HDFC Co-op NYC Guide

Oct 5th 2022
In NYC, HDFC (Housing Development Fund Corporation) Co-op buildings are a type of affordable housing for families looking to buy an apartment. However, qualifying for an HDFC apartment is not easy, and while HDFC co-ops offer great value they typically come with resale restrictions.

One of the most common restrictions for HDFC apartments is high flip taxes intended to keep them affordable and limit potential investment gains. As such, if you are among the select few who qualify for an HDFC co-op, you should evaluate whether or not the purchase is worth it.

hash-markTable of Contents

What Is an HDFC Building in NYC?
Pros of Buying an HDFC Apartment
Cons of Buying an HDFC Apartment
HDFC Co-op Rules and Regulations
What Is the Financial Structure for HDFC Buildings?
HDFC Income Restrictions
HDFC Coop AMI Levels for 2021
Is the Down Payment Requirement Lower in an HDFC co-op?
Are HDFC Apartments the Same as Mitchell-Lama Apartments?
NYC HDFC Co-ops FAQ

hash-markWhat Is an HDFC Building in NYC?

HDFC buildings were created in the 70s, and 80s to allow tenants to break free from their “slumlords” to form cooperative buildings. There are currently over 1,100 HDFC buildings in NYC, all of which receive tax breaks and other benefits to lower the cost of ownership. HDFC apartments are also much cheaper than regular coop apartments. To buy an HDFC apartment you'll have to meet certain income restrictions.

hash-markPros of Buying an HDFC Apartment

1. Cheaper Prices

The biggest advantage of purchasing in a NYC HDFC coop building is that prices are lower than for comparable apartments. You'll need to meet specific income requirements to purchase an HDFC coop apartment, but if you do, you'll be getting a great value.

2. Lower Monthly Costs

On top of the lower purchase prices, HDFC buildings also benefit from lower monthly fees. Because HDFC apartments are subsidized, your monthly mortgage and maintenance costs are typically much lower than traditional co-ops. 

2. Great Long-term Investment Potential

HDFC apartments can be a great long-term investment; that is because it can take decades to realize any capital gains when selling an HDFC coop. However, if you’re buying an HDFC unit intending to stay for decades, you’re likely making a great decision, that is because you will more than likely purchase the unit at below market value.

hash-markCons of Buying an HDFC Apartment

1. Flip Tax

This is a fee paid at closing to a co-op corporation for selling your co-op apartment. This fee is often used to generate additional income for the building, which is usually needed in HDFC buildings. Typically, the fee is paid by the seller. HDFC co-ops are known to impose high flip taxes on sales. Typically, 30 percent of a seller’s profits will have to be paid to the co-op. And, in some buildings, the flip tax can be as high as 50 percent. Depending on the co-op by-laws, high flip taxes may apply only to sellers who own for a short period of time. (e.g., less than five years).

2. Maintenance issues

While some HDFC buildings are well-managed and maintained, a lot of HDFC buildings have years of bad management and neglected maintenance. In HDFC apartments, it can be challenging to get maintenance fees increased because the majority of the shareholders are on tight budgets. Therefore, before purchasing an HDFC unit, your lawyer will review the board minutes, which will clue the lawyer in on any issue going on in the building, such as a major roof repair that is needed or a recurring bed bug infestation.

3. Risky if you unexpectedly need to move

Most of the time, when someone purchases an HDFC apartment, said shareholder will have every intention of staying in the unit for a long time. However, young families are especially susceptible to unexpected moves because of career changes or changes in family composition. Since only a small percentage of individuals, qualify for HDFC apartments, these types of units can stay on the market for months at a time. And, because you often are not allowed to rent or sublet HDFC apartments, you may be stuck with all the cost and expenses until the apartment is sold.

hash-markHDFC Co-op Rules and Regulations

The rules and regulations for HDFC buildings vary depending on the property and its individual bylaws, but overall, they are fairly restrictive, even compared to other cooperative buildings. One of the most common rules and restrictions in HDFC buildings is mandated owner occupancy, meaning you cannot rent out or sublet HDFC apartments. 

Common HDFC Co-op Rules and Regulations

  • Income limits and restrictions
  • High down payment requirements
  • Mandated owner occupancy
  • Limits on subletting
  • High flip taxes when selling 

hash-markWhat Is the Financial Structure for HDFC Buildings?

HDFCs were designed to be affordable housing. As such, HDFC buildings receive tax breaks and subsidies, which keep the operating costs and maintenance charges low.  Buyers in HDFCs must meet strict income limits. The limits are calculated using the area median income (“AMI”) or alternatively, a formula based on the utilities and maintenance fees for the apartment. Overall, the biggest difference between a regular co-op and an HDFC coop is the financial structure.

hash-markHDFC Income Restrictions

To qualify for an HDFC apartment, your income must be relatively low. Most HDFC buildings set income restrictions based on the AMI level. More than likely if your family makes over $150,000 annually, you won’t be eligible for an HDFC apartment. 

hash-markHDFC Coop AMI Levels for 2021-2022

Family Size 50% AMI 70% AMI 90% AMI
1 $41,800 $58,520 $75,240
2 $47,750 $66,850 $85,950
3 $53,700 $75,180 $96,600
4 $59,650 $83,510 $107,370
5 $64,450 $90,230 $116,010
6 $69,200 $96,880 $124,560
7 $74,000 $103,600 $133,200
8 $78,750 $110,250 $141,750

hash-markHDFC Co-op Down Payment Requirements

Surprisingly, HDFC co-ops require at least 20 percent down just like every other co-op in New York City. However, since a lot of HDFC co-ops are struggling financially, they may require down payments higher than 20 percent all the way to cash only deals.  This means that first-time buyer mortgage programs will not work in an HDFC co-op, because these programs typically only require 3 percent to 5 percent down. 

hash-markHDFC Co-ops vs. Mitchell-Lama Apartments

HDFC apartments are different than Mitchell-Lama apartments. Mitchell-Lama co-ops are formed under Article 2 of the Private Housing Finance Law (“PHFL”). If you own a Mitchell Lama apartment there are rule and regulations which govern the sale and transfer of the apartment should the shareholder vacate or die. 

hash-markNYC HDFC Co-ops FAQ

Are HDFC coops good investments?

HDFC apartments are great investments if you plan on living in the co-op. When you purchase in an HDFC building you'll save a substantial amount on the purchase price, and you'll benefit from the cost-savings as long as you live there. 

Can you rent out an HDFC apartment?

It is almost impossible to rent out an apartment in an HDFC co-op. Most HDFC buildings have rules that don't allow subletting or limit it to specific situations, such as when the owner intends to return to the apartment after a short period of time.  

Can you sell an HDFC apartment?

Selling an HDFC apartment is a bit harder than selling a regular condo or co-op apartment as the building will likely have numerous rules in place you'll have to follow. There are likely to be income limits that prospective buyers will have to meet, and you might also have to pay a significant flip tax on any profits you realize.