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From Affordable Housing
The Pros and Cons of Buying an HDFC Apartment + Notable New Affordable Listings
By Cait Etherington
Thursday, January 13, 2022
Like a miracle, in a sea of listings you discover a two bedroom that is not only under $600,000 but also under $300,000. Better yet, it’s in a desirable neighborhood, has recently been renovated and comes with a den, a large living room and an eat-in kitchen. What’s the catch? It is nearly certain that if you stumble across this or any similar listings, you are looking at an HDFC (Housing Development Fund Corporation) unit. While there are no hidden catches, purchasing an HDFC unit, if you even qualify, is a decision that should be given careful consideration.
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.
From the Listing: Income restrictions apply (165% AMI) for purchaser(s) maximum income: $137,940 individual, $157,575 two persons, $177,210 three persons, $196,455 - four persons. Must be a primary residence. See floor plan and full details here.
Reasons to Buy an HDFC Unit
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.
From the Listing: Welcome home to a wonderfull two bedrooms.
AMAZING layout and gorgeous view from every room.
Balcony with direct Marcus Garvey Vews and City Views.
Pass through kitchen, Bedrooms, living rooms with open views.
This apartment offers a large and enjoyable living space witn plenty of closets. The pass-thru kitchen and large foyer makes this unit a very desirable home. See floor plan and full details here.
AMAZING layout and gorgeous view from every room.
Balcony with direct Marcus Garvey Vews and City Views.
Pass through kitchen, Bedrooms, living rooms with open views.
This apartment offers a large and enjoyable living space witn plenty of closets. The pass-thru kitchen and large foyer makes this unit a very desirable home. See floor plan and full details here.
Reasons to Avoid Buying an HDFC Unit
Buying real estate in New York City is nearly always a great long-term investment. The one exception to this rule is the purchase of an HDFC unit. While HDFC units are increasingly experiencing bidding wars and in some instances, even being sold at or close to market value, they are also subject to restrictions that work in the favor of co-ops rather than sellers.
Most notably, HDFC co-ops impose a high flip tax on sales. Typically, 30 percent of a seller’s profits are kicked back to the co-op at the time of the sale. In some buildings, however, the flip tax can be as high as 50 percent. Depending on the co-op, exceptionally high flip taxes may apply to all sellers or only to those who choose to sell after owning for a short period of time (e.g., less than five years). Thus, while HDFC units are frequently sold at a profit (bear in mind that many of these units were originally purchased from the City for a mere $250—yes, $250—so making a profit is inevitable), as a rule, it is never advisable to purchase an HDFC if your ultimate goal is to sell the unit at a profit.
High flip taxes are not the only downside to HDFC purchases. While some HDFC buildings resemble well-managed market-rate co-ops, others have suffered from years of poor management and neglected maintenance. Before purchasing an HDFC unit, you are advised to research the building’s financial history and to investigate whether or not the building has any recent safety or maintenance violations on record. While no one welcomes maintenance fee increases, in HDFC buildings tenants often face the opposite problem. After all, in buildings where many or most residents are living on fixed incomes, keeping maintenance fees low is often considered a greater priority than addressing major building repairs. As a result, one may end up owning their dream apartment but in a building with compromised conditions, and this can impact one’s quality of life, as well as the value of their investment.
High flip taxes are not the only downside to HDFC purchases. While some HDFC buildings resemble well-managed market-rate co-ops, others have suffered from years of poor management and neglected maintenance. Before purchasing an HDFC unit, you are advised to research the building’s financial history and to investigate whether or not the building has any recent safety or maintenance violations on record. While no one welcomes maintenance fee increases, in HDFC buildings tenants often face the opposite problem. After all, in buildings where many or most residents are living on fixed incomes, keeping maintenance fees low is often considered a greater priority than addressing major building repairs. As a result, one may end up owning their dream apartment but in a building with compromised conditions, and this can impact one’s quality of life, as well as the value of their investment.
Finally, while you may not be planning to move, you can’t always anticipate when and why you will need to move for work or personal reasons. Again, on this account, HDFC units pose unique risks. As already noted, only a small percentage of New Yorkers qualify for HDFC units and cash-strapped HDFC co-ops are frequently looking for buyers with large down payments and even for cash-only deals. This means that HDFC units often sit on the market for weeks and even months longer than units in non-HDFC buildings. To make matters worse, most HDFC co-ops also place restrictions on rentals. This means that in addition to waiting longer than usual to turn over a unit, you may find yourself unable to rent out your unit while waiting to sell.
While there is no reason to avoid purchasing an HDFC unit, it’s by no means recommended for serial movers or buyers hoping to profit from their real estate investments in the short term. With HDFC purchases, the return on investment is something typically only realized in decades, not years.
While there is no reason to avoid purchasing an HDFC unit, it’s by no means recommended for serial movers or buyers hoping to profit from their real estate investments in the short term. With HDFC purchases, the return on investment is something typically only realized in decades, not years.
From the Listing: Bring your contractor and create your dream home in this expansive two bedroom (convertible three) located in a prewar elevator building in the heart of Washington Heights. Apartment 3 offers a flexible layout with plenty of design options to fit your needs. Full of charming original detail including clawfoot tub, transoms, french doors, original moldings, oversized bay windows and brick that can be exposed. See floor plan and full details here.
From the Listing: Great opportunity to own this top floor, three-bedroom co-op apartment. Located in a walk-up building, this sun-flooded home has east, west and northern exposures. The large windowed pass-through kitchen features gas range, dishwasher, stainless steel refrigerator, granite countertops, and plenty of cabinet storage. There are hardwood floors, five closets, nine-foot ceilings, picture molding and built-in bookshelves. See floor plan and full details here.
From the Listing: This is a rare opportunity to own an architecturally and tastefully designed, spacious, FULLY RENOVATED 3 bedroom / 1.5 bath penthouse (4 flights up) a block away from Central Park and Morningside Park to the west.
See floor plan and full details here.
From the Listing:
This spacious apartment is on a quiet tree-lined block and features 3 bedrooms and 1 bathroom. With maintenance at just $850/month, it's a great value to not be missed. Gifting and 10% down payments are allowed by the co-op.
Highlights of this home include a renovated open kitchen with a large island, top of the line stainless steel appliances including dishwasher, high-end Bertazzoni gas range and microwave, and a Bosch washer and dryer in-unit. See floor plan and full details here.
Highlights of this home include a renovated open kitchen with a large island, top of the line stainless steel appliances including dishwasher, high-end Bertazzoni gas range and microwave, and a Bosch washer and dryer in-unit. See floor plan and full details here.
From the Listing: This newly renovated, sun-filled one-bedroom apartment will surely exceed expectations. The apartment features an artfully crafted open kitchen layout that is both compact yet surprisingly spacious. The custom kitchen cabinetry is sure to make any at-home chef delighted with such generous storage space and top-of-the-line stainless steel appliances such as an LG vented stove/hood, LG refrigerator, Bosch dishwasher, stainless sink, and quartz countertops. The apartment also features Grey-stained bamboo floors, high ceilings, LG laundry in-unit, and six windows with both southern and eastern exposures. See floor plan and full details here.
From the Listing:
Treat yourself to an open living and dining room 27 feet long. North facing, bright light. A walk-up to the 4th floor offers you roomy bedrooms with ample closets, one a walk-in. The sizable windowed kitchen has plenty of storage and counter space; needs some TLC and appliances. Re-finished hardwood floors throughout, freshly painted walls, bath and 1/2. Excellent value as your primary residence.
See floor plan and full details here.
From the Listing: Welcome to the Maynard! An Exclusive Boutique Cooperative Located in the Heart of the Historic Weeksville Section of Crown Heights. This exceptional gem of an apartment is a top corner floor, loft like duplex that receives tons of natural sunlight all day long! With floor to ceiling windows, you'll enjoy Southern and Eastern Exposures throughout the entire two floors of the duplex.
See floor plan and full details here.
From the Listing: Located on Broadway between 152 and 153, this 5 bedroom apartment (could be used as a 4 bedroom + den) is the first to be listed for sale in the building. This corner unit has an abundance of space and the kind of sunlight you only get from the 6th floor. Located within 3 blocks of the nearest train station and bus stops, along with easy access to supermarkets, restaurants, and Hudson River Greenway.
See floor plan and full details here.
From the Listing: Mint condition one bedroom perfectly located in the heart of the East Village. Enter into this loft-like space and take in high ceilings, beautiful hardwood floors, exposed brick and huge south-facing windows with incredible light throughout the day. See floor plan and full details here.
From the Listing: East Village Unicorn! Enjoy this incredibly highly designed 1BR with a private Terrace, super low monthlies of $350/mo, and all the bells & whistles! Southern, northern, and western exposures and light! Lofty Full-size floor-to-ceiling custom wrought French Doors open up the space onto a custom renovated private terrace. Top-of-the-line details, solid real oak plank floors, Central A/C, built-in stereo sound system, custom walk-in closet, high ceilings. See floor plan and full details here.
From the Listing: Beautiful and Sunny four-bedroom coop apartment with wonderful views of Morningside Park. The central feature of the apartment is the fully-renovated large open kitchen complete with stacked Bosch washer and dryer, stainless steel appliances and generous counter space and cabinetry. Recessed lighting throughout the unit and a perfect gallery hallway to hang all your art and pictures. Low maintenance of only $646. Apartment is already wired and ready for Verizon FIOS. See floor plan and full details here.
Additional Info About the Building
Contributing Writer
Cait Etherington
Cait Etherington has over twenty years of experience working as a journalist and communications consultant. Her articles and reviews have been published in newspapers and magazines across the United States and internationally. An experienced financial writer, Cait is committed to exposing the human side of stories about contemporary business, banking and workplace relations. She also enjoys writing about trends, lifestyles and real estate in New York City where she lives with her family in a cozy apartment on the twentieth floor of a Manhattan high rise.
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