The rich get slicker.
Housing Development Fund Corporation cooperatives were designed with low-income homebuyers in mind. But the children of wealthy parents have found a loophole to take advantage of the special property tax break and discounted prices, according to Bloomberg Businessweek.
Close to 1,000 properties in New York City receive the special tax break. While income limits apply to buyers, wealth limits do not. That allows affluent offspring to acquire them in all-cash deals funded by gifts from their parents.
The buildings are often in financial or physical distress, so lenders see them as poor candidates for mortgages. That gives all-cash buyers an edge by limiting competition; they score bargains because the pool of low-income, cash-rich home shoppers is small.
Buyers sometimes include students at local colleges and young people pursuing careers in creative disciplines. But starving artists, many are not.
The subsidy program creates a maximum taxable value for each HDFC unit, which this year is $11,079. The top 20 percent of the eligible buildings by value end up seeing the aggregate tax benefit, while struggling buildings tend not to. The result, Businessweek reports, is one of the most unequal property tax programs in the country.
The publication noted that many of the city’s HDFC units are in Harlem, which has seen a boom in housing demand, and few are in the Bronx. Some buildings in the program don’t even enforce income restrictions, according to Businessweek.
The Department of Housing Preservation and Development tried to reform the system five years ago, but failed to overcome opposition from HDFC co-ops.
In 2018 a law was passed requiring owners to market affordable apartments on a housing portal being run by the agency. But last year, the City Council passed a bill exempting HDFCs from the law.
[Bloomberg] — Holden Walter-Warner