HDFC Summer Newsletter

AUGUST | 2020
Goldstein Hall attorneys have more than twenty-five years of collective experience representing limited equity and tenant-sponsored cooperative Housing Development Fund Corporations (HDFCs). We understand the unique needs of HDFC shareholders and are dedicated to helping HDFCs resolve issues and overcome challenges in a time- and cost-effective manner. Goldstein Hall offers legal services covering virtually all matters involving HDFCs, and we are also a resource to help HDFCs stay abreast of law and policy changes impacting their buildings.
New Local Law Provides HDFCs Relief from HPD Marketing Requirements
Bottom line: Article II and XI cooperatives (a/k/a Mitchell Lamas and HDFCs) are exempt from the HPD marketing portal requirements of Local Law 64 and, absent any other written agreement, unit resales can continue as usual.  

What were the Local Law 64 marketing requirements?
Local Law 64 in 2018 required the New York City Department of Housing Preservation and Development (“HPD”) to establish an online housing portal to foster a uniform and transparent process for the marketing of available rental and for-sale affordable housing in New York City.

What is the HPD marketing portal?
Per Local Law 64, by July 1, 2020 HPD had to develop an online housing portal for use by owners of affordable units being offered for sale or rent, and for renters and homebuyers to apply for occupancy or purchase of an affordable unit—called NYC Housing Connect 2.0. HPD describes Housing Connect as an “online application system” for HPD/HDC-assisted affordable housing.

What’s the issue with the portal in the HDFC context?
Many established HDFCs expressed concern about Local Law 64 requiring HDFC shareholders/unit owners to use the new HPD marketing portal. As originally passed in 2018, a provision in the law required co-op owners who wanted to sell their units to list them on the HPD affordable housing portal — regardless if they intended to sell the unit to a relative or otherwise keep the unit in their family over generations. Beyond the complexity of registering available units online, Local Law 64 contains annual reporting requirements and fines owners up to $2,000 per month if they fail to report certain data to HPD. Many HDFC shareholders are seniors or low-to-moderate income families, so such fines could be financially devastating.

What happened to the requirement of the marketing portal for existing HDFCs as a result of their advocacy?
On July 28, 2020 the City Council passed the amendment to the NYC Administrative Code (Int. 1783) to exclude certain cooperatives—namely any cooperative incorporated pursuant to Article II, IV, V or XI of the Private Housing Finance Law—from the Housing Connect 2.0 requirements. Article II and XI cooperatives (a/k/a Mitchell Lamas and HDFCs) are exempt from the HPD marketing portal requirements of Local Law 64 and unit resales can continue as usual.

Anything else about marketing in the HDFC context to keep in mind?
Mitchell Lamas and HDFCs are still subject to the HPD Marketing Handbook for all initial sales. HPD has indicated that, in the future, the exclusion for resales could change because HPD is likely going to add provisions to subsequent regulatory agreements that will require all cooperative resales to be subject to the Marketing Handbook and/or Housing Connect portal. For now, HDFCs can maintain insider waiting lists for internal transfers based on need; however, family members who wish to split from the household must apply for another unit that becomes available through the HPD lottery process. In short, an established HDFC that re-engages with HPD—either by entering a new regulatory agreement or otherwise obtaining government financing, subsidy or tax exemptions—will be subject to some type of marketing guidelines for resales. Long established HDFCs with old or expired regulatory agreements are not subject to Local Law 64 marketing portal requirements and unit resales can proceed as usual.
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