What Happens to Our HDC Apartment if the Building Leaves the Program?

Aug. 17, 2015 — We want to buy an HDC apartment, but the building's considering leaving the program. How will that affect us?

If a building decides to leave a Housing Development Corporation (HDC) program, there are a number of issues to consider. If income restrictions are lifted, owners can tap additional equity in an apartment. Also, once the property is no longer income-restricted, its fair market value will increase. This unlocked equity will allow owners to refinance and take equity out of the property or sell the unit and cash in on the increased value.

On the negative side, the new free market status may also change the building's makeup, attracting more investors and renters. Leaving the HDC program may result in those who have more limited incomes and who have potentially worked to improve a neighborhood, no longer being able to afford to purchase in that building.

HDC subsidies make sense because they allow middle-income individuals and families to stay in the city. HDC is a city agency that offers subsidized building loans that make apartments affordable and require escrowing of monthly reserve replacement, which keeps buildings financially sound.

It also helps that HDC has an engineering and financial staff to make sure proposed capital projects make sense and that the building has the available funds to complete a project. In addition, before HDC releases any funds to the contractors, it checks to see that every "I" is dotted and "T" is crossed in the contracts. With HDC, you have a partner who shares the desire for your property to be successful that extends beyond paying back the loan or inter-building politics.

Peter von Simson is CEO of New Bedford Management.