Building types in Manhattan
HDFC co-ops in Manhattan
Manhattan’s HDFC stock came out of the City taking title to abandoned buildings north of 96th Street and on the Lower East Side, then selling them to their tenants.
What is different about buying an HDFC co-op in Manhattan?
Quick Answer
Manhattan holds a large share of the city’s HDFC stock, concentrated in Harlem, Washington Heights and on the Lower East Side. Because these corporations were formed one building at a time out of City in rem takings, the income cap, any resale formula and the flip tax differ from block to block.
Which co-op buildings of this kind are actually in Manhattan?
- Tenant-purchased walk-up and small elevator buildings in Harlem, Hamilton Heights and Washington Heights, most formed in the late 1970s and 1980s
- Lower East Side buildings that came out of the same in rem and tenant-interim-lease programs
- A number of corporations whose regulatory agreement was extended or renegotiated with the City after the original term
- Buildings where market pressure around them has risen sharply while the resale restriction has not moved
What do board approval and financing look like in Manhattan?
- The income cap comes from that building’s governing documents: the certificate of incorporation, the City deed and, where one exists, a regulatory agreement
- Lenders underwrite the building’s governing documents as well as the purchaser, and the pool of lenders that will write an HDFC loan is small
- The income cap, and any resale restriction, limits the appraised value, which limits the loan amount, which can force a larger down payment than the price alone suggests
- The board reviews income documentation before approval, and household size adjusts the cap, so a purchaser near the cap needs the calculation confirmed in writing
Which taxes and recording steps apply in Manhattan?
- No mortgage recording tax and no ACRIS instrument for the purchase, because the loan is a UCC filing against shares
- New York State transfer tax and the New York City real property transfer tax apply to the share transfer
- The flip tax in a Manhattan HDFC commonly runs to the corporation and can take a substantial share of the seller’s gain
- The mansion tax is rarely reached, because the resale restriction holds prices below the market around the building
What pattern does a purchaser meet in Manhattan?
- The gap between the restricted resale price and the surrounding Manhattan market is wider here than anywhere else, which makes the flip tax and the purchaser income cap the two terms to read first
- Some Manhattan HDFCs carry deferred City loans or tax exemptions that end on a stated date, and what happens then belongs in the review
- Buildings that have deferred facade and roof work carry assessment risk that the income cap gives shareholders little room to absorb
- Where the corporation signed a regulatory agreement it has an expiry date, and a purchaser holding past that date is holding a different asset than the one on offer today
Why do Manhattan HDFC income caps differ building to building?
Because the cap is computed from that building’s own numbers. Private Housing Finance Law 576, carried in the certificate of incorporation and the City deed, sets it at six times annual maintenance plus utilities, or seven times with three or more dependents, against a ceiling of 165 percent of area median income. Where the deed or a regulatory agreement sets a lower limit, such as 120 percent of AMI, that governs instead.
Can a Manhattan HDFC be sold at the surrounding market price?
It depends on the documents. Where a regulatory agreement exists it may cap the resale price; in most older HDFCs the limit on price is the purchaser income cap plus the flip tax, which is payable to the corporation out of the sale. Both terms are in the building documents rather than in any public record, and both have to be confirmed before a contract rather than after.
What else should you read before closing on one of these?
In the glossary
- Flip taxA transfer fee charged by a co-op or, less often, a condominium when a unit changes hands. It is a creature of the building's governing documents, ...
- CovenantA recorded promise or restriction that runs with the land and binds future owners. Restrictive covenants limit what the property may be used for or...
- Co-op lien searchThe search performed on a co-op purchase covering UCC filings, judgments, liens and unpaid building charges tied to the shares and to the selling s...
- Transfer tax (RPTT and NYS)Taxes on the conveyance itself, one City and one State. Rates step up at higher prices, and who pays is set by custom and then confirmed by the con...
- Proprietary leaseThe occupancy lease a co-op corporation grants a shareholder for a specific unit. It is assigned at closing together with the stock certificate for...
Questions this raises
- What are HDFC co-op income caps?HDFC co-ops cap purchaser household income under the Private Housing Finance Law, against an area median income ceiling. How the cap is measured an...
- Can you resell an HDFC co-op at market price?HDFC resale is limited by the building’s own documents: a purchaser income cap, a flip tax to the corporation and, where one exists, a resale price...
- Who pays the flip tax in a New York co-op sale?A flip tax usually comes off the seller’s proceeds, but plenty of New York buildings shift it to the purchaser. Why the rider has to name the payin...
Building types
- HDFC co-opAn affordable cooperative formed under Article XI of the Private Housing Finance Law, with an income cap on purchasers and a flip tax that runs to ...
- Standard co-opThe ordinary New York City cooperative: you buy shares in a corporation and receive a proprietary lease to occupy a specific apartment.
- Mitchell-Lama co-opA limited-equity cooperative in the State and City Mitchell-Lama program, sold from a waiting list at a formula price rather than on the open market.
- Sponsor co-op unitAn unsold share allocation still held by the building’s original sponsor, sold under the offering plan rather than through the ordinary board process.
This building type, borough by borough
- HDFC co-ops in BrooklynBrooklyn’s HDFC buildings sit in Bedford-Stuyvesant, Crown Heights, Clinton Hill and Bushwick, and many of them are small enough that the board is ...
- HDFC co-ops in the BronxThe Bronx holds a dense band of HDFC buildings through Mott Haven, Highbridge, Morrisania and the Concourse, most of them formed out of the City’s ...
- Standard co-ops in ManhattanManhattan is the borough where cooperatives still outnumber condominiums, so board practice, financing caps and post-closing liquidity requirements...
- Mitchell-Lama co-ops in ManhattanManhattan’s Mitchell-Lama co-ops run from Chelsea to the Lower East Side to Harlem and Roosevelt Island, and several have voted on leaving the prog...
- Condops in ManhattanA condop is a condominium regime split between a commercial unit and a residential unit that is itself run as a cooperative, and Manhattan holds th...
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