Our Program

Resident Benefits

Residents get a community owner with their interests in mind. Typically there is a recorded Regulatory Agreement that outlines how the project will be operated—rent increases, community rules, family/senior status, what happens to surplus cash flow, etc.

Rent increases are limited by some objective standard, either a percentage of CPI or actual operating costs. If a City has rent control, we would use that standard. After a specified asset management fee to the non-profit, all surplus cash flow goes back into the project. The homeowners are protected against large increases and can see where their money is going. The project can be designed to allow as much resident input as desired, without the homeowners having ownership or management headaches.

City Benefits

In many Cities, manufactured home communities are the largest stock of affordable housing in the area. Purchase by a non-profit preserves an affordable community, provides funds to upgrade maintenance, eliminates future rent disputes and is very popular politically compared to the typical affordable housing project—the residents are grateful, while the surrounding neighbors are not affected by a new project.

In nearly all of our cases, the city councilmembers have described their action to approve the bonds as their most satisfying vote of the year.

Non-Profit Benefits

Millennium Housing is a “501c3” corporation, named after the IRS code section that describes us. Millennium gets a “free” park—no money down with non-recourse financing. As long as the income is greater than the debt service, we will be eager to acquire the park. Because the price is set at the level that results in 100% financing, we have, in essence, unlimited funds for appropriate acquisitions. This is a no-brainer for the non-profit.

Financing

Millennium has several advantages over a conventional buyer. We can issue tax-exempt revenue bonds based on the income from the property. Our financing is based on revenues, not Loan-to-Value considerations, so we usually get 100% financing. Currently we can borrow at an interest rate of approximately 5.6-5.9% 38-years fixed, fully amortizing. This rate was as low as 5.25% last year, but the municipal bond market is weaker now. In addition, the non-profit is largely exempt from property taxes, so our net income is higher than a conventional investor would receive.

In some cases, the local Redevelopment Agency will provide further financial assistance to the project in return for the low-income restrictions referred to above.

Tax Benefits to Seller

Generally Sellers are attracted to our program because of the prices we can pay. However, sometimes we can offer tax advantages as well.

If a Seller elects to carry back the financing, the interest portion of the note payment is exempt from both State and Federal taxes, including alternative minimum tax. An owner would have effectively converted taxable rents into tax-exempt interest. The principal portion of the payment would receive installment sale treatment, subject to normal capital gains taxes.

Some existing loans contain a penalty or “yield maintenance” fee upon prepayment. This can make it costly to sell a property. In many cases, these loan fees do not apply to our transactions, because the park is being purchased for a public purpose.

Conclusion

Because of our favorable financing, potential for assistance from the local redevelopment agency and high probability of actually closing your escrow, you should consider a non-profit alternative when considering your exit strategies.

Millineum Housing

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