Showing posts with label income restriction. Show all posts
Showing posts with label income restriction. Show all posts

Dec 20, 2016

Future of HDFC Coops? Now May Be the Time to Sell.

Why sell your HDFC coop now? 

As an industry recognized expert in HDFC coop sales, I've been asked by buyers, sellers and HDFC coop board members about the proposed changes. At this point the changes have only been proposed to community boards by HPD and a "taskforce" working with HPD of so-called "interested stakeholders" aka affordable housing activists, community organizers, law firms and management companies with their own political and monetary agendas before taking this proposal to the City Council for a vote sometime in 2017. The City Council must vote to approve a new tax break for HDFCs before this program can go into effect. Tax break is fine the rest of the proposal is not.

The proposed changes may put the future of your investment and equity in jeopardy. Because of this uncertainty NOW may be the most advantageous time to sell.

Many shareholders that I sold HDFC units to have reached out to me with concerns about the price they paid for their unit and the new proposed resale caps. My understanding is HPD’s proposal exempts units that have already sold above the proposed price caps by excluding those units from price restriction, and allowing a higher income cap of 165% of AMI for the resale of those specific units. While such an accommodation sounds great in theory and intention it's not based in reality. 

Whether an apartment is "affordable" or "market" the market (supply and demand) determines what a buyer will pay regardless of income but not the government. The government can not guarantee to shareholders who bought their apartments at prices above the proposed price caps that they will not lose any equity when they sell.

All units in a building need to be priced accordingly. Why would one buyer pay a higher price for a comparable unit in the same building when other comparable units are being sold for less? 

Proposed Changes and New Regulatory Agreement: 

According to advocates for the proposed changes and new regulatory agreement, the proposed change aims to preserve true affordability: maintaining income restrictions, while introducing asset restrictions and caps on sales prices (in buildings that vote to sign the Agreement)

HPD’s current avenues to help are limited under Article XI of the Private Housing Finance Law (PHFL). HPD has authority over formation, dissolution, and changes to certificate of incorporation

The "taskforce" of "interested stakeholders" expects that introducing this Regulatory Agreement will create more clarity for buildings about the affordability intentions of Article. In my opinion these "Interested stakeholders" want to change the "P" in (PHFL) from Private Housing Finance Law to Public Housing Finance Law eliminating shareholders and self-sustaining coops their property rights.

 Provisions of Proposed New Regulatory Agreement 

• 40-year Agreement with corresponding tax exemption that will be more generous than the current tax exemption for properties sold through DAMP (The Division of Alternative Management) cap which expires in 2029) 
 • A deeper exemption to account for added requirements in the Regulatory Agreement
 • Every eligible HDFC Coop – even high-value coops – would receive a tax benefit
 • The lowest value coops, which experience high rates of financial distress, would pay no property taxes on the residential part of their building, and could use the savings to pay down delinquent tax bills or making building improvements
 • To improve a building’s overall financial health, the new Agreement will require a 30% flip tax. When units are sold, 30% of the profit from that sale will go to the building’s reserve fund

Sales Restrictions

 • Eligibility for becoming a shareholder in an HDFC:
• Household income at or below 120% of AMI ($108,750 for a family of 4 in 2016)
• Household assets at or below 175% of AMI
 • Household must make the HDFC unit its primary residence
• Shareholders cannot sublet their apartments for more than 18 months cumulative out of a five year period, and they must obtain Board and Monitor approval if they choose to sublet their units
• Shareholders cannot own property within 100 miles of New York City
• Sales of units at prices affordable to 110% of AMI or below

While the proposed changes add more restrictions, and burdens for both buyers and sellers it does not address the problem of coop boards lack of accountability to its shareholders and potential buyers.

The city council has never voted to make coops in NYC accountable even though bills have been proposed numerous times. A coop does not have to give a reason why they reject a purchaser, they do not have to follow any standard application process or procedures nor are they required to conduct the application/purchase approval process in a timely manner. No special training or knowledge of real estate or Fair Housing is required to be a director on a coop board. The city council, the mayor and HPD should be concerned about housing discrimination rather than punishing low and moderate income New Yorkers that were fortunate enough to be here 20-30 years ago and take the on abandoned buildings in deteriorating neighborhoods. The original intent and spirit of the HDFC.

Contact your city council member and let them know you're an HDFC shareholder that wants to sell your unit to a low or moderate income New Yorker but you don't want the government punishing you by mandating the price you can sell it for. The income restriction already in place naturally limits the price you can get and it's still significantly below market. A portion of your profit is going back to the HDFC housing corporation in the form of flip tax already limiting your equity.

If you have been considering selling your HDFC coop, please contact me for a complimentary market evaluation and consultation.


This blog site is designed and published as a consumer service by local real estate broker to help Manhattan, New York City buyers, sellers and renters make informed real estate decisions. This site and its feeds are owned and operated by Mitchell J Hall, a NY State licensed real estate associate broker associated with The Corcoran Group and member of the Real Estate Board of New York.

Legal Disclaimer - The opinions expressed here are those of the authors and do not neccessarily reflect the opinions or policy of The Corcoran Group. This site is not the official website of The Corcoran Group or its affiliated companies, and neither The Corcoran Group nor its affiliated companies in any way warrant the accuracy of any information contained herein. Any product and/or services offered for sale on this website shall not be considered an offer to sell such goods and/or services in any state other than New York.

Legal Disclaimer - Information on this site is not intended as legal or financial advice. - All material herein is intended for information purposes only and has been complied from sources deemed reliable. Though information is believed to be correct, it is presented subject to errors, omissions, changes or withdrawal without notice. I operate a business that supports Fair Housing.“We are pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the nation. We encourage and support an affirmative advertising and marketing program which there are no barriers to obtain housing because of race, color, religion, sex, handicap, familiar status or national origin.”

© Copyright 2006 -2016 © © Al l Rights Reserved