NYC’s HDFC Co-op Apartments: So affordable and yet so unattainable!

A classic Catch-22 of NYC real estate when an apartment is affordable and yet economically unattainable!

This is the plight for many in New York under the guidelines of what is known as H.D.F.C., or Housing Development Fund Corporation.

While this co-op program that began during the severe economic downturn in the 1970’s (remember Municipal Assistance Corporation or MAC?) was initially meant for low income NYC residents (these apartments may have sold for as little as $250), today there is a problem that is limiting the pool of potential buyers who may qualify.

The fact that these apartments are extremely desirable because they are likely below ‘market’ price and in up and coming neighborhoods is mitigated by the fact that there are strict income limitations that potential buyers must adhere to.

Therefore, based on the fact that they are not earning a great deal of money, lenders will require a huge downpayment that they may not have. Thus the Catch-22!

(When you have finished reading this article take a look at these other unaffordable NYC apartments: ‘Top 10 most expensive NYC apartments currently for sale!’)

HDFC through real-life examples

‘…Welcome to the world of what is known in real estate as the H.D.F.C., or Housing Development Fund Corporation — a form of co-op housing intended for low-income New Yorkers. The bulk of these income-restricted co-ops came into being after thousands of derelict apartments were seized by the city in the late ’70s. The city began fixing up the buildings, then allowed tenants to buy them for nominal amounts and turn them into low-income co-ops. The buildings were concentrated on the Lower East Side and in Upper Manhattan, Brooklyn and the South Bronx. Originally, the apartments were sold to residents for just $250 each. To keep them affordable, income ceilings were imposed on resales, as were hefty flip-tax provisions to help deter anyone looking to make a quick profit. In return, tax subsidies helped keep maintenance low.

Today, there are an estimated 25,800 of these apartments across some 1,200 buildings, according to the New York City Department of Housing Preservation and Development. In the past, the apartments were resold for moderate amounts. But over the last decade, as some once-blighted neighborhoods became more desirable, the script changed. Resale listings popped up for $300,000, even $800,000, putting them out of reach of most low-income buyers. In rare cases the apartments have gone for more than $1 million. At the Grinnell, a century-old building topped by corner towers at 800 Riverside Drive, a nine-room income-restricted apartment sold for $2.025 million in March — $30,000 above the $1.995 million asking price. At these prices, it’s reasonable to wonder: Who can afford to buy these apartments with a limited income? Increasingly, brokers and housing advocates say, the answer is retirees, young people receiving help from their families, middle-class workers with a sudden inheritance and others who qualify on paper for the income caps but have significant assets.

“I’ve seen every permutation,” said Lee-Ann Pinder, a real estate agent with Citi Habitats, who has worked on a number of income-restricted deals over the last six years. They included buyers who “had a change in circumstance in their life” and buyers who had sold property and were going back to school, she said. Otherwise, “If you’ve got an income cap of $72,000 for an individual, and they are supposed to buy a property for $400,000, how’s the math going to work?” she said.

Gary Cowling, an actor and teacher who purchased the Hell’s Kitchen apartment listed by Mr. Stanley of Corcoran for $510,000, had saved some money by living frugally in a rent-controlled apartment. He came into a small inheritance after his parents died that allowed him to pay cash — a crucial factor in closing the deal, as the co-op lacked some financial records required by banks for lending. “You needed to be income poor, but savings rich,” said Mr. Cowling, who met the $67,000 income cap. “Acting and teaching does not make a lot of money…’  (NY Times)

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