Affordable housing in NYC is something everyone wants but few finds. It’s especially so for buyers as most of the cities affordable housing options are geared towards renters. However, there are a few options, one of which is HDFC co-ops. These types of co-ops sell for well below the market rate, but they’re in short supply and come with some restrictions that make them difficult to pick up. Below is our guide to them, what they are and how you can grab one for yourself.
What is an HDFC co-op?
Housing Fund Development Corporation (HDFC) buildings can be found all across the city. The first of them went up a few decades ago when tenants in buildings with derelict landlords were allowed to form cooperatives and take over their buildings. Prices have steadily risen since those early days, but HDFC’s can be found on the market for a few hundred thousand dollars apiece.
They function much like typical co-ops but have a different financial structure. Through tax breaks and state subsidies they can keep operating, and, hence, maintenance costs at a minimum. These tax breaks mean that they only pay about a third of the taxes they would otherwise.
What’s the catch?
As with most good things, there is a catch. Buyers must meet strict income caps, tied either to their area median income (AMI) or a formula based on the unit’s maintenance fees and utilities. Also, they come with significant flip taxes when you want to sell. The exact amount varies from one building to another but usually hovers around 70/30. Meaning you’ll be forgoing 30% of your profits on a sale. This makes them more geared for families in for the long haul rather than speculators.
The problem facing most buyers is how to come up with the large down payment while still earning less than the buildings income cap. Because of this, HDFC units are favored towards those with low(ish) incomes but significant assets. Those with a trust fund, an inheritance or young buyers whose parents are helping them out will be in the best position to scoop one up.
So how can I buy one?
Co-op boards, in general, are known for being strict on applications, but with HDFC co-ops it’s taken to a new extreme. Because HDFC apartments sell for well below the market rate they attract a lot of interested buyers, many of which fail to meet the financial requirements. You’ll need to meet the usual requirements when putting together your co-op board package such as having references and being financially sound enough to make your monthly maintenance charges.
Make sure you provide all the required information and carefully proofread your board package for any errors before you send it in. Any mistakes or missing information could jeopardize the whole purchase or, at the least, cause significant delays.
If you need financing, some credit unions like the Lower East Side People Federal Credit Union provide packages specifically for HDFC buyers. Keep in mind though that if you do need a mortgage, finding a lender that will approve an HDFC building can be difficult. Should a foreclosure occur, the bank will also be bound by the same resale and income restrictions as the shareholder. Something which is very unappealing to most financers.
The purchase process for an HDFC co-op apartment is much the same as any co-op purchase, with the addition of extra paperwork and financial requirements. Each building will be different so approach it like you would any co-op purchase.