This article will guide you through the ins and outs of HDFC co-ops, including their pros and cons, rules and regulations, and income restrictions. We'll also compare HDFC co-ops with Mitchell-Lama apartments and provide a detailed look at the financial structure of these buildings. By the end, you'll have a clear understanding of whether an HDFC co-op is the right choice for your housing needs in NYC.
Table of Contents
What Is an HDFC Co-op?
HDFC Apartments Pros & Cons
Applying for an HDFC Co-op Apartment
HDFC Co-op Rules and Regulations
HDFC Income Restrictions 2023-2024
HDFC Coop AMI Levels for 2024
HDFC NYC Co-ops vs. Mitchell-Lama Apartments
HDFC Co-op Apartments Bottom Line
HDFC Co-op FAQs
What Is an HDFC Co-op?
An HDFC co-op is a type of affordable housing available in New York City. 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.
HDFC Apartments Pros & Cons
HDFC Apartments Pros
- Cheaper Prices
- Lower Monthly Costs
- Great Long-term Investment Potential
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.
3. 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.
HDFC Apartments Cons
- Flip Tax
- Maintenance Issues
- Risky if You Unexpectedly Need to Move
1. Flip Tax
One of the most common restrictions for HDFC apartments is high flip taxes intended to keep them affordable and limit potential investment gains. 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).
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.
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.
Applying for an HDFC Co-op Apartment
1. Research and Identify HDFC Co-ops
Find Listings: Use real estate websites, local newspapers, housing forums, and the NYC Housing Connect portal to search for HDFC co-op listings.
Understand Eligibility: Check the specific income restrictions and guidelines for each HDFC co-op, usually tied to the Area Median Income (AMI) levels.
2. Prepare Financial Documents
Income Proof: Collect recent pay stubs, tax returns (last two years), W-2 forms, and 1099 forms if applicable.
Assets Documentation: Gather recent bank statements, investment account summaries, and proof of any other assets such as property deeds.
3. Attend Open Houses and Contact Sellers
Visit Properties: Attend open houses to inspect the condition and amenities of the properties and get a feel for the community.
Engage with Sellers: Introduce yourself to the seller or their agent, express interest, and ask about the application specifics.
4. Submit an Application
Application Form: Obtain and complete the specific HDFC co-op application form, typically available from the seller, co-op management, or real estate agent.
Additional Documentation: Include required documentation such as employment verification letters, letters of recommendation, and a personal statement explaining your interest in the co-op and your financial stability.
5. Interview with the Co-op Board
Preparation: Prepare by reviewing common co-op board interview questions and your financial documents.
Interview: Attend the interview, dress professionally, and be ready to discuss your finances, employment, and reasons for wanting to join the co-op.
6. Get a Mortgage Pre-Approval (if needed)
Contact Lenders: Reach out to lenders experienced with HDFC co-ops, as not all banks may be familiar with the unique structure.
Secure Pre-Approval: Provide the lender with your financial documents to obtain a pre-approval letter, indicating your borrowing capacity.
7. Review and Sign Contract
Legal Review: Hire an attorney specializing in real estate to review the contract, ensuring all terms are clear and fair.
Finalizing Purchase: Sign the contract after thorough review and negotiation of any terms, then submit any required deposits.
8. Complete the Closing Process
Schedule Closing: Coordinate with the seller, your attorney, and any financial institutions to set a closing date.
Final Payment and Transfer: Prepare for the final payment, including any closing costs, and attend the closing meeting to sign final documents and receive the keys.
HDFC 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.
- Income limits and restrictions
- High down payment requirements
- Mandated owner occupancy
- Limits on subletting
- High flip taxes when selling
HDFC Income Restrictions 2023 - 2024
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 $175,000 annually, you won’t be eligible for an HDFC apartment.
HDFC Coop AMI Levels for 2024
| Family Size | 50% AMI | 70% AMI | 90% AMI |
|---|---|---|---|
| 1 | $54,350 | $76,090 | $97,830 |
| 2 | $62,150 | $87,010 | $111,870 |
| 3 | $69,900 | $97,860 | $125,820 |
| 4 | $77,650 | $108,710 | $139,770 |
| 5 | $83,850 | $117,390 | $150,930 |
| 6 | $90,050 | $126,070 | $162,090 |
| 7 | $93,300 | $134,820 | $173,340 |
| 8 | $102,500 | $143,500 | $184,500 |
HDFC 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.
HDFC NYC 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 rules and regulations which govern the sale and transfer of the apartment should the shareholder vacate or die.
HDFC Co-op Apartments Bottom Line
If you're looking to purchase affordable housing in NYC, an HDFC co-op can be an ideal option. As long as you meet the income requirements to qualify for the property, you can save a lot of money by purchasing an HDFC apartment. However, you should plan on living in your HDFC co-op, as the building will likely have restrictions and taxes associated with trying to sell the property early or flip it for a quick profit.
HDFC Co-op FAQs
1. 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.
2. 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.
3. 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.