Jul 23, 2018

HDFC Coops - Affordable Home Ownership in NYC



HDFC Coops - Affordable Home Ownership in Manhattan

Q: What is an HDFC coop?

A: HDFC (Housing Development Fund Corporations)
Since 1979, the Department of Housing Preservation and Development (HPD) has sold formerly City-owned buildings to Housing Development Fund Corporations (HDFC's)

HDFC coops are affordable cooperatives in New York City. They sell below market (40%-50%) below non HDFC comparable coops and condos.

45 West 110th Street, HDFC
If you qualify an HDFC coop may be right for you. It may be a great deal.

Many HDFC coops are considered a form of limited equity home ownership. HDFC coops offer many of the same benefits as regular coops but they have some eligibility (maximum income restriction, primary residence requirement and many have a "flip tax" paid by the seller.

Since they are sold below market and the maintenance remains low because the city reduces real estate tax on HDFC coops upon selling a portion of the profit is often shared with the coop and sometimes the city (60/40 buildings) hence "flip tax".

Back in the late 70' and 1980's many rental buildings were abandoned by landlords and owners that may have owed back taxes or city water charges and the buildings were taken over by the city. NYC HPD (Housing Preservation Department) through an affordable housing program helped to rehabilitate the buildings, trained the tenants on ownership, set the Coop up financially to be self-sustaining, and then sold the apartments to the existing tenants for very low sale prices many as low as $250 in exchange the new owners had to maintain the buildings and keep them affordable.

The City helped rehab many of the buildings and trained the existing tenants, even some squatters about maintaining their building and becoming a self sufficient housing cooperative. It has been a very successful program. Over the years they rarely sold and remained within families.

While they still sell below market many sellers are now able to get the highest possible price for their 

More recently I've represented sellers and buyers in Harlem's most sought after HDFC coop as well as HDFC's in Hamilton Heights, Sugar Hill, Morningside HeightsManhattan Valley, Hell's Kitchen the East Village and Williamsburg, Brooklyn.

While prices vary building to building and neighborhood to neighborhood it should be noted that under the private Housing Finance Law, all HDFCs must be low to moderate/middle income households.. 

The specific definition of low income for some HDFC cooperatives were time limited and have expired, the cooperation must adopt a new standard. The highest standard that HPD will accept is 165% of the median income for the metropolitan area.

 An HDFC coop must be a primary residence and the income restrictions are based on area income standards. In many cases either less than 120% or 165% area median income. Therefore individual HDFC coops have different income requirements. It also varies depending on the household size. A household of five can have a substantially higher income enabling larger households to afford larger apartments. At 165% AMI the maximum income allowed for a household of five is $185,955. 

The cost of owning and maintaining shares in a cooperative include apartment maintenance, the monthly payments on any loan used to purchase the shares, utilities, and homeowners insurance.

Generally buyers should not pay more than 30% of their gross income in housing costs. HDFC boards have the same discretion to approve or reject a buyer like any regular coop. The only difference is there is a maximum income allowed to purchase or lease in HDFC coop apartments.

An HDFC coop represents a great opportunity to own a home  in New York City, at below market price of other coops and condos but with some restrictions on purchasing and upon selling.

When buying or selling an HDFC Coop it is important to use a broker, attorney and lender that understands the rules, restrictions and nuances of HDFC coops.

More reading:

HDFC Coops | Facts vs Myths
HDFC Coop Income Standards
The Flip Tax
Restrictive Covenants

If you would like more information about buying or selling an HDFC coop please contact me.


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