How Do I Buy an HDFC Without a Trust Fund?

Illustration: Emma Ericson

Welcome to “Apartment Department,” Curbed’s advice column by Clio Chang. Join us every other Wednesday for questions about making peace with noisy-sex neighbors, the nuances of roommate fridge etiquette, and whatever else you might need to know about renting, buying, or crying in the New York City housing market.

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Dear Apartment Department,

I want to buy an HDFC co-op and I think I qualify based on my income, but I’m totally bewildered by the actual requirements. For example, this Washington Heights apartment costs $445,000, and the income limit is $78,708. Even with 90 percent financing, I’d still have to have $44,500 for the down payment and … I don’t. I’ve heard of at least a few people who have bought their apartments this way, but they seem to have met the requirements by having basically zero income (lots of multidisciplinary-artist types) and large trusts. That’s not me. Please walk me through what’s actually involved here — it feels like it shouldn’t be so confusing. It’s the only way I can see buying a place in the city, but is it actually a real option?

Sincerely,

Broke But Maybe Not the Right Kind of Broke

Dear Broke,

Historically, HDFC co-ops, which come with income restrictions for buyers and usually a big flip tax for sellers, are meant to be affordable for regular people. The income restrictions keep out Wall Street types, and the flip tax is meant to weed out speculators and investment buyers. But it’s true, as you point out, that some HDFC buyers today have a trust fund or are retirees with strong savings and very little income. “I often refer to them as great for the social-working children of billionaires,” says Molly Franklin, a broker at Corcoran who often works with first-time buyers. It is highly unlikely, after all, that someone who makes under $79,000 a year at their nonprofit arts job would be able to save up enough for a down payment on a $445,000 one-bedroom unless they have some outside source of cash.

But it is possible to buy an HDFC even if you’re not a Gallatin alum with a mom who’s a VP at BlackRock. Franklin says it just requires a lot of patience, a long-term savings plan, and a “hyperfocused” personality (good luck with that last one). “There’s seldom an easy and fast fix to making an HDFC happen if you don’t have inheritance money,” Franklin says. Every HDFC will have different income limits and different rules around financing. One in Park Slope, for example, requires buyers to have at least one dependent in their household. “It’s a difficult cake to stack,” Franklin tells me. Then you’ll have to work with one of the few banks that will lend to an HDFC buyer — CitiBank tends to be a good option, per one broker. (There’s a limit on the profit, so lenders are more wary.) Plus, each HDFC co-op is going to have different rules that you should look into: “With all of those compounding factors, it’s a narrow audience who can actually do it,” Franklin says. On the flip side, she points out, it might also mean you’re the only qualified buyer who can see it all through.

Danielle Nazinitsky, a broker at Decode who says she sells five to ten HDFCs per year, says you can get it done as long as you’re flexible — expanding the neighborhoods you’re searching in, being okay with just one bathroom (which is the setup, she says, for most HDFCs). There’s also ways to make your application stand out, but they might require cash as well: One of her clients who was in his 60s and had saved up after living in a rent-controlled apartment his whole life was competing with 15 other people for a huge $300,000 apartment with a capped selling price. “We offered to pay the 6 percent broker fee,” Nazinitsky says. This won over the seller, since it allowed them to recoup more profit in a transaction where those things are deliberately limited.

There are also city programs geared toward first-time homebuyers like HomeFirst, which gives qualified candidates up to $100,000, but the brokers were mixed about actual usefulness of these offerings. “You will never find a seller that will ever accept that,” Nazinitsky says. She pointed out that it could take up to a year for the grant to come in, and if the seller has a different offer from someone else sooner, then they’re more likely to take that. Franklin agreed that using a HomeFirst grant could be difficult but pointed out that HDFCs are often sitting on the market for a long time. Another tip: Franklin says HDFCs shouldn’t be the only apartments you’re looking at — you can still find an extraordinary deal on the regular old co-op market. “I would cast a wider net,” Franklin says. “They are a great thing, but they’re not the only deal in town.”

I’ll admit that none of this feels “simple.” Perhaps a success story will warm your heart: Nazinitsky helped Adam Wohlman and his wife, who both work in public service and don’t have family money, buy their HDFC. Wohlman’s wife’s aunt and uncle lived in an HDFC building and a unit was up for sale — a $510,000 one-bedroom in Manhattan Valley that had a combined income limit of $175,000. Wohlman did intense research on Reddit and ended up finding Nazinitsky, who helped them put in an offer with a 10 percent down payment, which was the most they could afford at the time. Nazinitsky also recommended a mortgage officer who was an expert on HDFCs and had done a loan in the same building.

In a development that seemed like it was going to doom them, another prospective buyer put in an all-cash offer above asking. But the board approved Wohlman and his wife anyway. Why? Per Wohlman: “There are a lot of folks in the building who have lived there for decades who are community-minded and focused on affordability.” So you may find a group of people who appreciate the leg up this model gave them and want to pass it on to the next generation. (Okay, and it certainly helped that they had family members on the board.) A lot of things had to line up for their HDFC purchase to work out, Wohlman says, but eventually, it did. “After we were seriously engaged in this process, I thought we had a 10 to 15 percent chance,” Wohlman tells me. He’d heard all the same things you have — that it’s only cash buyers or trust-fund types who win in the end, that the HDFC, he says, is “kind of just a mirage of obtainability.” But “that isn’t always the case,” he adds.

Have a question for the Apartment Department? You can send it to clio.chang@nymag.com.

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