Eah, anyone else, questions about an HDFC building
Started by tenemental
over 17 years ago
Posts: 1282
Member since: Sep 2007
Discussion about
On the thread http://www.streeteasy.com/nyc/talk/discussion/4895-building-at-160-east-2nd-street, pushlatency asked (and I'm curious): ...they made a series of pretty significant claims to which I'm skeptical. 1. the expiration of its HDFC status in 3 years, with the unit going market rate then, no more 60/40 security agreement, and no more income restriction (~34,000). Prior to this I hadn't... [more]
On the thread http://www.streeteasy.com/nyc/talk/discussion/4895-building-at-160-east-2nd-street, pushlatency asked (and I'm curious):
...they made a series of pretty significant claims to which I'm skeptical.
1. the expiration of its HDFC status in 3 years, with the unit going market rate then, no more 60/40 security agreement, and no more income restriction (~34,000). Prior to this I hadn't heard of any HDFC going market rate or at least planning to.
2. For the current purchase, it was stated that the buyer would be would be able to circumvent the 34k income restriction, essentially opening the unit up to any buyer regardless of declared income (this is fraud as far as I understand).
3. Several units in the building were still rentals, but not rent stabilized/controlled, so they were providing positive cash flow to the CO-OP (I'm not sure how common it is for an HDFC to contain a certain number of rental units, and if they did, I'd expect them to be stabilized, considering the nature of HDFC).
4. I was repeatedly told that the maintenance would not be going up, regardless of the income restriction expiring, rising operating costs or the potential improvements they are considering. In fact, I was told that the board had turned down a maintenance increase on four recent occasions. But, with the rentals being unrestricted, they provide funds which could keep keep the maintenance of the co-op units stable, - makes sense.
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Response by tenemental
over 17 years ago
Posts: 1282
Member since: Sep 2007
OK, I realize there aren't many question marks up there, but any information would be appreciated on:
-HDFC status expiration and changes
-the, ahem, flexibility of income restrictions
-rentals in HDFC buildings
-maintenance decisions in HDFC buildings (my thoughts on that question are on the original thread)
I know Eah doesn't read the board on weekends, so this may need a bump tomorrow.
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Response by tenemental
over 17 years ago
Posts: 1282
Member since: Sep 2007
pushlatency, search discussions here for "income restriction" and "income restrictions." Lots of good information. Add'l insights still appreciated, though.
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Response by broadwayron
over 17 years ago
Posts: 271
Member since: Sep 2006
I don't know anything about HDFC's, but how does (#3 above) a rental provide positive cash flow to the co-op? The rental income goes to the owner of the unit (or sponsor), not the co-op.
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Response by tandare
about 17 years ago
Posts: 459
Member since: Jun 2008
Not an expert, but looked into this before and just had a friend buy into an HDFC building...
The buildings gain HDFC status by making an agreement with the city to provide low-income or middle-income housing at reasonable levels. The buildings can "expire" but it doesn't mean that they actually stop following income guidelines and depending on building, flip-tax & sales price regulation.
UHAB is the org that helps people create HDFC buildings. I have been told that not all buildings are very involved with UHAB, FWIW...
I would be *very* skeptical of anyone who promises a building will sunset out of the HDFC program and then there will be no income restrictions - they can't guarantee it and the building would lose special priveleges it gets from the city, I believe, even if everyone on the Board agreed to that. It is a great sales pitch that they often give people. Most brokers I spoke with thought that promise was hopeful at best and downright misleading at worst.
Rentals in HDFC building = rent stabilized. The HDFC structure frowns upon investors. Not sure how they could *not* be rent stabilized apts, but again, not an expert.
There was someone on the board who actually owns some HDFC property - not sure who, but I believe it was property in Wash. Hts.
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Response by pushlatency
about 17 years ago
Posts: 4
Member since: Oct 2007
Tenemental, thanks again for creating this thread.
re: Broadwayron
The broker and owner lead me to believe that the rental units were under the ownership of the Co-op itself and not a particular tenant. When I heard that, I figured they were probably rent stabilized unit, considering that would be more compatible to the spirit of the HDFC then just having a bunch of market value rentals sharing a building of sub-34k income home-owners. They "assured" me this wasn't the case and that they were market rate. I suppose the arrangement makes a certain degree of sense from the prospective that the market rate rentals can provide cash to keep the maintenance of the Co-op low.
All in all, it doesn't sound like a very HDFC-thing for an HDFC to do.
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Response by tenemental
about 17 years ago
Posts: 1282
Member since: Sep 2007
"UHAB is the org that helps people create HDFC buildings. I have been told that not all buildings are very involved with UHAB, FWIW..."
From what I've read on other threads (see the searches above), UHAB (now SHUHAB?) is more actively involved in KEEPING HDFC buildings low-income, and they received some heavy criticism. Not sure how many HDFC buildings they've actually created (but I'm also no expert).
"There was someone on the board who actually owns some HDFC property - not sure who, but I believe it was property in Wash. Hts."
That's eah, hence the shout-out. Alanhart also had some excellent info.
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Response by anonymous
about 17 years ago
tenemental, my experience with HDFC coops in Washington Heights has been interesting. They will be flexible on the income restriction. For example, if the husband is say a musician and documents 30k in income but the wife is a hedge fund maanger they present the husbands financials to the board. No one seems to then double back to see who hold the mortgage or the fact that both own the shares. The boards - in my opinion - are trying to get new, more wll off people into the buildings and will bend the rules. It seems to come down to whether the board wants to change the demographic of the building. If so, they will make anything happen. As long as a percentage of the building is low income - and it likely is if you count in the original owners - then the building can retain HDFC status.
As far as point #4 goes, I've yet to see an large increase in maintenance on any of my units. Primarily because the building pays for capital repairs by releasing rentals to the market. Don't forget, they own these units outright and it is all money in the reserve fund when they sell. Also the board knows the older home owners will not be able to afford increases. The long term view is that eventually these people will cash out but 'till then they keep the building afloat by selling off units.
You'd be amazed how financially well off some of these buildings are because of the amount of untis they own.
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Response by tenemental
about 17 years ago
Posts: 1282
Member since: Sep 2007
Thanks, eah. Valuable info.
"It seems to come down to whether the board wants to change the demographic of the building. If so, they will make anything happen."
So it's really at the sole discretion of the board? There's no government entity that's going to analyze the specifics of the sale and cause trouble (even down the road)?
Is it much more difficult for a single purchaser without a lower-income spouse to hide behind?
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Response by inquirer
about 17 years ago
Posts: 335
Member since: Aug 2007
tenemental, some HDFC buildings (Manhattan Valley comes to mind) use a formula that sets the income cap at close to $500,000. The higher the last sale price, the higher the income limit. What's more, they keep the maintenance low but the sale prices up. Everyone benefits. Check out w 106.
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Response by tenemental
about 17 years ago
Posts: 1282
Member since: Sep 2007
inquirer, thanks. I'm looking to stay downtown, but it's good to know.
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Response by msanders
about 17 years ago
Posts: 7
Member since: May 2008
For what it's worth the seller here told me income is not an issue. However, a 70% flip tax (on total sales price - not profit!) is mandatory for the foreseeable future. She said about 5 years before it ceases to be HDFC but I'm skeptical of her estimate......might be much longer or indefinite.
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Response by tandare
about 17 years ago
Posts: 459
Member since: Jun 2008
If one expects or desires an HDFC to stop being an HDFC and is counting on that -- I'd say not to bother buying one unless you have a very high tolerance for the HDFC regulations continuing indefinitely, which is what HDFCs were designed to do.
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Response by tenemental
about 17 years ago
Posts: 1282
Member since: Sep 2007
Hey, msanders, how've you been? When you say "here," do you mean the building at W 106, or something further south?
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OK, I realize there aren't many question marks up there, but any information would be appreciated on:
-HDFC status expiration and changes
-the, ahem, flexibility of income restrictions
-rentals in HDFC buildings
-maintenance decisions in HDFC buildings (my thoughts on that question are on the original thread)
I know Eah doesn't read the board on weekends, so this may need a bump tomorrow.
pushlatency, search discussions here for "income restriction" and "income restrictions." Lots of good information. Add'l insights still appreciated, though.
I don't know anything about HDFC's, but how does (#3 above) a rental provide positive cash flow to the co-op? The rental income goes to the owner of the unit (or sponsor), not the co-op.
Not an expert, but looked into this before and just had a friend buy into an HDFC building...
The buildings gain HDFC status by making an agreement with the city to provide low-income or middle-income housing at reasonable levels. The buildings can "expire" but it doesn't mean that they actually stop following income guidelines and depending on building, flip-tax & sales price regulation.
UHAB is the org that helps people create HDFC buildings. I have been told that not all buildings are very involved with UHAB, FWIW...
I would be *very* skeptical of anyone who promises a building will sunset out of the HDFC program and then there will be no income restrictions - they can't guarantee it and the building would lose special priveleges it gets from the city, I believe, even if everyone on the Board agreed to that. It is a great sales pitch that they often give people. Most brokers I spoke with thought that promise was hopeful at best and downright misleading at worst.
Rentals in HDFC building = rent stabilized. The HDFC structure frowns upon investors. Not sure how they could *not* be rent stabilized apts, but again, not an expert.
There was someone on the board who actually owns some HDFC property - not sure who, but I believe it was property in Wash. Hts.
Tenemental, thanks again for creating this thread.
re: Broadwayron
The broker and owner lead me to believe that the rental units were under the ownership of the Co-op itself and not a particular tenant. When I heard that, I figured they were probably rent stabilized unit, considering that would be more compatible to the spirit of the HDFC then just having a bunch of market value rentals sharing a building of sub-34k income home-owners. They "assured" me this wasn't the case and that they were market rate. I suppose the arrangement makes a certain degree of sense from the prospective that the market rate rentals can provide cash to keep the maintenance of the Co-op low.
All in all, it doesn't sound like a very HDFC-thing for an HDFC to do.
"UHAB is the org that helps people create HDFC buildings. I have been told that not all buildings are very involved with UHAB, FWIW..."
From what I've read on other threads (see the searches above), UHAB (now SHUHAB?) is more actively involved in KEEPING HDFC buildings low-income, and they received some heavy criticism. Not sure how many HDFC buildings they've actually created (but I'm also no expert).
"There was someone on the board who actually owns some HDFC property - not sure who, but I believe it was property in Wash. Hts."
That's eah, hence the shout-out. Alanhart also had some excellent info.
tenemental, my experience with HDFC coops in Washington Heights has been interesting. They will be flexible on the income restriction. For example, if the husband is say a musician and documents 30k in income but the wife is a hedge fund maanger they present the husbands financials to the board. No one seems to then double back to see who hold the mortgage or the fact that both own the shares. The boards - in my opinion - are trying to get new, more wll off people into the buildings and will bend the rules. It seems to come down to whether the board wants to change the demographic of the building. If so, they will make anything happen. As long as a percentage of the building is low income - and it likely is if you count in the original owners - then the building can retain HDFC status.
As far as point #4 goes, I've yet to see an large increase in maintenance on any of my units. Primarily because the building pays for capital repairs by releasing rentals to the market. Don't forget, they own these units outright and it is all money in the reserve fund when they sell. Also the board knows the older home owners will not be able to afford increases. The long term view is that eventually these people will cash out but 'till then they keep the building afloat by selling off units.
You'd be amazed how financially well off some of these buildings are because of the amount of untis they own.
Thanks, eah. Valuable info.
"It seems to come down to whether the board wants to change the demographic of the building. If so, they will make anything happen."
So it's really at the sole discretion of the board? There's no government entity that's going to analyze the specifics of the sale and cause trouble (even down the road)?
Is it much more difficult for a single purchaser without a lower-income spouse to hide behind?
tenemental, some HDFC buildings (Manhattan Valley comes to mind) use a formula that sets the income cap at close to $500,000. The higher the last sale price, the higher the income limit. What's more, they keep the maintenance low but the sale prices up. Everyone benefits. Check out w 106.
inquirer, thanks. I'm looking to stay downtown, but it's good to know.
For what it's worth the seller here told me income is not an issue. However, a 70% flip tax (on total sales price - not profit!) is mandatory for the foreseeable future. She said about 5 years before it ceases to be HDFC but I'm skeptical of her estimate......might be much longer or indefinite.
If one expects or desires an HDFC to stop being an HDFC and is counting on that -- I'd say not to bother buying one unless you have a very high tolerance for the HDFC regulations continuing indefinitely, which is what HDFCs were designed to do.
Hey, msanders, how've you been? When you say "here," do you mean the building at W 106, or something further south?