HDFC Coop Guide
HDFC (Housing Development Fund Corporations) Since 1979, the Department of Housing Preservation and Development (HPD) has sold formerly City-owned buildings to Housing Development Fund Corporations (HDFC's). HDFC coops are affordable cooperatives in New York City. They are a relatively unknown market niche that are city subsidized and sell below market (40%-50%) below non HDFC comparable coops and condos.
Qualifying for an HDFC Unit
First, there is the problem of qualifying. Unlike a typical co-op, to qualify, you may need to make less—rather than more—money. For example, if you’re a family of four and your declared household income is greater than $150,000 annually, you will likely not qualify for most HDFC units currently on the market. Ironically, this means that a family struggling to qualify to rent an average-priced two-bedroom apartment under the “40-x-the-monthly-rent” rule makes too much money to qualify for most HDFC purchases.
More surprising to many would-be HDFC buyers is what one is expected to bring to the table. Like most co-ops, HDFC co-ops require at least 20 percent down. This means that first-time buyer mortgages, which frequently require only 3 percent to 5 percent down, are out of the question. But cash-strapped HDFC co-ops often require much higher down payments and even seek cash-only deals. In other words, in order to buy into a HDFC building, you will need to be income poor but asset rich.
If you are among the rare breed of New Yorker who qualifies for an HDFC unit, you will be among the lucky few who have the option of purchasing an apartment well under market value. Whether or not it is a strategic purchase in the short- or long-term, however, is another question.
Reasons to Buy an HDFC apartment
If you do qualify for an HDFC unit, the short- and long-term gains can be significant. Since the units are usually, but not always, well below market value, your mortgage will likely carry for much less than current market rent on a similar unit. In addition, most HDFC units, which were created to provide affordable housing to people living on low to middle incomes, have relatively low maintenance fees (usually ranging from $300 to $650 monthly). Again, this means significantly lower monthly costs. If so inclined, this also means having more money on hand to invest in one’s unit. As a result, even a unit that requires a gut renovation—and many HDFC units do—may turn out to be a strategic purchase.
Of course, much depends on whether or not you plan to stay for decades or simply for a few years. If you’re buying an HDFC unit with the intention of staying for decades, you’re likely making a great decision. If the unit is located in a co-op with solid financials and it otherwise meets your criteria in terms of space and location, you will save thousands of dollars on housing every year and more importantly, you’ll own in a market where owning can be a challenge, even for fully employed professionals. By contrast, if you plan to move, an HDFC unit may turn out to be an investment you live to regret.