HDFC's Proposed Regulations Shake Up Co-op Shareholders It Would Mean Some Co-ops Getting More Tax Breaks While Others Might Be Losing Theirs

Some co-op shareholders were concerned how the proposed HDFC regulations would affect them (iStock).

A proposed agreement drafted by New York City’s Housing Preservation and Development (HPD) department has caused Mayor Bill de Blasio some grief recently, as regulatory measures affecting buildings in the Housing Development Fund Corporation (HDFC) program have riled up some co-op shareholders.

In short, the de Blasio administration aimed to require HDFC co-ops to hire monitors appointed by the city, and set limits on the sale prices of units. Non-compliant buildings would lose valuable tax breaks; compliant buildings would gain them. As reported by the New York Post on April 29, the mayor met with a group of concerned HDFC co-op owners and, according to a post on the HDFC Coalition Facebook page, agreed to “pause” HPD's proposal, which owners believed applies a “one-size-fits-all” opt-in program offering greater tax incentives and increased city regulation to a situation requiring more nuance.

The co-ops in question, according to the Post story, are “once-derelict buildings the city sold decades ago to homesteaders for as little as $250 an apartment,” and “now have income limits for those who want to buy in.”

In a time of increased concern over skyrocketing costs of living, dilemmas over affordable housing are complex. The Cooperator spoke with attorneys who have long worked with HDFCs to ascertain how HPD's proposed regulation came to be, the nature of residents' objections to it, and whether a compromise can be reached.

The Proposal

In the years since the HDFC program was established, several of those originally derelict buildings rescued by the program have evolved into successful, independently functioning, even thriving co-op properties, while others remain in distress, or fall somewhere in between. HDFC co-ops may take advantage of property tax reductions under the Division of Alternative Management (DAMP), which encourages private ownership of buildings once owned by the city. Some co-op shareholders appeared concerned as to how the mayor's proposed regulatory move could affect these tax incentives.

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7 Comments

  • Thank you Erica Buckley for putting the situation in perspective. As one of the original ($250) owners, I see my HDFC unit as my home and not as investment property. I want to live there, not sell it. And I don't think it's right for low-income people to have to compete with wealthy people for what is essentially government housing, when you consider the tax benefits that we enjoy. I'm very concerned that as more wealthy people purchase HDFC units, the maintenance cost will increase and drive people like myself out. That's wrong! Regulation is needed to protect these units from being swept up into the for-profit housing market at the tax-payer's expense.
  • Hello, I just want to say that this whole proposal didn't make sense from the beginning. I attended a number of meetings that HPD held to talk with shareholders, and like any issue, I expected there to be two sides to the argument in the crowd. Not one single person was for this. Adding a mandatory monitor removed the rights of the homeowners in exchange for tax credit. Not only is this ridiculous for buildings that have been in good standing and operating efficiently, but it convolutes the issue. When an HDFC shareholder asked "why doesn't HPD supervise and act when an HDFC isn't in a good state", they were told HPD didn't have the man power to monitor all the HDFCs. Their answer to solve this problem was to hire an outside agency to be put in charge of the properties? When asked "Who will manage the monitors", HPD said they would. With this plan a gaping hole would be created for corruption and fraud. Furthermore, the HDFC program was meant to revitalize apartments and neighborhoods that were decrepit, purchased by the city and sold to persons who would take responsibility and ownership of them. This program was never meant to keep low-income housing individuals in low-income, it was meant to help neighborhoods and the people that live in them, and thats where monitors once again do not make sense. They shouldn't be monitors, they should be counselors. Assigned to HDFCs that aren't in a good way, they supervise them and assist in their success. And after an HDFC becomes stable, the counselor leaves. This way it's manageable for HPD, it gives these struggling HDFCs a goal, freedom and the ability to become a homeowner and prosper! Removing DAMP tax in exchange for signing a new agreement that removes a homeowners rights is a whole other issue and frankly sounds illegal.
  • Deborah, I live in a building that is composed of people who originally bought in the 1980s and those who have bought recently and from the perspective of my building, we don't want anything to change. No one wants maintenance to go up, and I'm proud to say it hasn't with our building and there isn't a plan for it to be raised any time soon. We're able to sustain ourselves and make room for modest improvements, keep our home a nice place to live. I understand your perspective, that you don't want to sell and you're not in the property as an investment. I'm here to live too. But for my future, it's nice to know that when I start a family being able to buy a property at a young age really helped me get started on the right foot. And with people who see the property as an investment it should only make the situation better for everyone. Maintenance should not go up as a result. If that happens, I would seriously question "for what purpose". This is where a proactive Board Of Directors becomes important. In my building we don't want anyone to move who doesn't want to. But older residents never thought their apartment could be an investment, they've taken solace in knowing that if they did move at some point or if they were to pass away, their property has become something valuable that can be utilized to make better lives for their families. Our building has become stable enough now to the point of where owners can refinance and take out loans to do things for their families they never thought would be possible. With all that said, we're on the same side. And I ask one question; What was the purpose of this proposed regulation change? The only answer I can think of is to take away the freedoms of owning a home from the home owners.
  • The missing piece to Erica's thoughtful analysis of the original intent and legislative mandate of Art. XI is a definition of low income. Once the city decided divert these units away from low income people by defining low income as high as 165% of the Area median income that opened up opportunities for shareholders to sell to people for whom the entities weren't created. The city can't have it both ways. They can't obstruct low income residents from selling unit at high prices while creating policies that do exactly what allow the shareholders to get away with their folly. NYC HDFC
  • As an HDFC shareholder, I am disgusted by Deborah's comment that HDFCs are government housing!! Excuse me, but HDFCs are not projects run by the government...asides from a modest tax break, we pay for everything ....new roofs, new boilers, new windows etc...The new proposed RA is a shameless way for Mayor Deblasio to say he saved "affordable housing " at the expense of HDFC shareholders.
  • Tommy10009@yahoo.com on Monday, July 31, 2017 12:21 PM
    I ageee with Mr. maderich....HDFCs are not government housing! Ms Buckley seems to be a mouthpiece for HDP....I did some research and yes she's in cahoots with many government agencies...why did the writer of this article not offer a counter opinion? I understand the basic philosophy of "low income" HDFCs but most HDFCs never heard a peep from HDP for 30 years and were left to fend for themselves...and 75% of HDFCs are hugely successful and rescued its tenants from poverty and helped them live the American dream! Now the city wants to take away their equity and 30 years of hard work. Class action lawsuit anyone?
  • HDFCs are NOT government or public housing, and many would be surprised to learn that they are not even nonprofit housing. HDFCs are privately-held, independently-owned business corporation organized under the Business Corporation Law, so city government has no power to intervene regarding the internal operation of these businesses, unless there's a failure to meet its municipal obligations such as taxes, water, and mortgage. While I understand people's desire to retain their equity, equity gains as high as 10,000 times the original cash outlay, I'm concerned that the crestion of mixed income cooperatives, which is the current policy in city government,?will ultimately harm those members of the corporation, who earn less. Most of the noise coming from shareholders about preserving their equity is actually coming from those higher income earners who are using the concerns of the original purchasers to take the spot light away from the legal and illegal loopholes they exploited to gain membership in these corporations with the aid of corrupt and dysfunctional boards. Hiding behind I'll-informed loudmouths, these higher income earners want to purchase apartments for 10,000 per share while holding onto a tax exptiond designed to subsidized low income housing. The city's regulatory agreement is harmless and toothless, all it really does is keep millionaires from purchasing HDFC shares, restrict equity gains from roughly 10,000 per share to roughly 7,500 per share, and divert the entire HDFC portfolio away from low income residents to middle income earners. Before the folly of the regulatory agreement began, shareholders had real concerns that everyone has forgotten about. That's the real tragedy, the real outrage. If there's going to be a class action suit, I encourage the tax payer who subsidize these abuses to be the first to petition the Supreme Court.