HDFC Primer
A Housing Development Fund Company (HDFC) cooperative is a limited equity cooperative incorporated under Article XI of the Private Housing Finance Law. HDFC cooperatives are typically sponsored by an organization called the Urban Homesteading Assistance Board (UHAB). UHAB assists in the process of turning over City-owned buildings to their residents and in creating the cooperative.
These cooperatives are intended for persons of low income. As such, the co-ops have both income rules for people becoming shareholders and caps on the resale prices when shareholders leave. The income rules will vary on a case by case basis, however, in all cases the income cap will not exceed 120% of the "Area Medium Income” when UHAB is the direct sponsor of the co-op.
Roughly, HDFC cooperatives converted prior to 1995, have an income restriction on new shareholders equal to 6 or 7 times the annual maintenance plus utilities. Families with less than 3 dependents use 6 times the annual maintenance plus utilities to determine eligibility of income and families with 3 or more dependents use 7 times the annual maintenance plus utilities for the calculation. HDFC Cooperatives converted after 1995 typically have an income restriction of 120% of Area Median Income as the maximum qualifying amount.
Purchase prices are unique and are personalized to a building based on that building’s renovation scope and the mortgage the building has to pay. In all cases the controlling documents should be consulted to determine the actual income restriction and re-sale policies.
Since the apartments are intended for low income residents, they are often sold at a heavily discounted purchase price. The apartments can be sold for such low amounts because they are often subsidized by housing grants. In the event, the apartment within the HDFC co-op is sold to someone who exceeds the income restrictions, the seller will have to pay back the housing grant that subsidized the apartment, ultimately resulting in no profit to the seller.
Due to all of the restrictions and rules governing the re-sale and purchase of HDFC apartments, Boards and sellers should contact their attorneys for guidance during this process.
If you would like to discuss this client alert in more detail or how it may affect your community association, please contact Ashley Newman at 212-279-9090 or by email at anewman@stark-stark.com
