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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.
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.
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.