Oct 19, 2011

HDFC Co-op | "Affordable" Home Ownership


HDFC Coops - Affordable Home Ownership in Manhattan
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 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 amounts some as low as $250 in exchange the new owners had to maintain the buildings.

Rather than becoming a landlord, the City helped rehab 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.

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. 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 income. 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.

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 household size. A household 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. 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, 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 in the "flip-tax" (private transfer fee.)

When buying or selling an HDFC Coop it is important to use a broker 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.
 
Disclaimer: I am not a lawyer, this blog and my answers to questions are my opinions for information purposes only based on my experience as a real estate broker and not intended as legal or financial advice and should not be used as a substitute for advice of legal counsel.

comments

48 Responses to "HDFC Co-op | "Affordable" Home Ownership"
  1. NYC Birthday Ideas said...
    October 22, 2011

    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.

  2. Mitchell Hall said...
    October 24, 2011

    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.

  3. Anonymous said...
    May 23, 2012

    how much can maintenance go up on hdfc coops? anything they want or is it controlled?

  4. Mitchell Hall said...
    October 11, 2012

    How maintenance may be increased is usually in the coops by laws

  5. Anonymous said...
    October 22, 2012

    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.

  6. Mitchell Hall said...
    October 23, 2012

    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.

  7. Mitchell Hall said...
    October 23, 2012

    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.

  8. David Ding said...
    November 24, 2012
    This comment has been removed by the author.
  9. David Ding said...
    November 24, 2012
    This comment has been removed by the author.
  10. David Ding said...
    November 24, 2012
    This comment has been removed by the author.
  11. Mitchell Hall said...
    November 28, 2012

    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.

  12. David Ding said...
    November 30, 2012
    This comment has been removed by the author.
  13. David Ding said...
    December 04, 2012

    one person $66000 to $91000 is quite high, how can it be for low income families?

  14. Anonymous said...
    January 02, 2013

    When determining your income, do you use your net or gross? Is that before or after deductions?

  15. Friend2B said...
    January 13, 2013

    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) ???

  16. Mitchell Hall said...
    January 14, 2013

    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.

  17. Rson1982 said...
    January 29, 2013

    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?

  18. Rson1982 said...
    January 29, 2013

    What is the percentage of the profit that goes back to the Co-op after selling the property in a HDFC building?

  19. Mitchell Hall said...
    January 29, 2013

    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.

  20. Anonymous said...
    February 13, 2013

    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)?

  21. Anonymous said...
    February 19, 2013

    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!

  22. Anonymous said...
    February 24, 2013

    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

  23. Mitchell Hall said...
    February 26, 2013

    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

  24. Anonymous said...
    February 26, 2013

    Mitchell, thank you so very much for responding. I appreciate your prompt response.
    Blessing,
    Barbara

  25. Mitchell Hall said...
    February 28, 2013

    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

  26. Anonymous said...
    April 21, 2013

    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?

  27. bronx-coop said...
    April 22, 2013

    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.

  28. Mitchell Hall said...
    April 22, 2013

    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

  29. Anonymous said...
    April 24, 2013

    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??

  30. Anonymous said...
    April 28, 2013

    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

  31. Mitchell Hall said...
    April 28, 2013

    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.

  32. Mitchell Hall said...
    April 28, 2013

    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.

  33. Anonymous said...
    April 30, 2013

    Thank you for your response Mitchell. -Antonio

  34. Anonymous said...
    May 08, 2013

    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

  35. Mitchell Hall said...
    May 12, 2013

    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.

  36. Anonymous said...
    May 15, 2013

    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

  37. Mitchell Hall said...
    May 15, 2013

    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.

  38. Ben said...
    May 25, 2013

    I am a shareholder in an HDFC whose 30-year Regulatory Agreement has recently expired. Some shareholders want to continue to be a regulated building by entering into another RA with HPD. Others want to be an "independent HDFC", i.e. we would decide for ourselves what constitutes "affordability."

    I would be interested in hearing from other HDFC buildings with similar issues.
    benbbedell@gmail.com

  39. shondera said...
    August 03, 2013

    Hello Mitchell,

    I am a HDFC shareholder. I am also disabled. Would I be entitled to apply for drie?
    Thank you.

  40. Mitchell Hall said...
    August 03, 2013

    Hi Shondera,

    has your maintenance been increased? You may be.

    http://www.nyc.gov/html/dof/html/property/property_tax_reduc_drie_dr_te.shtml

  41. Anonymous said...
    September 01, 2013

    I applied for a 1 BR coop in a HDFC building. Is it legal to put up a wall in the living room to create another BR and rent that out? I will still be living there and the rental income will not push me over the income restrictions.

  42. Anonymous said...
    September 17, 2013

    I am thinking to buy a 2BR coop and share with one or two roommates. Do you think it's possible? or depending on coop?
    Thanks.

  43. Mitchell Hall said...
    November 14, 2013

    Probably depends. Are the roommates co-purchaser's? Total household income will most likely need to be disclosed. If roommates pay you rent an HDFC coop will most likely count the rental income you will receive toward the maximum income allowed.

  44. Andy said...
    January 22, 2014

    Hey Mitchell, impressive to see that you have a post from 2 years ago still generating comments and replies!

    I've brushed up on as much reading as I can about the Roommate Law and so far what I have concretely gleaned is that if I purchase a co-op as a residence, I can have an unscreened roommate.

    From what articles I've read, the financial circumstances are (within reason) not noted in the law. Hypothetically it would be up to me and the roommate. You mention: "If roommates pay you rent an HDFC coop will most likely count the rental income you will receive toward the maximum income allowed."

    I don't see how that could work, especially if the rental income is something that happens after the purchase. From what I understand, your income is allowed to rise AFTER the purchase is complete.

    I am curious, though; is there a hypothetical for what your roommate could pay? Since you only pay maintenance fees, is that the equivalent of a "rent" limit? Would they only be allowed to pay half of that? Or could you charge them market rate? Or half of market rate, etc?

    And I'm assuming the Roommate Law specifies at most ONE roommate...but I'd be interested to know whether I could get a 3 BR Co-Op and have TWO roommates.

    Thanks, Mitchell, hope to hear from you!

  45. Mitchell Hall said...
    January 22, 2014

    Andy, Thanks for visiting my blog. I don't have hypothetical answers to hypothetical questions. Coops including HDFC coops are set up as private housing corporations. Co-ops are governed by New York Business Corporation Law. The coop board has a fiduciary duty to act in the best interest of the corporation. Coop boards based on their bylaws, proprietary lease or their own discretion have the right to decide and determine what is in the best interest of the housing corporation including approving or disapproving sales of shares, assignments of leases and subletting of the whole or any part of an apartment. NY State Private Housing Finance Law requires the HDFC to provide housing to low income individuals and households. Once you are a shareholder, if you already got passed the board approval process on your own the roommate law may protect you or a future roommate from board consent. You should consult a real estate attorney

  46. Andy said...
    February 11, 2014

    Thank you for your quick response, Mitchell. Perhaps I can rephrase/alter my question to be a little more concrete:
    Per the Rent stabilization act, it is illegal for a master tenant to charge more than the proportionate amount of rent to an occupant.
    If I own shares in an HDFC, I am not paying rent. I am paying my mortgage and maintenance fees.
    Am I subject to the Rent stabilization Law? I understand co-ops may have specific bylaws, but I am asking whether outside of the bylaws I am bound by any such law.

  47. Mitchell Hall said...
    February 11, 2014

    Hi Andy,

    Two separate an distant questions.

    1. A rent stabilized apartment can be sublet, the landlord must be informed and the amount allowed of rent charged (I believe is 10% above master tenant's rent) However having someone a "roommate" occupy the apartment with you living there as your primary residence is different than subletting. I believe in that scenario you benefit from the protection of the roommate law.

    2. Owning shares in an HDFC coop are not subject to rent regulation/stabilization. However, HDFC coops are for low income households so to sublet an HDFC coop the sub-tenant can not have an income above the maximum allowed. Some HDFC coops in addition to the maximum income allowed may also use the formula of "affordability" recommended by HUD 30% Debt to income ratio (no more than 30% of their total income should go toward housing costs) So in essence the HDFC coop can determine the amount of rent a shareholder can sublet their apartment for.

    The coop board approves sublets. In other words if a potential renter's income is $99,000 (the maximum allowed in 165% of AMI HDFC coops) the maximum rent considered "affordable" is $2475. That is also the same "affordable" amount determined by most landlords in NYC. Most landlords will require an income of 40 times the monthly rent. $2475 x 40 = $99,000. In a coop, like a rental apartment a "roommate" living in the apartment with you is not considered a sublet. I believe in that scenario the "Roommate Law" may offer protection.

    However since HDFC coops are tax-payer subsidized housing for low income households, the "Roommate Law" may be a loop hole but profiting from a portion of the apartment is not in the spirit of HDFC and affordable housing program.

    In order to purchase a coveted 3 bedroom apartment in a well run desirable HDFC coop you will be thoroughly scrutinized and interviewed by the coop board. They will not only ask about finances but about your intent use and occupancy of apartment.

    Disclaimer: I am not a lawyer, this blog and my answers to questions are my opinions for information purposes only based on my experience as a real estate agent and not intended as legal or financial advice and should not be used as a substitute for advice of legal counsel.

  48. Yosef Shimron said...
    March 07, 2014

    Hi, we have been a tenant at 170 west 85th street HDFC corporation for the past 25 years. The new board in the building is refusing to meet with us and to discuss the future of our lease in the building. Our lease ends at the end of July 2014. We would like to know if we have any kind of rights as long term tenant in the building. Can they raise the rent to any amount or do they have the option to not to renew our lease. Are there any rules and regulations about our relationship with the co-op where we can read the bylaw that the co-op board is to comply with.

    Sincerely yours,
    Yosef Shimron
    [email]shimron2010@gmail.com[/email]
    201-724-1215

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