HDFC Coops - Affordable Home Ownership in Manhattan
Q: What is an HDFC coop?
A: HDFC (Housing Development & Finance Corporation) Coops are affordable cooperatives in New York City. They are a relatively unknown market niche that are city subsidized and sell below market (40%-50%) below non HDFC comparable coops and condos.
If you qualify an HDFC coop may be right for you. It may be a great deal.
HDFC coops are a form of limited equity home ownership. HDFC coops offer many of the same benefits as regular coops but they have some eligibility (income) restrictions 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 shared with the coop and sometimes the city hence "flip tax".
Back in the 1970'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 amounts some as low as $250 in exchange the new owners had to maintain the buildings.
Rather than becoming a landlord, the City trained the owners ( existing tenants) who care about their building and their future. It has been a very successful program. Over the years they rarely sold and remained within families.
During the past several years brokers including myself began listing and marketing HDFC coops and have been able to get much higher prices for the owners. While they still sell below market many sellers are now able to get the highest possible price for their coop.
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| The Monterey | 351 West 114th Street Morningside Park |
Q: What is an HDFC coop?
A: HDFC (Housing Development & Finance Corporation) Coops are affordable cooperatives in New York City. They are a relatively unknown market niche that are city subsidized and sell below market (40%-50%) below non HDFC comparable coops and condos.
If you qualify an HDFC coop may be right for you. It may be a great deal.
HDFC coops are a form of limited equity home ownership. HDFC coops offer many of the same benefits as regular coops but they have some eligibility (income) restrictions 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 shared with the coop and sometimes the city hence "flip tax".
Back in the 1970'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 amounts some as low as $250 in exchange the new owners had to maintain the buildings.
Rather than becoming a landlord, the City trained the owners ( existing tenants) who care about their building and their future. It has been a very successful program. Over the years they rarely sold and remained within families.
During the past several years brokers including myself began listing and marketing HDFC coops and have been able to get much higher prices for the owners. While they still sell below market many sellers are now able to get the highest possible price for their coop.
I recently represented a seller and a buyer in two different apartments in the same line in an HDFC coop in Morningside Heights. I sold the seller's apartment for $660,000 and got my buyer an apartment for $550,000. The highest prices in the building's history. A non HDFC comparable coop would be $900,000 - $1.1M.
Because HDFC coops were originally set up as low income housing they must remain affordable so a buyer must qualify financially. 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 size of family. A family of five can have a substantially higher income than one person.
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.
An HDFC coop represents a great opportunity to own a home in New York City, for a fraction of the price of other coops and condos but with that comes some restrictions on purchasing and upon selling you often have to give a portion of your profit back to the coop and/or the city.
When buying or selling an HDFC Coop it is important to use a broker that understands the rules, restrictions and nuances of HDFC coops.
HDFC Coop Income Standards
The Flip Tax
If you would like more information about buying or selling an HDFC coop please contact me.
When buying or selling an HDFC Coop it is important to use a broker that understands the rules, restrictions and nuances of HDFC coops.
HDFC Coop Income Standards
The Flip Tax
If you would like more information about buying or selling an HDFC coop please contact me.
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38 Responses to "HDFC Coops"Thanks so much for posting this. We were actually having a discussion about HFDC's today in the office, and I came home to do some research on them. Your post was extremely helpful in explaining the in's and out's.
One question that we did have that isn't really discussed on here is regarding the shares. Specifically, do they increase in value, or when they are sold do they typically sell at the same price as when originally bought. There seems to be some conflicting information out there. Thanks so much.
Most HDFC coops increase in value. The flip tax usually determines how much of the profit is shared with coop and/or city. Many original owners who bought for $250. sold for several hundred thousands. It is in the original offering plan as to how it was set up. The flip tax can be voted away by 2/3 majority.
how much can maintenance go up on hdfc coops? anything they want or is it controlled?
How maintenance may be increased is usually in the coops by laws
Thank you very much for the valuable information.
I have been looking for rules and regulations regarding HDFC co-ops, but with no luck. Most real estates professionals are either unfamiliar with HDFC buildings or quite frankly, they have better things to do than to deal with these below-market-value sales. I understand nobody wants to spend time on a project that pays about half of a regular transaction.
It is very surprising though that I could not find much useful information on nyc.gov either.
Would you please point me to the right direction concerning the rules and regulations of HDFC co-ops? I understand that there are income requirements, which usually is below a certain figure. I could not find information on how much below is too low or how many years I have to fall within the income requirements before the sale.
Thank you very much for your help.
Every HDFC coop has it's own rules and regulations since they are corporations like any other coop. Some HDFC coops may have different requirements based on the year and date the building became an HDFC coop. The rules and regulations are in the HDFC coop bylaws. The standard definition of "low income" "moderate income" or "affordable housing" has changed during the existence of the program so shareholders must consult their corporate documents to determine the standard applicable to their cooperative.
Below is a general guideline based on 120%- 165% of NY median incomes.
HDFC Cooperative Median Income Standards: 2010
Household Size Maximum Income 120% Maximum Income 165%
1 $66,600 $91,600
2 $76,100 $104,600
3 $85,550 $117,650
4 $95,050 $130,700
5 $102,700 $141,250
6 $110,300 $151,650
7 $117,950 $162,200
8 $125,500 $172,600
Most HDFC coops are resales. Private owner selling listed with a real estate broker such as myself. Therefore you won't find them listed on nyc.gov but rather on real estate and broker websites.
There is usually no minimum income requirement only maximum. However like most coops the board will want to see that you can afford to make the monthly mortgage and maintenance payments. There is no formula every coop board has their own discretion. They usually require your last two most recent tax returns. Once you purchase your income can increase above the maximum with out any consequences.
Feel free to contact me at 917-312-0924 or mhall@corcoran.com if you have any other questions or if you would like me to represent your interests in a purchase or sale. In New York State buyers have the right to their own representation and there is no fee to the buyer since the seller pays the broker fee.
David,
An HDFC coop must be the shareholder's primary residence. Primary residence is the address on your federal tax returns. The residence must be occupied for over 185 days per calendar year. You may be able to count your present home as a second home or vacation home but they will know from your application it is your current primary residence. They may ask you to sell it. Every coop board including HDFC coop boards can use their discretion to approve or reject a prospective purchaser. Some boards may allow it while others may not.
one person $66000 to $91000 is quite high, how can it be for low income families?
When determining your income, do you use your net or gross? Is that before or after deductions?
As a married couple, can only one partner buy an HDFC coop since only one fulfills the income restriction requirements (we file joint tax returns btw) ???
Freind2B
No!
HDFC coops are a subsidized "affordable housing" program for low to moderate income families. Income qualifications are based on number of occupants/family size. Recent tax returns will be required as documented proof of income.
What would be percentage of the profit made by the seller when selling his home that goes back to the co-op on a HDFC building?
What is the percentage of the profit that goes back to the Co-op after selling the property in a HDFC building?
The percentage of profit shared is determined by the coop's flip tax. The coop's flip tax is in the coop's bylaws. Each building is different and each building has it's own governing documents such as certificate of incorporation and bylaws.
I'm a student in grad-school (ie: makes no income) and my wife qualifies for an HDFC apt we're interested in. If she makes the purchase and I become an official occuppant, would I be able to buy another HDFC apt in the future (assuming my income then qualifies for HDFC)?
Thanks very much for posting this. If I am trying to purchase a HDFC coop, who confirms my income? Do I have to send my tax returns to a city agency, or the building's board? Or what?
Are there additional hurdles involved in securing financing for HDFC coops?
Finally, it's my understanding that the building must sign a 30-year agreement with the city when it becomes an HDFC coop. Do such buildings ever leave the program or convert to normal coops at the end of the 30-year term?
Thanks again!
Hi Mitchell,
I am interested in finding out if you know of any lenders to purchase a HDFC coop? I was pre-approved by a well known bank and was told that they do not finance HDFC coops. I would like to know so that I can acquire the pre-approval prior to purchasing. Thanking you in advance.
Be well,
Barbara
Anonymous Feb 13, 2013.
An HDFC coop must be your primary residence.I'm not sure how a married couple can pull off two separate primary residences.
Anonymous Feb 19,2013.
Each HDFC has their own application and board approval process. A majority of shareholders can vote to remain or to leave HDFC program after term determined in the certificate of incorporation. It is rare for a building to leave and give up the tax benefit and subsidies.
Barbara, February 24, 2013.
Chase, Bank of America and Citibank finance loans in HDFC coops. In my opinion the best loan officer to secure an HDFC coop loan is:
Michael Most
Senior Mortgage Consultant
Citibank
666 Fifth Avenue, Floor #12B
New York, NY 10103
917-841-8096 Cell
855-831-9028 Efax
Email: michael.most@citi.com
Website: www.tipsforhomes.com/mmost
NMLS#363202
Mitchell, thank you so very much for responding. I appreciate your prompt response.
Blessing,
Barbara
Barbara, You're welcome. Feel free to contact me if you need any help finding an HDFC coop or if you need representation.
Best,
Mitchell
Why would the city allow buildings to remain in the HDFC program if the building is now being run well. Wouldn't the city be suffering a tax loss?
Also, what happens when a building is no longer HDFC?
I am a owner of a HDFC coop that I have been trying to sell for over a year and a half now. Biggest problem is finding a buyer a mortgage. Where do you get mortgages for your prospective buyers? We were told by our managing agent that the only source for loans was the Lower Eastside Peoples Federal Credit Union. They are not an option for people who make more that $38K, their rules for membership don't allow members who make more than that.
Hi Bronx-coop,
Call Michael Most at Citibank. If the building meets citibank/Fannie Mae guidelines Michael can get the coop approved.
Michael Most
Senior Mortgage Consultant
Citibank
666 Fifth Avenue, Floor #12B
New York, NY 10103
917-841-8096 Cell
855-831-9028 Efax
Email: michael.most@citi.com
Website: www.tipsforhomes.com/mmost
NMLS#363202
I am a shareholder in an HDFC coop whose 30 yr underlying mortgage is going to be paid off in a fairly short period of time. The coop is having a very difficult time agreeing on a new resale policy to take effect when that happens. There is a division between those seeking a greater amount of profit when selling and those who want to stay closer to the HDFC affordable tradition. It's become a source of a great deal of anger and internal politics. Can you recommend any websites that might present "case histories" of how different HDFCs have coped with a similar transition, or any other resources that might help us in seeing our way through this dilemma??
Dear Mitchell: Thank you for all your useful information. I understand the basics about income requirements and flip taxes. But I am confused about how listing/sale prices are determined. Is there a City formula to ensure that a unit is affordable? Or do Coop boards or sellers set listing/sale prices? Thank you again. -Antonio
Hi Anonymous April 24, 2013
The dilemma your coop is currently facing is very common. Many HDFC coop boards have the division you mention. I often hear when I represent sellers in HDFC coops that the board and coop is divided between the older and newer members and shareholders.
An HDFC coop seller I represented a few years ago would refer to her coop's board as the Supreme Court of the United States. Three conservative directors, three liberal/progressive directors and one swing vote director.
In my opinion the best website for information and guidelines on HDFC coops is NYC(HPD) Housing Preservation and Development. 212-863-7327.
http://www.nyc.gov/html/hpd/html/home/home.shtml
There is also a non-profit called Urban Homesteading Assistance Board that may be able to help.
http://www.uhab.org
Good luck.
Antonio, April 28, 2013
HDFC coop shares may only be sold to households within the applicable income standard. The most common income standards are 120% of area median income, 165% of area median income and section 576 of the Private Housing Finance Law (PHFL)a formula based or the maintenance of the apartment, cost of financing plus a factor for utilities. This formula is based 0n the cost of housing.
Generally, buyers should not pay more than 30% of their gross income in housing costs. NYC HPD expects boards/sellers to set and enforce sales prices that are affordable to people within the HDFC's target income range.
Thank you for your response Mitchell. -Antonio
Mitchell,
Great Post Mitchell. My question is this: my wife and I own a Harlem brownstone and would like to retain ownership of this property and buy a HDFC unit. We would meet the income requirements and would move to the HDFC unit which would become our primary residence. Would owning our building disallow us from purchasing a HDFC apartment? Thank you in advance for your help!
Best,
Paul
Hi Paul,
Will you rent the brownstone? Will the rental income you receive from the brownstone put you over the maximum income cap?
If it will be a source of income that provides cash flow but you still meet the income requirements, I don't think it would disallow you from purchasing an HDFC apartment.
However, each individual HDFC coop board, just like any coop board can reject any buyer for any reason other than discrimination.
Hi Mithcell,
I'd like to transfer my HDFC coop to my daughter who is a college student, the broad almost agreed, but should I pay the 30% flip tax for resale profit since I just transfer instead of resale.
Thanks,
Helen
Hi Helen,
Restrictions and liabilities regarding transfer of shares can usually be found in the coop's proprietary lease or by laws.
Many boards consent to transfers to a financially responsible family member who has lived in the apartment with the shareholder for a 2 year period. If transferred in compliance with lease there may be no further liability.
You should consult a real estate attorney experienced in NYC coops.
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