Paradox of Affordable Homeownership In NYC
As a co-op or condo owner in affordable housing, Are you more interested in preserving affordable homeownership or substantially increasing your net worth? Therein lies the paradox. How you answer this question will have significant ramifications on the affordable homeownership stock in NYC. There is no moral judgment implied in your answer to this question. But your answer will determine where you stand in the grand debate going on in the affordable housing community in NYC.
On the one hand, affordable co-ops and condos are endangered species in NYC. On the other hand, affordable homeownership provides many New Yorkers with an asset that continues to increase in value and constitutes a sustainable portion of their net worth (i.e. assets minus liabilities). It is more than a roof over their heads; it is a mechanism to create inter-generational wealth.
This affordable homeownership paradox is particularly acute for owners in housing development fund corporations ("HDFCs"), entities incorporated pursuant to Article XI of the Private Housing Finance Law and Section 402 of the Business Corporation Law ("BCL") for the purpose of operating cooperative housing. These owners are subject to a myriad of restrictions, including but not limited to: a) the unit must be their primary residence, b) income limit of 165% of area median income ("AMI")*, c) significant flip tax, d) very restrictive calculation of profit before the flip tax is imposed--the difference between the purchase price and the resale price (no consideration is given to transaction costs or renovation costs, e) restrictions on subletting--only two out of every four years.
*165% of 2017 AMI
$157,410 - Family of four
$141,735 - Family of three
$126,060- Family of two