In December 2021, Liberty Landing Cooperative, a new cooperative association formed under the Missouri Cooperative Associations Act, acquired the Liberty Landing Manufactured Home Community for a purchase price of $9.5 million, financed with the first loan by ROC USA in the State of Missouri. The acquisition highlights the benefits of cooperative real estate ownership – here, it provided the residents of the community (and now the members of the cooperative) the opportunity not only to acquire and control the land on which they live but also to manage and protect themselves from increased costs. This case study serves as a replicable template for additional cooperative ownership affordable housing transactions locally and nationwide.
Under the cooperative ownership structure, the resident members organized to form a self-governing cooperative association, managed by a board of directors and officers comprised of residents elected by the members. Each member owns an interest in the cooperative, while the cooperative owns the land on which the community is located. Members will also continue individual ownership of their manufactured homes on the site.
A critical component to the successful creation of the Liberty Landing Cooperative, and its acquisition of the real estate, was the early and diligent work of the leadership and members of the organization with counsel and lender representatives to ensure the governing documents of the cooperative achieved their goals.. There were several matters the parties had to keep in mind to best balance the intent, rights, and obligations of all parties to the transaction.
- The control and authority of the initial ownership group had to align with the desired flexibility and eventual turnover of individual owners within the cooperative. Foreseeable ownership issues, including transfers for estate planning purposes and the possibility of a member’s exit or removal from the cooperative, were given careful consideration.
- The bylaws were carefully drafted to provide board and officer terms and authority necessary for consistent, sustainable management of the cooperative and enforcement of clear rules and procedures while providing reasonable flexibility for foreseeable changes to or needs of the cooperative or underlying real estate.
- Close attention was given to lender requirements, as is common for financings for cooperatives. Liberty Landing Cooperative’s lender required inclusion of specific provisions in the organization’s governing documents to preserve the intended use of loan funds to support the intended affordable housing purposes of the cooperative.
The other component critical to the successful transaction was financing of the $9.5 million acquisition. ROC USA Capital, a nonprofit lender, provided the financing. ROC USA is supported by lenders and donors whose capital helps resident groups in manufactured home communities solidify their futures by financing acquisitions utilizing the cooperative ownership structure.
Cooperative ownership creates more buying and borrowing power, collectively, for the residents collectively than any of them would have had individually. This method of ownership and financing reduces barriers to property ownership for Liberty Landing residents and more control over future costs and their community.
Initial membership fees for cooperatives are usually significantly less than a down payment for individual purchases of homes. Monthly membership fees are similar to monthly rent for a tenant; however, unlike renters, the members of a cooperative control the real estate and can protect against rent increases, ownership change, and other market factors beyond a tenant’s control.
While the Missouri Cooperative Associations Act has only been in existence for a little over a decade, cooperative real estate ownership is not a new phenomenon. Various forms of cooperative ownership have existed in certain locations in the United States since the 1800s, and several cooperatives that date back to the 1970s or earlier remain active.
Further, the Missouri Cooperative Associations Act is unique to Missouri, but the general cooperative ownership structure used for the Liberty Landing transaction is not. There is a lack of uniformity in how cooperatives must be organized from state to state. However, this has not hindered the use of cooperatives across the country. The absence of a specific statute for cooperative entities does not necessarily foreclose the possibility of cooperative ownership in any given state (in neighboring Kansas, for example, there is no similar cooperative associations act, but cooperatives have commonly organized there for decades as not-for-profit corporations).
The use of the cooperative ownership structure may not be commonplace in Missouri (or many other jurisdictions) today, but it is currently enjoying a bit of a renaissance across the United States, at least in the affordable housing sector. The heightened awareness of the affordability housing issues affecting us at the local, state, and national levels and the expanding availability of financing for cooperative associations make it more likely to play a more prominent role in providing affordable housing solutions.
The Liberty Landing Cooperative acquisition serves as a modern template for cooperative association ownership in Missouri. It can be referenced as an example, not just for other manufactured home communities, but for a variety of other affordable housing and other similar special interest projects (including senior living, student housing, and housing for artists and others whose work contributes to the public good or quality of life in the broader community).