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HDFC Co-ops (Housing Development Fund Corporation) are something most New Yorkers are aware of but few fully understand. The idea of Co-op ownership alone can be complicated and the added restrictions most people know HDFCs have for potential buyers and owners can make many unsure exactly what and how they function, and who they are for.
First, let's take a look at the official NYC HPD (Housing & Preservation Department) definition and description...
Part of the confusion surrounding HDFCs stems from the fact that not all use the same income restrictions. As stated by the HPD above, co-ops can have an income restriction of anywhere between 80% AMI and 120% AMI. HDFCs have a cap on the taxable value of the units that, in most cases, significantly lowers real estate takes on the property. This exemption is effective only as long as the project is owned and operated by an HDFC that is in conformity with the laws that govern them. The HPD Is authorized to revoke this tax exemption if it determines that the HDFC is not in compliance.
Almost all HDFC cooperatives require owner occupancy and limit subletting. Although short-term subletting with board permission is acceptable where the shareholder intends to return to the apartment, long-term sublets are not permissible in any circumstance. Generally, subletting is limited to no more than 18 months in any 5-year period. In addition, it is not acceptable for shareholders to charge subtenants more than 10% above the monthly maintenance. Any subtenant must also meet the applicable income standard of the cooperative.
It is important when looking at HDFC apartments to make sure you are not falsely lured by the low price tag. The system is structured for you to not make a profit on a resale, and most HDFC Co-ops have higher than normal flip taxes that sellers must pay back to the co-op on any profits made in a resale. It is also important to have a good and savvy real estate attorney on your side who will ensure all of your due dilligence materials during contract are accurate and complete. Since a co-ops financials are managed by the Board and there is always room for mismanagement, error, and even fraud where discounted taxes are involved, especially in a system built on real estate in a market like NYC where prices are only rising.
That said, HDFCs do provide an amazing option for hardworking New Yorkers to own a piece of the city they help build every day. They can be an amazing option for those that meet the requirements - if you fit within the criteria below, please feel free to reach out with questions or for more information!
Household Size 120% AMI Income Limits (2015/2016)
1 $72,600
2 $82,920
3 $93,240
4 $103,560
5 $111,960
6 $120,240