Buy Affordable Housing

Do I have to accept a limit for the sales price of my HDFC co-op?

  • HDFC resales are often subject to extra restrictions to keep them affordable
  • Limitations such as sales caps usually come with a tax benefit for the building
Celia Young Headshot
By Celia Young  |
December 5, 2023 - 4:45PM
Rooftops of buildings and skyscrapers in the Harlem skyline of New York City

HDFC apartments tend to be cheaper, but subject to more restrictions than market-rate units.


I purchased an HDFC co-op in Harlem last year, and recently learned that the HPD is considering implementing a price cap on future sales at the building. Is this allowed? If my building doesn’t want the limit on sales prices, can we reject it?

Housing Development Fund Corporation cooperatives (HDFC) can be subject to a handful of restrictions—including capping the price you get when you sell—but your building has the ability to negotiate these price limits under certain circumstances, according to our experts. 

Most HDFCs are governed by a regulatory agreement, where the building receives a partial tax exemption—or in some cases a loan or a grant—in exchange for keeping shareholder costs at a minimum. To keep those costs down, HDFC owners are traditionally hit with a large flip tax when they sell, which can be up to 30 percent of the sales price or higher if you’ve owned the apartment for less than five years. 

Prospective buyers are also subject to income restrictions, which require them to earn no more than a certain level, such as 165 percent of the area median income—or $163,185 for a person living alone—or an amount based on the apartment’s monthly fees. 

Why HDFC apartment resale prices can be limited

A limit on the price an apartment can be sold for is another way to keep HDFC co-ops affordable, says Dean Roberts, an attorney at the law firm Norris McLaughlin and head of its New York real estate group. But those efforts sometimes have unintended consequences.

“In order to qualify, you have to have a low income and also have the money to buy the apartment,” Roberts says. “I always laughingly refer to Article 11 [which established the HDFC tax incentives] as the ‘trust fund baby housing act,’ because the ideal candidates were somebody who's doing an internship at the Metropolitan Museum of Art because the parents are paying for everything and buying an apartment for them.”

Roberts is referring to the fact that it can be easier for New Yorkers with a lot of savings, wealthy parents, or, yes, a trust fund, to purchase an HDFC. 

Putting a cap on the price a seller can obtain may seem like a good deal for a buyer, but it also limits a buyer's home equity, says Glory Ann Hussey Kerstein, who chairs the steering and anti-foreclosure committees at the HDFC Coalition, an advocacy group for HDFC owners city-wide.

When would an HDFC have a resale cap?

Most HDFC buildings have been subject to regulatory agreements for decades, and restrictions on the buying and selling of individual units have grown more complicated in recent years. 

The program began when the city purchased many financially distressed buildings in the 1970s and 1980s and then sold those apartments to tenants. 

“[HDFC] got started to help sweat equity tenants take control of their buildings,” Roberts says. “And they were pretty simplistic in the 1990s and really revolved around the real estate tax credit that, over time, evolved to become really full blown regulatory agreements,” Roberts says.

When the program began, it did not include resale price caps, and it’s still fairly rare for an HDFC to have a limit on unit sales prices. It’s difficult to identify a standard maximum sales price because the restriction is relatively new, but it usually changes by neighborhood, Roberts says.

If your building is considering implementing a limit on resale prices, it’s probably because your regulatory agreement is expiring, or your board is looking for additional financing or a grant from the city, Roberts says. In either case, your board would have to agree to any new regulatory agreement with the New York City Housing Preservation & Development Department (HPD), which will likely offer you an extension on your tax benefit to sweeten the deal.

However, it's very rare to see a resale cap proposed on an HDFC, and it will limit the amount of money that goes back into the building's coffers through the property's flip tax, says Adam Leitman Bailey, founding partner of law firm Adam Leitman Bailey. That's why Bailey often negotiates to remove a resale price restriction.

Can my building negotiate?

It’s worth noting that the city council has to approve any HDFC regulatory agreement through a resolution, Kerstein says. HPD uses tax incentives to encourage co-ops to stay within the HDFC program, and the Department of Finance implements the tax benefit once it’s approved. 

If your building is unhappy with the proposed price restriction, but doesn’t want to lose its tax benefit, your best bet would be to collectively contact your city councilperson who could advocate for your building.

“The authority to extend or offer a tax cap comes from the city council, so go to your city council members.” Kerstein says. “Meet with your shareholders, organize, talk, communicate, and sit down with them.”

Celia Young Headshot

Celia Young

Senior Writer

Celia Young is a senior writer at Brick Underground where she covers New York City residential real estate. She graduated from Brandeis University and previously covered local business at the Milwaukee Business Journal, entertainment at Madison Magazine, and commercial real estate at Commercial Observer. She currently resides in Brooklyn.

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