and financially capable developers to induce

them to partner with the cooperative sector to create MHAs.

In order to use the LIHTC program effectively, one must begin with the LP or LLC ownership

structure described above. In order to assure that a §515 portfolio will ultimately become

resident owned and controlled as an MHA, a nascent MHA must be part of the LP or LLC

ownership structure from the beginning of the acquisition/conversion process. This can be

accomplished by creating the MHA as a legal entity and having it act as a co-general partner

(LP) or co-managing member (LLC) along with the experienced developer being partnered with.

Before describing the transition to full resident control, it will be useful to discuss the third

element – the NCBA-affiliated umbrella organization created to support and sustain individual

MHAs. For the sake of simplicity, let’s refer to this organization as Umbrella. Umbrella will be a

national nonprofit umbrella organization dedicated to the support of resident-controlled,

permanently affordable housing. Working in concert with experienced LIHTC developers,

Umbrella will initiate and support the aggregation, rehabilitation, and transition to resident

ownership and control of geographically appropriate groupings of existing §515 projects. For

each grouping of projects to be converted to resident ownership and control, Umbrella will create

a legal subsidiary – an MHA.

Participating as part of the LP or LLC ownership structure necessitated by the LIHTC program,

Umbrella and its subsidiary MHA will work along with its developer-partner to select a

geographical cluster of §515 projects and aggregate them under common ownership with enough

size (in terms of unit numbers), strength (in financial terms), and depth of resident leadership to

create a stable, resident-controlled structure sustainable indefinitely (after initial rehabilitation

and modernization) without infusion of new government subsidy. Each Umbrella subsidiary

MHA will carry its set of aggregated properties through rehabilitation to ultimate resident

ownership and control. A key element of the transition will be the change in composition of the

board of each subsidiary – from an initial board composed of members of the Umbrella board, to

a board democratically elected by and composed wholly or largely of residents representing the

aggregated properties of each MHA (additional board members could represent community

institutions). The transition to resident ownership and control will take place in incremental

stages.

The initial board will control the MHA (and, thus, participate in the control of the owning

LP/LLC) throughout the development period.

The role of the board during the development period will be to keep tabs on the

development activity – all of which will be carried out by the developer.

During the development period, the MHA will act as liason between the residents and the

developer and will solicit resident input through the creation of property-specific

advisory committees. If properly selected, advisory committee members are likely to

become leaders within the MHA (e.g. board and committee members) as the composition

of the MHA board changes.

Sometime after the conclusion of the development period (18-24 months after bond

closing), the MHA will hold its first annual meeting and will elect resident

representatives to replace members of the initial MHA board.

During the years following development, Umbrella will continue under contract to

supplement the expanding expertise of the MHA board and committee leadership as it

prepares to assume complete oversight of the properties at the end of the 15-year

compliance period.

As the end of the compliance period nears, the framework within which the resident-

elected board will exercise oversight authority will evolve (through on-the-job training

through Umbrella) from one largely controlled by the developer to a board fully capable

of carrying out its responsibility with backup from Umbrella.

Property operations will evolve from being restricted/regulated by both LIHTC and

USDA requirements to being regulated only by USDA.

As a result of a right of first refusal built into the ownership structure, the MHA will be

able to acquire the properties outright (i.e. buy out the tax credit investors) for a minimal

price at the end of the 15-year LIHTC compliance period.

At the end of the 15th

year, the democratically governed, resident controlled subsidiary

MHA will be the permanent owner of the aggregated properties. It will continue to

employ and oversee professional property management to operate the properties.

There will be no purchase price required from individual residents in exchange for the

membership in the MHA and the control rights they will attain thereby.

At the end of the 15th

year (or 30th

year, if tax-exempt bonds are used and remain in place

until fully amortized), LIHTC compliance requirements will end, leaving somewhat more

open USDA resident-income limitations in place.

The workability of the MHA structure is premised on:

o The residents seeing the advantages (over third-party ownership) of the control

they will acquire through participation in the MHA;

o An effective democratic process to elect good leaders to the MHA board; and

o Sufficient competence (arrived at through individual experience and well-

designed and carried out training) among the residents and their elected leaders

(with backup support from Umbrella) to carry out their governance and

operations-oversight roles.

In addition to its role in initiating the formation of subsidiary MHAs (and in the initial

revitalization of MHA properties), Umbrella will support them on an ongoing basis. It will

provide a framework for initial MHA membership and leadership training carried out during the

compliance period (while the MHA board participates in control of the properties in conjunction

with the developer). Building upon existing resources (largely within the cooperative and

affordable housing communities – such as NCBA, CDF, the National Association of Housing

Cooperatives, the USDA Cooperative Services Program, Cooperation Works, local CDCs, etc.) it

can develop a robust framework for ongoing training and support.

Umbrella will also use its parent-subsidiary structure to provide an effective network within

which individual MHAs can exchange information and experience and allow Umbrella to serve

as a backup asset manager to individual MHAs. At first, the bulk of the training and asset

management responsibility can be carried out via subcontracts with capable elements of the

cooperative and affordable housing communities. Ultimately, the growth of the entire

organization should enable Umbrella to assemble a staff capacity for backup activities, with or

without a contractual network to supplement in-house capacity.

POSSIBILITY 3 -- THE CONVERSION OF EXISTING MANUFACTURED HOUSING

COMMUNITIES TO COOPERATIVE OWNERSHIP

The conversion of existing manufactured housing communities to cooperative ownership is

already taking place programmatically across the US and is poised to dramatically gather scale.

The New Hampshire Community Loan Fund (NHCLF) has converted 100 formerly investor-

owned parks to cooperative ownership and, in the process, garnered interest in replication and

expansion from across the nation. With support from the Ford Foundation, among others,

NHCLF created ROC USA which, in partnership with the Corporation for Enterprise

Development (CFED), has developed technical and financial resources to take manufactured

housing community conversion to scale within the continental US.

There being no need to reinvent the wheel, this report will eschew any discussion of program

development beyond the suggestion that NCBA deepen its relationship with ROC USA, CFED,

and the spinoffs and subsidiaries that have been created to further the cooperative conversion

mission. Instead, this report will focus solely on the possibility of using USDA financial

resources to support ROC USA, the cooperative communities they have or seek to convert, and

the members of those communities who would benefit by the upgrading or replacement of their

individual homes.

In a housing cooperative, there are two elements of ownership: one for the cooperative

corporation and a second for the individual homeowner. In a traditional housing cooperative, the

cooperative corporation owns all of the real estate (the lands and buildings) while the individual

homeowner owns a cooperative interest (an ownership interest in the cooperative corporation

coupled with a perpetual right to occupy a specific dwelling unit owned and operated by the

cooperative corporation). In a manufactured housing cooperative, the two elements of ownership

are allocated a bit differently between the cooperative corporation and the individual

homeowner. The cooperative corporation owns the land and its improvements (which may

include roads, pads, community buildings, utility hookups, and even water and sewage facilities)

while the individual homeowner owns both a cooperative interest (an ownership interest in the

cooperative corporation coupled with a perpetual right to occupy a specific pad or site owned by

the cooperative) plus the manufactured housing unit in which s/he dwells.

When we look at potential financing mechanisms for cooperative housing, we can also break

them down into two elements: financing obtained by the cooperative corporation itself and

secured by the real estate it owns; and financing obtained by the individual homeowner and

secured by his/her individual property – the cooperative interest plus (in the case of a

manufactured housing cooperative) the individual manufactured housing unit. Using the

terminology of traditional housing cooperatives, we will call the first type of financing a blanket

loan and the second a share loan.

In a cooperative conversion, blanket loans are used to acquire and/or upgrade a manufactured

housing park. After the conversion, share loans can be used by existing cooperative members to

upgrade or replace their individual units and by prospective cooperative members to either

acquire the unit and membership of a member who wishes to sell or to acquire a newly issued

membership and a new unit from a manufacturer and fill a previously vacant pad.

Building upon the support of the Ford Foundation, ROC USA has created ROC USA Capital to

provide 100% blanket financing for park acquisition and improvement at cooperative conversion.

The loans require that the cooperative be supported at the conversion and throughout the life of

the loan by a ROC USA certified technical assistance provider. While the need for additional

sources of blanket financing is not urgent, supplemental financing would be useful.

Per ROC USA, their conversions often involve substantial rehabilitation on top of acquisition

costs as parks for sale have generally suffered from lack of owner interest and/or deteriorating

cash flow. As a result, repair needs have often gone unmet. Several USDA programs could be

tapped.

A sine qua non of blanket USDA grants/loans would be the cooperative’s eligibility as a

recipient/borrower. Potential sources would be the Rural Utilities Water and Environmental

Programs (WEP) and the Community Facilities (CF) programs. Eligible WEP

recipients/borrowers are public bodies, non-profit organizations and recognized Indian tribes.

Eligible CF recipients/borrowers are public entities, non-profit corporations, and tribal

governments.

Applicable regulatory definitions of non-profit organizations (7 CFR 3052) and non-

profit corporations (7 CFR 3052.105) do not require IRC 501(c) tax-exempt status (while

regulations for other, similar, USDA programs do so), and

Said definitions either expressly (7 CFR 3052) or indirectly include cooperatives.

Thus, a strong argument can be made that manufactured housing cooperatives are eligible WEP

and CF recipients/borrowers. Concurrence from USDA Office of General Counsel (OGC) would

be useful.

With the above caveats as to eligibility:

WEP grants, loans, and loan guarantees could be used for blanket lending to

manufactured housing cooperatives in rural areas and cities and towns of 10,000 or less

to fund water, waste water, and solid waste disposal systems owned and operated by the

manufactured housing cooperatives.

o The budget for grant funding is small and tends to be over-subscribed.

o The direct loan program will cover up to 75% (more typically, 70%) of costs.

o USDA state offices have authority for up to $5 million.

o Loan terms are up to 40 years (or useful life of facilities/equipment financed,

whichever is less).

o There are three tiered interest rates from 2% to 3.75% depending upon local

income levels.

WEP loans could be used in conjunction with ROC USA Capital lending to finance upgrades to

existing water, waste water, and solid waste disposal systems owned and operated by

manufactured housing cooperatives. The loan terms (up to 40 years) and the advantaged interest

rates could reduce monthly payments by those manufactured housing cooperatives whose needs

fit within the program and the use of outside financing would stretch the financing capacity of

ROC USA Capital.

CF grants, loans, and loan guarantees could be used for blanket lending to manufactured

housing cooperatives in rural areas and cities and towns of 20,000 or less to construct,

enlarge, of improve community facilities for public safety and services (including

electrical power and gas) but not community recreation or antenna television facilities.

o The budget for grant funding is small and tends to be over-subscribed.

o The direct loan program will cover up to 100% of project costs but is permanent

(takeout) financing only – separate interim or construction must be obtained.

o USDA state offices have authority for up to $3 million.

o Loan terms are up to 30 - 40 years depending on state law (or the useful life of the

facilities financed, whichever is less).

o The current interest rate is 3.75%.

CF loans and loan guarantees could be used as takeout financing for ROC USA Capital interim

financing. The loan term (up to 40 years) and the 3.75% interest rate could potentially lower

monthly blanket loan payments by manufactured housing cooperatives and would effectively

replace a secondary market by allowing the existing loan pool to revolve rapidly (therefore

greatly expanding the potential coverage of the ROC USA Capital pool).

The greater need for manufactured housing cooperatives is share lending. Most lending into

manufactured housing units is controlled by manufacturers (for new units), is expensive, and is

often tinged with fraudulent or predatory practices.1 Resale financing is generally seller

financing. Third-party lenders are generally reluctant to issue loans on favorable terms to finance

new units or to finance the sale or improvement of existing manufactured housing units because:

Loans are small and difficult to underwrite; and

The value of the unit (which secures the loan) is greatly impaired where the unit is sited

on leased land within an investor-owned park.

The second of these problems is greatly ameliorated with respect to manufactured housing units

sited in cooperatively owned parks.

The owner has perpetual tenure as a cooperative member – absent a breach of the

owner’s occupancy agreement with the cooperative, s/he cannot be forced to move the

unit.

The cooperative operates at cost, allowing monthly charges to remain affordable over

time and the value of the coupled cooperative interest plus unit to correspondingly

appreciate as the underlying land value appreciates.

USDA does direct and guaranteed lending for single-family housing in rural areas under its §502

program. The program requires that the housing financed be occupied by the borrower as his/her

primary residence. Both elements of the §502 program will cover manufactured housing,

provided that the unit:

Is permanently installed on the site; and

Meets the HUD Manufactured Housing Construction and Safety Standards and USDA

thermal and site standards.

Direct lending:

Is available to families at or below 80% of AMI.

Finances 100% of the cost of purchasing an existing dwelling, purchasing a site and

constructing a dwelling, or purchasing a newly constructed dwelling located in a rural

area.

Carries a term of up to 30 years for manufactured housing.

Payment assistance can reduce the effective interest rate of the direct loan from the note

rate (currently 4.875%) to 1%, depending on income.

Leasehold interests are eligible if the lease extends to at least 150% of the loan term.

1 See, e.g. Consumers Union (2002)

Guaranteed lending:

Is available to families at or below 115% of AMI.

Finances up to 100% of the cost of building, repairing, renovating, of relocating a home

or purchasing and preparing sites, including providing water and sewage facilities.

Is available from USDA-approved conventional lenders.

Carries a term of 30 years.

Carries interest rates as set by the lender.

Can only be used to purchase NEW manufactured housing units unless the unit is already

financed by a §502 direct or guaranteed loan.

Generally, USDA has used §502 to finance manufactured housing permanently installed on land

directly owned by the borrower. In fact, both direct and guaranteed §502 financing can be used

to acquire such land as well as construct the permanent foundation in addition to purchasing the

manufactured housing unit. USDA recognizes that cooperative park ownership provides

economic stability to manufactured housing ownership and has created pilot programs in New

Hampshire and Vermont (new this year) to enable unit acquisition or replacement in

cooperatively owned parks.

Stated USDA concerns for extending §502 lending beyond the pilot programs include:

Demonstrated demand for such a program extension.

Development of a mechanism for dealing with asset recovery and resale in foreclosure

situations.

Demonstration that extension to cooperative members is an effective use of program

resources.

Development of a process for qualifying cooperative parks based on:

o Cash flow;

o Reserve funds;

o Proof of park ownership by the cooperative; and

o Homeownership/lending readiness programs for borrowing members.

Successful use of the pilot programs is critical to convincing USDA to expand the program

nationwide.

The §502 program, if expanded, would provide an excellent source of financing for new

manufactured housing units, either along with a new cooperative membership for infill or

expansion sites or for unit replacements by existing cooperative members. Since older

manufactured housing units are often extremely energy inefficient (leading to very high monthly

energy costs) as well as lacking in structural integrity, unit replacement could be an excellent and

affordable option for cooperative members if such advantageous financing were made available.

Short of unit replacement, there are two potentially accessible USDA programs that might

finance existing unit upgrades and improvements. The first is §504, which helps very low

income (below 50% of AMI) single-family homeowners in rural areas make existing homes safer

and more sanitary by removing health and safety hazards or make them accessible and usable to

household members with disabilities.

The §504 program:

Provides 1% loans with terms up to 20 years.

For families with at least one household member/applicant age 62 or older, the program

provides grants of up to $7,500, depending on income, alone or to make loans affordable.

Grants and loans can only cover eligible (health and safety and/or accessibility) costs and

must be sufficient to remove all health and safety issues.

Loans of more than $7,500 must be secured by a mortgage (or its equivalent).

Loans plus any prior liens cannot exceed the value of the home.

Manufactured housing is eligible if:

o The applicant owns the home and the site and occupied the home prior to filing an

application; and

o The home is on a permanent foundation.

Leasehold interests are eligible if the lease extends at least 2 years beyond the term of the

loan or 5 years beyond the loan term if a grant is involved.

A second possibility for unit upgrades and improvements might be available from USDA Rural

Utilities (RU) under the Rural Economic Development Loan & Grant (REDLG) program. The

REDLG program makes grants and zero interest loans to existing RU borrowers (rural electric

and telephone cooperatives) who in turn make them available to third-party borrowers as zero-

interest loans for projects that create jobs in rural areas or that provide infrastructure or

community facilities in rural areas that will lead to economic stability.

The program is administered through the national RU office and not distributed to the

states.

The maximum loan is for $740,000 with a loan term of 10 years.

A maximum of $300,000 per grant application may be requested to establish a revolving

loan fund.

The borrowing/grantee electric or telephone cooperative can lend to for-profit or non-

profit businesses or public bodies.

Using REDLG money, the Electric Cooperatives of South Carolina (ECSC) have created an

innovative energy efficiency loan program for members of their electric cooperatives to upgrade

heating and cooling systems, doors, windows, water heaters, insulation, roofs, siding, and

electrical updates. The program is structured in such a way that individual borrowers incur no

costs – the loans are paid out of monthly energy savings – while capturing one third of the

resulting energy savings for their own pockets. As 24% of South Carolina’s housing consists of

manufactured housing units – 54% built prior to 1995 – the program was designed to work

especially well for such housing, regardless of siting on directly-owned, cooperatively-owned, or

investor-owned land.

South Carolina Representative James E. Clyburn has introduced legislation to expand the energy

efficiency loan program to RU borrowers nationwide.

The ECSC energy efficiency loan program is part of a larger home improvement loan and grant

program called Homeward. The overall program includes low-interest loan and grant funding for

home acquisition and improvement that would appear to work well overall for manufactured

housing cooperatives in South Carolina – especially for those served by ECSC member electric

cooperatives. Even absent enactment of the Clyburn legislation, replication of the Homeward

program by rural electric cooperatives nationwide would substantially benefit rural manufactured

housing cooperatives in other states.

PRELIMINARY CONCLUSIONS

To this point, the report has examined three potential cooperative conversion possibilities

involving USDA resources. It has eliminated as infeasible the large-scale conversion of

individual §515 rural rental housing properties to cooperative ownership, has outlined a

potentially feasible program for the large-scale conversion of §515 properties to resident

ownership and control via mutual housing associations (MHAs), and has outlined potential

financial resources within USDA that, in partnership with ROC USA, CFED, and others

currently engaged in the large-scale conversion of manufactured housing communities to

cooperative ownership, might be further developed to support such cooperatives and their

members. The sections that follow will further examine and expand upon the potential of a §515

MHA conversion program.

A MORE CRITICAL ANALYSIS OF THE FEASIBILITY OF UNDERTAKING LARGE-

SCALE PORTFOLIO CONVERSIONS TO MUTUAL HOUSING ASSOCIATIONS

Previously in this report, we delineated three elements necessary to a feasible program of

portfolio conversions to MHA ownership:

The use of the LIHTC program to provide financing for acquisition and rehabilitation of

MHA portfolios;

Partnership with experienced LIHTC developers to carry out the acquisition and

rehabilitation program; and

The creation of an NCBA-affiliated umbrella organization to support and sustain

individual MHAs.

This section of the report will examine each of these elements in more detail.

ELEMENT 1 – MORE ABOUT THE LIHTC PROGRAM

As discussed above, there are two different elements of the LIHTC program that could

conceivably be used to finance the conversion of portfolios of USDA §515 properties to mutual

ownership – competitive credits and the credits of right that are associated with private activity

bonds. The limited allocation of competitive credits annually on a state by state basis, the

difficulties inherent in the competitive process whereby they are awarded to specific projects,

and the fact that the total national supply of competitive credits over a ten-year period would be

woefully insufficient to meet the revitalization needs of the §515 portfolio argues for the use of

private activity bonds with their credits of right.

The state by state allocation of private activity bond authority is many times the size of each

state’s allocation of competitive credits. While state allocations of competitive credits have often

been significantly over-subscribed, private activity bond authority often goes unused in all but a

few states. Finally, the fact that of all the potential uses of private activity bonds, only their use

to finance affordable housing brings with it the additional federal award of tax credits, makes

obtaining bond funding and associated credits of right a more obtainable and reliable funding

source.

Whether one employs competitive LIHTC credits or private activity bond funding with

associated credits of right, critical gate-keepers and financial partners in the development process

will require that the properties acquired for conversion be both completely rehabilitated and

brought up to market condition (i.e. with the addition of amenities demanded by the rental

market such as air conditioning, dishwashers, disposals, etc.). We will refer to this combination

of repairs and improvements hereafter as “full revitalization” and the combination of full

revitalization with conversion to mutual ownership as “full revitalization conversion”. Tax

credits alone are almost never sufficient to pay for full revitalization. Additional lending in

significant amounts is almost always required. But additional lending alone (even additional

§515 lending at 1% amortized over 50-years) cannot make full revitalization conversions

affordable without the additional proceeds brought in through the sale of tax credits. Further,

existing USDA regulations in most cases prohibit the use of loan proceeds to pay developer fees

for revitalization conversions of existing properties or profits to sellers.

Until the outset of the current financial crisis, private activity bonds and tax credits of right

provided a usable, feasible funding source for our program of full revitalization conversions. The

current economic crisis, however, has significantly diminished investor interest in both tax

credits and tax-exempt bonds.2 Per Desai et al, “the puncturing of the bubble in the US housing

market in 2007 and the subsequent financial crisis of 2008 have had profound consequences for

the LIHTC program. Prior to the crisis, $1 of tax credits traded at an undiscounted price of nearly

90 cents; by early 2009, the corresponding price had fallen below 70 cents…”

While there are clear signs that the economic environment may improve in the near to mid-term

future,3 now is not the most propitious moment to undertake the sort of full revitalization

conversions that this report contemplates. Instead, it is the moment to plan and gather the

resources to move forward when the economic environment improves.

ELEMENT 2 – PARTNERSHIP WITH EXPERIENCED DEVELOPERS

The complexity of the application process, both with respect to planning for and obtaining

allocations of private activity bonds and associated credits and with respect to obtaining USDA

authorization for property transfers/conversions with full revitalization, will require the

involvement of experienced developers – at least until elements within the cooperative

community can acquire the requisite experience and the financial substance necessary to go it

alone. As discussed earlier in this report, we envision the creation of an NCBA-affiliated

umbrella organization which, for the sake of simplicity, we are calling Umbrella – a national

nonprofit organization dedicated to the support of resident-controlled, permanently affordable

housing.

A more complete description of Umbrella, along with an outline of the process whereby

Umbrella can be created, will be addressed more fully in a companion to this report. What is

critical to address at this point is that, in order to induce partnerships with experienced

LIHTC/USDA developers, it will be vital that Umbrella add significant value beyond the

heuristic notion of empowering project residents. Even nonprofit developers will need something

beyond the potential to improve residents’ lives to make such partnerships enticing. We propose

that that enticement stem from USDA permission to use project operating income to pay for

Umbrella services to member projects. Specific regulatory change allowing such expenditure

from project funds (ultimately, from project rents) would make Umbrella a cost-effective

development partner to both for-profit and nonprofit developers. As discussed further later in this

report, it would also provide a second source of funds (other than membership fees) for the

ongoing menu of non-development services provided by Umbrella to its member properties.

2 See, for example, the website of the National Council of State Housing Agencies (NCSHA) at

www.ncsha.org/advocacy-and-issues 3 For example, the current administration proposes to allow a 30 percent “basis boost” for Housing Credits for tax-

exempt bond-financed developments involving the preservation, recapitalization, and rehabilitation of federally

financed housing that is subject to a long-term use agreement limiting occupancy to low-income households. This

would significantly improve the amount of tax credit equity available to our bond-financed full revitalization

conversion program.

ELEMENT 3 – UMBRELLA

To this point, we have been speaking of Umbrella as a mechanism to provide development

services in partnership with seasoned third-party development professionals, as a nexus for

MHAs after full revitalization conversions, and as a provider of training and other services to

those MHAs. The research we are about to discuss opens up a second, more immediate role for

Umbrella with respect to existing, pre-revitalization properties willing to embrace a significant

degree of resident empowerment and control.

FIELD RESEARCH

This research, relying on interviews with practitioners, policy analysts and §515 residents,

examines the benefits and challenges to converting §515 developments to resident participatory

management models. Based on the results of this research, we recommend the creation an

organization and system (Umbrella) to foster the conversion of §515 developments to resident

management and control.

The nature of §515 mortgage financing – and the substantial reliance on rural rental subsidies to

provide cash flow to the developments – does not foster resident involvement in the management

of the property. Program regulations regarding permitted uses of project operating funds

(adopted with the intention of minimizing project rents) leave little or no ability to support

resident initiated programs and no ability, or requirement, for residents to participate in

management tasks. This has led to a landlord/tenant relationship where residents are highly

reliant on the property owner to provide housing – placing them in extreme jeopardy if the

decision is to leave the program and/or no longer accept rural rental subsidies.

Legislation, changes in regulatory policies, and recent litigation have confounded efforts to

develop an effective method to preserve, revitalize, or convert §515s (to an alternative

management model) before the end of their mortgage term. Aside from the impact on

owner/developers, this further underscores the potential of creating a housing crisis for thousands

of low-income people including frail elderly, and/or disabled residents.

Over the past 25 years there has been some discussion, research, and policy work that explores

different methods of preserving rural multi-family housing. These have included:

Preserving the status quo;

Conversion to market rate rental housing;

Conversion to market rate cooperatives;

Conversion to limited equity cooperatives; and/or

Conversion to mutual housing associations.

Preserving the status quo would lead to the expiration of use requirements for the developments

without providing sufficient funding for property repair and revitalization. This could mean a

sizeable decline in the availability of affordable multifamily housing in rural areas. While it is

true that in rural communities where §515 developments have high vacancy rates – with a proven

decline in moderate- and low-income people – it might be that conversion to market rate rental

housing will be the de facto result of market conditions. The same would be true for conversion

to market rate coops. Obviously market rate models would not necessarily protect the availability

of affordable of multi-family housing to people who are moderate- or low-income.

In the absence of a mortgage (or lien), cooperative agreement, or association by-laws that would

require acceptance of subsidies, owners could, at will, choose to reject them. This would place

existing tenants at risk of losing their housing. Governance situations where residents

themselves have influence over this decision are preferable if the purpose of assistance programs

is to help clients become more independent and self-sufficient since they would need to be

responsible for balancing the benefits, challenges and effects of such decisions.

Two viable alternatives would be limited equity cooperatives (LECs) and mutual housing

associations (MHAs). While much has been written about applying the LEC model to §515

properties, less research has been done around applying the MHA model. However, there has

been little movement within the "§515 world" toward fostering either as a method of trying to

revitalize and preserve the affordability of §515s.

Our field research examines these alternatives highlighting the potential for applying the

different management models as part of revitalization and conversion of §515s. The report

includes a discussion of altering the existing dichotomy of models to include provisions for

tenant associations as a way of contrasting the different models and illustrating the benefits of

true tenant participatory management.

RESEARCH METHODOLOGY

The information and conclusions for this research were derived from two sources: existing

literature and interviews with key stakeholders. Literature included scholarly journals, policy

statements, and research reports – some of which are unpublished. Key stakeholders included

USDA personnel (national, state, and local Rural Development (RD) offices), funders, national

and state policy analysts, statewide affordable housing coalitions, non-profit and for-profit §515

developers and managers and property managers. Two groups of tenants were also interviewed.

The interviews were conducted face-to-face and via telephone – with a considerable amount of

emailing as well. Interviews were conducted informally. While the bibliography includes a list

of the offices and/or organizations that individuals were from, it does not include their names

since (very often) the information they were providing did not necessarily represent positions or

decisions of their organizations.

Interviews were conducted with stakeholders from diverse rural communities in central,

southwest and southern Indiana, western Massachusetts, New Hampshire, and the western and

Hudson Valley regions of New York. Although the demographics of the different communities

was not used in selecting them, the intent to was interview stakeholders from rural and mixed

rural communities.

Different rural communities have different economic characteristics. These relate to the nature

of their industry and their proximity to urban centers. There are rural communities whose main

sources of employment are agri-businesses. These are what most consider to be true rural

communities. Beginning in the later half of the 20th

Century, many rural communities took on

characteristics similar to suburban areas while retaining some or most of their agri-businesses.

Residents of these mixed rural communities might commute to business parks or urban centers

for employment, or work in service or heavy industrial (including transportation) industries

within the area. Residents of §515s in rural communities very often commute to jobs in mixed

rural, suburban or urban centers.

RESEARCH PROBLEM ANALYSIS

Since the inception of the §515 program, the demographics and economics of rural communities

in the United States have changed. In recent years, these changes have manifested themselves in

challenges such as an aging population, outmigration, and shifts in employment patterns. The

demographics of multifamily developments in rural communities reflect these changes.

Although thorough demographics on the population of §515s are not available beyond the

characteristics outline above, a portrait of multifamily housing in rural communities generally

includes some mixture of the following:

Permanent housing for elderly and/or disabled people who want to remain in their

hometowns or live near relatives and friends;

Permanent housing for working, low-income families who work in industries that support

the local economy;

Permanent housing for working age families who want to live near family members and

where the head(s) of household are chronically un- or under- employed; and

Short-term housing for working age people who are actively looking for employment

(when they find jobs, these people often relocate to housing that is closer to their

employment).

The growing disparity among the types of rural communities in the United States greatly

influences the role of rural multi-family developments in general, and §515s specifically.

Although some communities can be categorized as either rural or mixed-rural based on

population density (and interaction with larger or urban economic centers), there are other factors

that greatly affect the demand for, and nature of, §515 developments. In remote, low-density,

rural communities §515 developments serve as either transitional housing for moderate- and low-

income workers or as permanent housing for senior citizens, people with disabilities, and/or

people who are very low-income and with few or limited job prospects. The §515 developments

that provide permanent housing for people who are elderly, disabled, or chronically un- or under-

employed usually have low vacancy rates. As a result, they are ‘stronger’ financially. In other

§515 developments where demand for housing for these populations is lower, properties

experience high turnover and vacancy rates and, as a result, are weaker financially. Market

forces have also shaped the types of units in §515s. Developments that were constructed to

attract people who are elderly or disabled may be mostly studio or one-bedroom units. Others,

targeting families, might have multiple bedrooms.

In mixed-rural communities, where the economy might be more diverse and population density

higher, §515s serve the same purposes but offer an alternative housing option for people not

seeking homeownership. In many of these communities (with home prices dropping as of 2012),

the difference in the cost of renting versus owning might be very slight. However, for low-

income households (who are often the target of predatory lending and thus higher interest rates),

§515 housing can provide a more financially secure alternative.

Rural rental subsidies (both RA and §8) are often critical to the finances of residents and the

financial solvency of certain §515 developments. However, these subsidies may not keep up

with operating costs, further threatening project affordability. Working age residents of §515s

can lack certain self-sufficiency skills necessary to secure alternative housing. Seniors and

people who are disabled and living on fixed-incomes remain in §515s due to their limited

incomes.

These issues have created a set of problem with multiple causalities. First, since rental subsidies

(which are capped by federal and/or state statute) do not always keep pace with actual operating

costs, many properties are in poor repair and operating at a loss. Complicating this is unresolved

federal litigation over legislation that has increasingly pressured owners to retain their properties

in spite of losses and a declining market. This means that tenants become more dependent on the

owner to maintain the status quo and remain at-risk of displacement if owners cannot afford to

maintain the development, choose not to revitalize units, and/or choose to prepay and ‘opt out’ of

the program. This also means that otherwise small operating reserves become smaller – making

developments less attractive to retain or sell.

With properties operating with slim margins or with negative income, there is no additional

funding to create programs that promote residents’ self-sufficiency. Particularly for

developments that are owned by for-profit companies residents are increasingly reliant on a

situation that might not be long-term – reinforcing their dependency on an unstable system.

MODELS OF RESIDENT PARTICIPATORY MANAGEMENT

There is much evidence that resident participatory management can stabilize a property and

enhance the quality of life for residents. Resident participatory management can provide low-

income families an opportunity to develop the social skills necessary for self-sufficiency and

independent living. Different models of resident participatory property management are

applicable to different situations – providing varying degrees of resident involvement in the

management of their housing.

Our research contrasts the following models:

Preservation of the existing model, but with the inclusion of tenant associations;

Conversion to limited equity cooperatives (LECs); and/or

Conversion to mutual housing associations (MHAs).

We explore the applicability of these three models in the following contexts:

The degree to which the model develops self-sufficiency among residents;

The applicability to §515s located in different types of rural communities; and

The financial sustainability of the model, both for the owner/manager and resident.

RESIDENT PARTICIPATORY MODEL 1 – PRESERVATION OF THE EXISTING MODEL

WITH THE INCLUSION OF TENANT ASSOCIATIONS

A tenant association is a group of tenants, from the same building or development, formed and

maintained with certain goals in mind including:

Informing tenants of their rights;

Building tenant/landlord relationship;

Improving building conditions or services;

Supporting regular communication among tenants;

Raising community awareness; and

Representing tenants in disputes with the landlord.

This model of engagement has its benefits. In particular, more informed, engaged tenants who

are better aware of their responsibilities as tenants are more likely to maintain their individual

units and the development as a whole. This creates a more pleasing and safe living environment

and eases some of the day-to-day burdens of a property manager. Managers working with tenant

associations have a built in communication tool that can be used to pre-empt or arbitrate

community-wide quarrels – creating a more positive atmosphere.

Participation in tenant associations is voluntary. Therefore, the degree to which it promotes self-

sufficiency among residents is limited. People may or may not choose to become involved. As a

result, while some tenant associations might sponsor programs to teach self-sufficiency – and the

interaction among tenants and between the tenants and landlord might encourage development of

related skills – the model retains the traditional landlord/tenant relationship. In this arrangement,

the tenant remains dependent on the landlord to provide for them, rather than the association (and

its individual members) being fully empowered.

An existing §515 development with the inclusion of a tenant association has the potential to

engage and somewhat empower residents. The model, if landlords support it, can be applied to

any rental property regardless of size. As such, it can provide an opportunity for tenants to have

an active role in the rental community.

There has been some research to suggest that rental properties with tenant associations are

financially better off because tenants are actively engaged. However, this is hardly uniform. The

benefits of tenant association are greatly dependent on whether the landlord supports it and is

willing to work with it and whether the association provides services that residents find valuable.

Table 1 provides a SWOT analysis of this model from the residents’ standpoint. As the table

illustrates, while this model engages and somewhat empowers residents and allows them to have

an active role in the development, the existing landlord/tenant relationship remains – with greater

benefits (strengths and opportunities) for the owner and/or manager.

Table 2 (which provides a SWOT analysis of this model from the owner/manager’s point of

view) further reinforces this point. The addition of a tenant association to the current §515

model means that the owner/manager retains tremendous control over the day-to-day operation

of the development.

TABLE 1. SWOT Analysis for Tenant Associations from Residents’ Perspective

Strengths Weaknesses

Engages tenants in activities in the development

Requires active participation of tenants in association

and regular attendance at meetings. If few tenants are

active, the association will be less effective.

Tenants may not be aware of their rights to organize

and participate in an association.

The association only provides a voluntary

communication vehicle to the owner. If the owner chooses not to work with the association (or its

members or other tenants) there may be little or no

recourse.

Only if a manager chooses to allow the association to

sponsor programs that enhance the property, will he/she

derive any economic benefit - and the value of the benefit is not guaranteed.

No equity for tenants

Opportunities Threats

Local service providers can more easily

coordinate and sponsor education and social programs for residents.

Local service providers can more easily assist with educating tenants on their rights and

responsibilities under local, state, and federal

housing laws.

Provides an opportunity to empower tenants to have a greater voice in advocating for maintenance of the development including: building conditions, services and community safety.

Tenants’ may develop leadership and social skills as active participants in the association.

Every family can vote and has a say in decisions of the tenant association.

An owner/manager may decide not to allow, or work

with, an existing association.

If members of the association and the owner/manager

have a disagreement, it might place residents at risk of eviction.

If improvements or revitalization are needed, the cost might be passed along to tenants (and sources of rental

subsidies)

If there are no local service providers to provide tenants with information, the association might remain weak.

TABLE 2. SWOT Analysis for Tenant Associations from Property

Manager/Owner’s Perspective


The owner/manager can regulate the activities

and participation of tenants in association.

The owner/manager has no obligation to provide

tenants with information about their rights and does not have to help to organize or encourage

participation in an association.

The association is only a voluntary communication vehicle with the owner/manager.

The owner/manager can disregard association input.

The manager/owner can, by controlling public

spaces in the development, limit the nature of

activities of the association.

Tenants may not agree with the owner/manager

regarding management priorities causing a strain in relations.

Owner/manager may not know how to work with an association and not be able to take advantage of the

improved relationship that can result from having a

tenant association.

Owner/manager may agree with tenants that building

conditions may need to be improved; however, they may not have access to capital or financing needed to

make such improvements to the building/property.


Residents might be encouraged to take a more active role in maintaining property and be

willing to participate in a conversion to another more participatory management model

Engaged tenants can assist with maintenance of the development including: building conditions, services, and community safety.

Owner/manager may see tenants organizing as a threat to their ability to manage and make decisions related

to the property.

Tenants may sue landlord, once aware of and if in

violation of local, state, or federal housing laws.

In this model, owners/managers assume greater financial risk – although in certain situations

they can (current litigation aside) pass along certain costs to tenants and/or subsidy providers.

Although tenant associations offer a number of important opportunities for residents to take a

more active role in the management of their housing, they are voluntary in nature. Landlords

can manage their properties as they see fit, which means that tenant associations will have

limited impact on the development.

Mandating the inclusion of a tenant association (something that would require §515 regulatory

changes) may, over the long-term, set the stage for conversion of existing housing to cooperative

ownership. As tenants become more aware of their potential collective strength and develop

certain social skills, they might become more confident in assuming a greater leadership role in

their communities. It might be that owners seeking to convert their properties would turn to the

association to assist them in sponsoring a conversion. This could lead to developments

becoming more self-sustaining and add value to the USDA loan portfolio.

RESIDENT PARTICIPATORY MANAGEMENT MODEL 2 – COOPERATIVE

OWNERSHIP

Cooperative members participate in the governance of the cooperative and are bound by its rules.

Cooperative members select the board of directors. The board of directors is comprised of

cooperative members, who are voted into office, and make various management and financial

decisions. Market rate cooperatives allow members to accumulate equity. Limited-equity

cooperatives (LECs) do not. LECs encourage self-sufficiency among residents by directly

involving them (as shareholders in the corporation) in the management and financial decisions of

the development – although (potential) shareholders very often require a substantial amount of

support and education to prepare them for the tasks.

Because converting them to LECs provides a framework for the preserving and revitalizing

§515s, this model offers a viable alternative to the existing model that is applicable to different

developments in different communities. However, as discussed above, converting individual

§515 properties to LECs is neither financially feasible nor programmatically sustainable.

Table 3 provides a SWOT analysis of the LEC model from the perspective of residents and Table

4 provides the equivalent analysis from the owner/property manager’s perspective.

Creating or converting to a co-op takes a considerable amount of planning, training, and time.

The process requires organizing residents including face-to-face training sessions and legal and

financial counseling. Through the organizing process and the resulting cooperative organization,

residents can build relationships among their fellow residents, improve conditions of properties

and strengthen feelings community safety.

As the analysis in Table 3 illustrates, the prototypical LEC model (unchanged here to reduce

equity to or near zero as the §515 program would require) has a number of strengths and

opportunities for residents – especially those who are of low- to moderate-income status. It

allows residents to build a certain amount of equity and encourages participation in the

management/governance of the property.

TABLE 3. SWOT Analysis for Limited Equity Cooperatives from Residents’

Perspective


Residents build equity in their ownership.

Housing is permanent.

LECs preserve affordability.

Economically sustainable

Residents actively participate in property governance/management.

Equity is limited.

Residents secure their own financing to purchase

shares in property.

Residents’ income, if too low, may require

subsidy in order to purchase shares or pay

maintenance fees.

Regulations may limit the use of rental subsidies to cover monthly carrying costs and/or purchase

of shares.

Sale of the unit requires co-op approval.


As cooperative owners, residents have a greater opportunity to become engaged in activities in the

development.

Rental assistance might be used to help the development with cost of shares and/or monthly

carrying costs.

Can use equity gained to pursue other opportunities

Opportunity to learn and social and financial literacy skills.

Residents may not be knowledgeable about co-operative ownership and/or be reluctant to

participate.

Requires preparation and education to develop interest/willingness to purchase shares.

Competes with traditional homeownership programs.

Financing products may not be available to residents to purchase shares.

Residents’ income may be too low to purchase

shares in building and therefore may become

displaced.

As Table 4 shows, LECs provide many benefits for an owner looking to sponsor a conversion.

Very often, larger co-op developments employ property managers to assume the day-to-day tasks

of operations. This means that an owner willing to convert their property to a LEC that would

preserve its affordability to people living on lower and/or limited incomes, could still see the

benefits of consistent cash flow from management fees while sharing the challenges of market

forces.

TABLE 4. SWOT Analysis for Limited Equity Cooperatives from Sponsor’s

Perspective


Monthly maintenance fees paid to a management company to maintain add to financial stability.

Improved communication and relationship between residents and property management.

Builds self-sufficiency among communities of low and/or limited income people

Owner would have to agree to sponsor the conversion or sell to another entity.

Limited income of residents may not be enough to keep up with costs of owning and maintaining

property (i.e., property tax rates, maintenance,

improvements etc.).


Managing multiple developments can increase (already stable) income for property managers.

As cooperative owners, residents become engaged in activities in the development

Rental assistance might be used to help cover the cost

to purchase of shares and pay monthly maintenance

costs.

Maintenance may be easier since residents may have a more active role in maintaining property

Current or other potential sponsors may lack the capacity, or be unwilling, to assist with the

conversion.

RD office would need to approve the conversion.

Financing for necessary revitalization may not be affordable by the development or allowed by

USDA.

LECs, when operating at the right scale can provide financial sustainability of for the property.

However, a key threat to this sustainability is the size of §515 developments. Smaller numbers

of units still retain higher operating costs. A single provider seeking to manage multiple

developments in distant communities will need to contract with a larger number of co-ops in

order to ensure positive cash flow. Therefore, in many ways, this model presents some of the

same challenges faced by current owner/managers.

RESIDENT PARTICIPATORY MANAGEMENT MODEL 3 – MUTUAL HOUSING

ASSOCIATIONS

MHA’s provide for, and rely on, a high degree of self-sufficiency among residents – at least

among those elected to serve on MHA boards. This is achieved because of their structure.

Governance of an MHA rests with the Association and its members. Management is responsible

to the Association as represented by its board of directors. Members are responsible to, and for,

the Association. As a result, the same strengths, weaknesses, opportunities, and threats exist for

both residents and the development (the MHA). This shared responsibility results in a stronger

‘union’ among members of the association/ residents of the development. As part of a

community environment, MHAs can work with other organizations in the area to enhance

services provided to their members.

Although scale is always a factor in determining financial viability, the MHA model is

applicable to a wider range §515s located in different types of communities. This is because

residents can have greater control over individual housing decisions. In particular, residents can

leave without penalty and without or having to find a buyer or wait for board approval to sell

their shares. The Association must adjust its operation to remain attuned to changing market

conditions but the multiple properties of which it is comprised can be used to balance each other

and stabilize the whole. As discussed above, the scale of multi-property MHAs supports

economically feasible revitalization conversions. This approach to operations means that

conversion to MHAs offers true potential for creating a financially sustainable model to preserve

and revitalize §515s developments.

Table 5 provides a SWOT analysis of MHAs as a housing model4.

TABLE 5. SWOT Analysis for Mutual Housing Associations from Residents’

Perspective


Residents, through membership in the Association,

control costs.

Residents who are members of MHA have right to

lifetime occupancy.

Rents/Fees are used to maintain properties and to preserve and expand affordable housing

MHAs can (if they choose) offer market rate and below market rate units which add to long-term

financial sustainability of properties.

Residents can move out if they choose, without

penalty

Residents actively participate in property governance/ management.

Housing development becomes economically self-sufficient since the MHA provides services, as

required, to its members

Members are actively engaged overseeing the

services that are provided.

Monthly membership charges could be cost

prohibitive for some potential members/residents.


Residents can develop social and financial literacy

skills as a result of their participation in the MHA.

Residents can become more self-sufficient as they become more actively involved in the community.

Lack of knowledge about what a MHA is, how it

works, and the benefits over other low-income

rental housing and types of providers.

MHAs with smaller membership and/or located in

more isolated communities might have higher operational and maintenance costs.

RESULTS OF THE FIELD RESEARCH

Policy Considerations

At the broadest level, policy and funder stakeholders agreed that certain regulatory policies that

govern §515s needed to be changed and/or updated to provide a framework to allow for, if not

encourage, conversion and revitalization.

One area particularly mentioned is the method that USDA uses to determine the need for new

Section §515s. It was pointed out that often, an area had been designated as a priority without

consideration of the larger market. For instance, a community might be designated as in great

4 Since their management is based on a resident controlled association, no separate owner or sponsor is involved. Therefore, only a single SWOT

analysis is provided.

need for low income, multi-family housing – but it might also be a community that has seen a

high amount of out-migration and/or might be extremely remote. In these situations conversion

and revitalization of an existing §515 development might not be appropriate. There was general

agreement among these stakeholders that while conversion to resident participatory management

schemes was to be encouraged, this needed to be considered within the broader question of

determining community need and market conditions.

There was concern, expressed by multiple stakeholders, of the need to include within the

resolution of the current litigation of a system to convert developments to resident control

models. The concern was that (in the current environment) when an owner wants to prepay their

mortgage to leave the program, rather than considering alternative management models, there is

a tendency to determine that only some of the units of the property are still needed rather than

agreeing to prepayment or financing a full revitalization conversion. This most often leads to an

agreement that requires the owner to preserve current rents for current tenants but permits renting

to new tenants at market rates. This means that, over time, units will be lost to the program.

While displacement of current tenants is avoided, market conditions demanding more affordable

housing units can be met only through new reconstruction rather than the revitalization of

existing developments.

Additionally, Stakeholders expressed concerns over how human service supports could be

provided in developments that had large numbers of residents who are elderly and/or disabled.

These residents – often lacking full ambulation – may not be able to drive (or even own a car),

thus requiring para-transit systems to get to and from community services (including doctors’

appointments, shopping and pharmacies). There was a concern expressed, among both property

managers and tenants, that current §515 regulations do not allow the funding of on-site

assistance from project operating funds. This means that property managers and off-site service

providers provide varying degrees of coordinated assistance. Concern was expressed that, where

such assistance was not available, residents may not be able to access needed services. Property

managers pointed out that they often were placed in the position of being social service providers

as an unfunded service. Nonprofit providers did, however, argue that they felt compelled to

provide such services since it was within their mission.

While nonprofit developers described themselves as familiar with the complex regulations

governing LIHTCs, some expressed concern that access to them had been reduced as a result of

the recent the financial crisis. They also expressed concern that obtaining investors might be

affected by potential tax reforms. There was general agreement that the process of obtaining a

LIHTC and/or bonded financing was “difficult and requiring a high level of specialized

knowledge.” Lacking this capacity placed many nonprofit developers, in particular, at a

disadvantage if they wanted to become involved in preserving and revitalizing §515

developments.

Lastly, there was true enthusiasm among these developers to work with USDA and state

agencies to design policies that would encourage revitalization, including conversion, of §515s.

Most viewed this as an essential way of strengthening the economic and social characteristics of

rural communities. They also saw it as a way of expanding housing resources in many of those

communities (in particular those that retained a market for multi-family housing). Some (who

were familiar with the MHA model) expressed support for the use of LIHTC to finance the

conversion of §515s to MHA ownership. These people felt that conversion of portfolios, rather

than single developments, was wise because it helped create economies of scale.

The Challenge of Resident Participatory Management to Owners/Managers

Owner/managers of few (less than 5) and many (more than 12) developments pointed out that

current regulatory requirements left little time to devote to ‘tenant relations.’ These managers

said that while some type of tenant participation might be ‘nice,’ the volume of inspections and

audits from regulators at the Federal and state levels – including those required as part of the

LIHTC investments – as well as audit requirements, meant that extra operating income that could

be squeezed from budgets always needed to be used to cover more urgent priorities.

Certain managers also described the sometimes-difficult process of obtaining approval to pursue

revitalization or changes in ownership/management from local Rural Development (RD) offices.

Potential sponsors described how existing regulations are not designed to promote conversions.

They also explained the how daunting conversions to limited equity or market rate cooperatives

might be since, without external support, tenants may not have the knowledge or ability to secure

their own financing to purchase shares in property. But most agreed that these difficulties were

mostly due to a lack of a framework to pursue them, rather than regulations that prohibit them.

As stated earlier, representatives from non-profit agencies described their role as a service

provider to tenants. These organizations saw themselves as providing housing and, in some

cases, supportive services (including HUD funded) to tenants. They didn’t necessarily see

themselves as landlords. But, as they pointed out, the services they were providing were not

designed to promote self-sufficiency and eventual independence for their tenants. Many §515

managers noted that a result of their slim operating margins (either minimally positive or

negative) was that the cost of supervising tenants in taking an active role in even minor projects

(social programming, beautification et al) was prohibitive. They described their role as one of a

traditional subsidized housing provider where social services where not mandated and self-

sufficiency outcomes were not required.

For-profit property owners, and those familiar with the market, also noted that the current state

of affairs, limiting their ability to ‘opt out’ of the program by prepaying their mortgages, placed

them in a catch-22. Many stated that they were unable to continue to operate their properties as a

result of negative cash flow and felt that staying in the program and accepting additional rental

subsidies further jeopardized the sustainability of their developments. Some owners noted that

their only alternative (if they could not leave the program) was to acquire additional properties.

Scaling up, in their view, provides greater positive cash flow and improves their equity position.

However their ability to reinvest to revitalize their properties remains limited.

Non-profit owner/managers described the difficulties faced when trying to acquire properties as

they become available either through expiring use or when an owner wanted to opt out of the

program. They specifically noted the difficulty in securing financing to purchase the property

and the legal complications of assuming a property financed under §515. They pointed out that

very often, banks are unwilling (or unable) to provide acquisition financing since the properties

had depreciated – in part due to lack of maintenance – or lacked a stable rent roll. Some of these

also pointed out that owners who might otherwise be willing to consider selling expressed

reluctance to opening pre-payment negotiations with USDA. They explained that many of these

owners stated a preference to wait until their mortgage could be paid off and, at that point,

convert the property to market rate housing or sell it to private investors.

A related issue is the capacity of nonprofits to “package a deal” to purchase a group of

properties. Policy analysts pointed out that many nonprofit developers operated within certain

geographic areas and with fairly limited assets. In order to provide cost effective management

(as landlords) they would need to operate multiple developments (scale being important to have

sufficient operating income). This lack of financial and/or human expertise meant that most

were ill equipped to revitalize, convert and/or operate multifamily properties at a larger scale.

According to some, this means that even if tax-exempt bond financing or LIHTCs were

available, access to the market and the expertise to assemble a purchase would be a major

challenge.

The Challenge of Resident Participatory Management to Residents

RD workers, for-profit and nonprofit managers all pointed out that the lack of model that

promoted self-sufficiency among tenants of §515s was of great concern. They observed that the

current system meant that residents were ill-equipped to assume any role greater than tenant.

They pointed out that the pressure for §515 owners to rent to people who were extremely low-

income not only impacted operating margins but also limited the scope of services to tenants.

This meant, as they described it, that §515 units were being rented to people who often lacked

strong self-sufficiency skills and, rather than create a system to build those skills, tenants became

increasingly dependent on the existing system. Some viewed this as an example of warehousing

– even more exacerbated since many developments were located in fairly isolated communities.

There was consensus among many who were interviewed that a major obstacle to any form of

increased resident participation in the management of §515properties was a lack of social skills

by residents.

A second important point, raised mostly be nonprofit service providers, was the lack of a

mechanism to act as a “voice” for residents. They, again, pointed to the current financial and

management structure of §515s as cause. Stakeholders pointed out that the system leaves little

opportunity to provide a mechanism that promotes communication among a formal group of

residents and managers. While they were quick to point out that the size of the developments

that they managed was small enough to promote communication between managers and tenants,

because relationships were based on a landlord/tenant model rather than a participatory model,

such relationships were not always encouraged. Tenants voiced similar observations. In

particular, some mentioned a desire to take a greater role in projects such as recycling and

beautification, but noted that there was no mechanism to do so.

Table 6 provides a synopsis of some of the key points raised during the interviews – outlining

both the perceived benefits and challenges associated with developing a new model to convert

and revitalize §515 developments.

TABLE 6. Management/ Participatory Models for 515 Developments

STRENGTHS OF MODEL CHALLENGES OF MODEL

From Perspective of

Residents

From Perspective of

Owners/ Property

Managers

From Perspective of

Residents

From Perspective of

Owners/Property Managers

Tenant

Association

Tenants can volunteer to become involved in Engages and empowers tenants development-wide issues

Tenants’ have the opportunity to develop social skills.

Preserves the landlord/tenant relationship

Owners retain the ability to pass along increases in expenses to tenants, as permitted by regulations.

Requires active participation of tenants in association and regular attendance at meetings.

Does not add to financial sustainability of the household or property.

Association would have to collect dues to cover costs of programs.

Landlord might find it easier to operate without an association.

Owners/landlords may agree with tenants that building conditions may need to be improved; however, they may not have access to capital or financing needed to make such improvements to the building/property.

Limited

Equity

Co-op

Residents share ownership of the property.

Residents build equity in shares –providing new and different financial opportunities.

Preserves the affordable nature of the housing.

Monthly income from maintenance fees covers expenses and can be raised as needed.

Residents may take more active role in maintaining property and common areas, since they are homeowners – easing the burden on managers.

Built-in method of communication and relationship between residents and property management.

Residents will need to actively participate in property governance/management.

Equity is limited. Residents have to secure

their own financing to purchase shares in property.

Financial assistance may be needed to assist residents with purchasing shares and monthly maintenance costs.

Would need owner and USDA to agree to sponsor conversion.

Limited equity means limited revenues, and may not be enough to keep up with costs of owning and maintaining property (i.e., property tax rates, maintenance, etc.).

Existing rules and regulations do not foster (easily) a conversion model.

Would need a model to finance or refinance existing developments with adjusted long-term use requirements and/or different prepayment rules and/or elimination of penalties

Mutual

Housing

Association

Residents’ housing costs remain affordable.

Residents who are members of MHA have right to lifetime occupancy.

Rents are used to maintain properties and to expand affordable housing in communities.

MHAs offer market rate and below market rate units which add to long-term financial sustainability of properties.

Residents receive membership fee back if they chose to move out.

Maintains affordable housing in community.

Provides a mechanism to expand, revitalize and convert existing properties to sustainable models.

Residents will need to actively participate in property governance/management.

The relationship between residents and the management association may be confusing to people who are not familiar with the model

Would need owner to agree to conversion.

Owner may not be willing to be contract to manage property on behalf of MHA or to transfer property to MHA or another organization.

Rents remaining limited and low may not be enough to keep up with maintenance and to support non-profit’s expenses.

More properties as acquired might mean the need for additional property management staff.

Would need a model to finance or refinance existing developments with adjusted long-term use requirements and/or different prepayment rules and/or elimination of penalties

RESEARCH CONCLUSIONS AND RECOMMENDATIONS

To a very great extent, the field research supports the feasibility of a national portfolio

conversion and revitalization program as we have outlined it. The field research particularly

underscores the need for a national nonprofit organization dedicated to the support of resident-

controlled, permanently affordable housing. Stakeholders who were interviewed expressed three

levels of concerns for changes from the status quo to other forms of management:

At the national level, there is a need for increased capacity to assist in adopting

alternative forms of management. This included updating regulations and

procedures for transfer of ownership as part of the conversion of properties.

With regard to financial concerns, owners expressed –

o The need to permit refinancing of properties and incorporating into

operating expenses the cost of tenant association programs, or

o Permitting refinancing that takes into account negative tax equity or

depreciated property values.

Given that the expressed concerns could be addressed, there was general consensus that

either the LEC or MHA model could be applied, and that the MHA model offers the greatest

opportunity to preserve and revitalize existing properties and would promote greater self-

sufficiency and stability for residents.

With this in mind, there was general consensus among the non-governmental stakeholders that

creation of some sort of model to provide technical assistance and support at the national,

regional and state/local level was needed. Such a model, our Umbrella, would be able to tackle

these policy, technical, and financial issues.

There was also the belief by many that there is a need to build a network of providers to

empower residents with the skills and knowledge associated with resident participatory

management. This includes education and training around residents’ rights, federal, state, and

local housing laws and basic life skills.

Also, there was consensus that such a model would need to provide an opportunity for owners to

participate and become involved– if for no other reason than to illustrate some of the benefits of

conversion and provide an avenue for working with experts to sponsor or arrange for conversion

of their properties. This included ‘working out’ any prepayment issues, working with an

organization to convert the property and, thereby, facilitating the preservation of affordable

housing and the revitalization of the development(s).

Appendix 1 provides the framework – in logic model format– for the creation and operation of

Umbrella. Creating Umbrella will address the problems of the existing §515s by providing

leadership in two significant areas. Umbrella will both promote revitalization and conversion

and provide residents a voice in their housing pre-conversion. By building a system of services

to support resident-centric properties pre-conversion, Umbrella will – at the very least – preserve

existing affordable rural multifamily housing. Ideally, Umbrella will provide residents with the

tools to fully revitalize and convert a significant portion of the §515 portfolio, enhancing the

environment of rural communities throughout the country.

Appendix 1: Logic Model Illustrating the Framework for A Policy, Planning, and Technical Assistance Provider

Problem

Statement:

If current trends continue unabated, rural communities -- in particular those with the potential for economic stability and growth -- will see a permanent loss of affordable rental housing. If this

occurs, these communities will lose a key aspect of their environment and a valuable and necessary economic asset.

Solution: Create an umbrella entity whose mission is to advocate for provide the revitalization of rural multifamily housing. The entity would provide

technical support and networking opportunities that promote housing in which management decisions that are influenced by residents. This

includes, primarily cooperatives and mutual housing associations but can also rental management development models owned by either

private or nonprofit entities.

To create a policy center that focuses on the

growth of new rural multifamily housing and

the preservation of and revitalization of

existing developments. In both cases

encouraging the establishment of resident

managed developments.

Goals: To build a consortium of potential members (providers, co-

op organizations, funders, financing entities et al) needed to

develop a framework for the preserving and developing

affordable resident centered housing.

To organize regionalized technical assistance

provider(s) that preserve, revitalize and

develop affordable resident participatory

housing management models (rural, affordable,

§515 et al).

To nurture a sustainable,

regionalized network of

local organizations with

developed expertise in

preserves and develops

Resident Centered Housing.

To create a national center that researches and

advocates for statutory and regulatory changes

that promotes cooperative and mutual housing

association ownership of rural multifamily

housing.

Objectives: Conduct

research on the

challenges to

converting

existing §515

rental units into

some form of

resident

participatory

management

model.

Develop a list of

potential

member

organizations

that can provide

technical and

financial

assistance to

promote

affordable

resident

participatory

management

developments.

Develop a list of

developments, by

region, that are

interested in

converting to a

resident

participatory

housing model of

management.

Develop a two-tiered membership organization

that includes service providers and residents to

implement the model on a statewide or

regional (pilot) and national (long-term) basis.

Build capacity among

regional and statewide

members to provide

technical assistance to

organize existing §515 developments into

cooperatives or mutual

housing associations.

Obtain funding for

further research into the

demographics of

residents of rural

multifamily housing

Publish a how-to

manual that

describes, for

potential

'sponsors' of

conversions of

rural multifamily

developments, the

process and

existing resources.

Work Steps: Complete a

research project

that identifies

trends,

challenges and

barriers to the

implementation

of the model at

the grass root

level.

Develop a list of

regional, state-

wide and local

technical

assistance,

finance,

organizing and

other

stakeholders

that are

interested in

promoting the

model

Build a list of local

groups,

developments,

owners/developers

and other

stakeholders, by

region and within

targeted states, that

would benefit from

the implementation

of the model.

Complete research on

existing models that

have similar

characteristics and goals.

Identify the

current state of the

market and

existing economic

and social

challenges.

Maintain a list (regionally

and intra-state) of §515

developments to target for

implementation of the

model.

Obtain funding for

further research into the

demographics and

challenges facing

owners and developers

(for profit and non-

profit) of rural

multifamily housing

Develop a series of

policy papers that

outline legislative

initiatives that

could be

undertaken that

would encourage

the conversion of

existing rural

multifamily

housing to co-

operative or

mutual housing

association

ownership.

Report on the

results of the

research.

Create a

membership

organization

that formalizes

relationships

among

stakeholders in

order to

implement a

technical

assistance

scheme.

Conduct meetings

and training

programs that

introduce the model

at the local, regional

and national levels.

Report on the results of

the research.

Report on findings. Working through regional

or statewide members,

promote the model

(ongoing).

Publish regular reports

on the nature or rural

multifamily housing

Work with

legislators and

USDA, EPA, HUD

and other Federal

agencies and

private entities to

identify resources

that can be used to

finance

conversions of

rural multifamily

housing.

Hold regional

and national

conferences and

meetings to

formalize

relationships

and design a

comprehensive

implementation

plan.

Provide technical

and financial

assistance to local

service providers

and developers

seeking to create

resident

participatory

management

developments.

People Interviewed

People with the following organizational affiliations were interviewed for this report5:

2Plus4 Management, Watertown, NY

City of Bloomington, Housing Department, Bloomington, IN

Community Action in Self-Help, Lyons, NY

Community Service Programs, Inc., Wappingers Falls, NY

Council for Affordable and Rural Housing, Washington, DC

Genesse Valley Rural Preservation Council, Mt. Morris, NY

Great Lakes Capital Fund, Indianapolis, IN

Hilltown CDC, Chesterfield MA

Hoosier Uplands, Mitchell, IN

Housing Assistance Council, Washington, DC

Housing Preservation Project, St. Paul, MN

Knox County Housing Authority, Vincennes, IN

Milestone Ventures, Indianapolis, IN

Musselman Apartments, Linton, IN

New Hampshire/Vermont State USDA Office

New York State Rural Housing Coalition, Albany, NY

RD Office of New York State

Stewards of Affordable Housing for the Future, Washington DC

Valenti Real Estate Services, Inc., Indianapolis, IN

Wyoming County Community Action, Perry, NY

5 This includes residents of certain developments.

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