HDFC Cooperative Apartments
HDFC stands for Housing Development Fund Corporation and is a incorporated under Article XI of the Private Housing Finance Law wherein buildings were and continue to be converted to cooperative apartments owned and managed by tenants turned shareholders with the goal being the rehabilitation of an under performing building into a successful, self-sufficient corporation.
HDFC Cooperatives are meant to be an affordable housing opportunity for buyers with limited income but the ability to afford a down payment and acquire financing.
HDFC history
Beginning in the 1970s- when New York City was in financial turmoil- many building owners stopped paying property taxes and allowed their buildings to fall into disrepair as the costs to renovate and maintain outweighed the rental income forcing countless owners into bankruptcy.
As the buildings sat in a state of abandonment the city chose to offload the burden of managing so many properties and began offering the sale of individual units- restructured as HDFC cooperative apartments- to tenants (renters) living in the buildings. These units were initially sold for $250 and included a property tax incentive, but came with the responsibility of renovating, managing, and maintaining a property that would often end up taking years to turn around.
common questions
INCOME LIMITS
How are income limits generally set for HDFC apartments?
There are two methods HDFC cooperatives generally use to determine income limits for incoming buyers: a percentage of the AMI (Area Median Income) or a formula comprised of monthly maintenance, utilities (gas/electric), and the months in a year. Some HDFCs may have a different Income Limit calculations/amounts so it is important to confirm with seller/board/management prior.
Please see the Income Limit AMI chart and explanations: INCOME LIMITS
HDFC cooperatives do not have asset caps. This means that buyers who have inherited money, have large savings with a low income, or have been gifted money by family for the purchase are able to do so assuming the building’s regulatory agreement, by-laws, and board allow.
RESALE PRICES
IS THERE A CAP ON THE PRICE OF AN HDFC APARTMENT SALE?
Depending on when a building’s governing documents were signed, HDFC cooperatives do not have any restrictions or caps on re-sale prices.
Please consult our SELLER’S GUIDE
Over decades New York City real estate prices have outpaced Area Median Incomes- this has provided shareholders with the lucrative but difficult task of capturing as much equity from the sale of their home while boards make sure potential buyers meet income requirements and mesh well with the community that has been built.
SUBLETTING
CAN I SUBLET MY HDFC APARTMENT?
Nearly all HDFC cooperatives require owner occupancy of the apartment, but in some cases building’s allow for limited subletting with board approval (ex. subletting is permitted for any 18 month period during the course of a 5 year period).
Shareholders should defer to their board and governing documents for their sublet policy.
FLIP TAXES
what is a flip tax and where does the money go?
Nearly all HDFC cooperative apartments are subject to a flip tax paid by the seller at closing from the profits of the sale. This money is split between the shareholder, the cooperative building/board, and potentially the city government.
Flip taxes can be calculated in several ways and vary in the percentage respectively allocated to the seller/shareholder, building/board, and sometimes the city. The flip tax may be calculated as a percentage of the profit, a pre-determined flat fee, or based on a price per share calculation.
An example of a flip tax calculation is below. In this example, the profits from the sale are being allocated to the seller/shareholder and to the building/board. The flip tax proceeds going to the building/board are meant to pay down existing debt, fund building-wide capital improvements, and help keep shareholder’s monthly maintenance payments stable.
Purchase Price: $65,000 (1987)
Sale Price: $500,000 (2018)
Flip Tax: 20%
(Sale Price minus Purchase Price) times Flip Tax Percentage
($500,000 - $65,000) x 20%
$435,000 x .2
Flip Tax Paid to the building/board: $87,000
It is important to discuss how this is being calculated per the building’s governing documents and board. Some cooperatives allow for broker fees, transfer taxes, and documented apartment improvement costs to be deducted from the sale price.
sell your hdfc
Please note that Wyllie Real Estate and Wyllie Real Estate Management are not able to provide legal, financial, or
architectural advice. Wyllie Real Estate is a licensed real estate brokerage in the state of New York.
The content above is for informational purposes only and buyers/sellers of HDFC Cooperatives should refer legal/financial/architectural questions directly to their building’s board/management, consult the appropriate
professionals, and review their building’s governing documents.
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