On my way to work yesterday a woman who I often see during my commute gave her usual spiel: “YOU DON’T HAVE TO BE HOMELESS TO BE HUNGRY!” and handed out free sandwiches to anyone who wanted one. I’m embarrassed to say I don’t know the name of the organization, but it has been around at least as long as I’ve lived in Harlem. And, like all my New York Values, it reminded me how much I love this city for looking after its people in so many different ways.
It also got me thinking about something I wanted to touch on during buyers’ month, even though it’s not directly related to the talk I’m going to give. Many people believe they will never be able to buy in NYC due to a relatively low salary — those who work in non-profits, for example. But there ARE ways, potentially, to become a homeowner even while taking home less than $60k a year.
New York is quickly gentrifying, and one way that people avoid displacement is through protected leases (like rent stabilized or rent controlled apartments). An even better way is through ownership, but long before property values in an up-and-coming neighborhood skyrocket, it’s still relatively expensive to own a home on a single 9 to 5 salary. For this reason (and probably others), the city got involved and made ownership possible for lower income individuals through two avenues: HDFC co-ops and Mitchell-Lama apartments. I’ve broken down both below, so you can find the motivation to save for a down payment even if you aren’t pulling in six figures.
HDFC co-ops are, of course, co-ops that place a limit on how much you can earn as a purchaser. Because they are not regulated aggressively by a government body, they basically operate like regular co-ops, and the specific rules vary by building. The maximum allowable income is set compared to the average income in the area, so while HDFC’s in upper Manhattan often allow a maximum of $72,000 for an individual, a Soho HDFC may allow closer to $150,000 as an annual salary. Unfortunately, a lot of them also insist on 100% of the purchase amount paid in cash because of financing limitations on this type of building. As I read in an article many years ago, to buy 100% down HDFC’s you need to have a low-paying job and then a sudden windfall (like the death of a wealthy relative), or have someone “gift” you the cash to purchase. If you are able to get a family member to help you with the down payment, and the co-op allows co-purchasing or gifting, this can be a great workaround. If that isn’t an option for you, you can save the customary 20% for your down payment and look at the buildings that do allow financing. But don’t expect to make a killing when you sell! Not only is the buyer pool smaller than for free-market apartments, you often have to pay a hefty flip-tax to the building, roughly 30% of any profit from the sale. But it makes sense; you get the benefit of buying at a discount and getting property tax breaks, and the building gets the benefit of making a little bit of money for repairs whenever someone moves out.
Mitchell-Lama apartments, on the other hand, are government run so there is a more consistent process. They offer both rental and sale apartments with a set income restriction based on the below chart. The purchase/rental price is connected to your income on a sliding scale. Have you ever heard about the people who bought apartments for $250? That was part of a Mitchell Lama program that allowed tenants in delinquent buildings with terrible landlords to “go co-op” and then purchase their apartments for this INCREDIBLE LOW PRICE. How do you score one of these apartments now? You join one of the open waitlists/lotteries. It could take years and they won’t be $250, but it’s still worth applying if you. Much like HDFC, you won’t profit on it when you move out. It’s even stricter; I believe you are only given back what you paid initially.
Unfortunately, these types of buildings are becoming less and less common as the tax incentives expire and boards/landlords choose to go free market so they can make bank off units they originally purchased very cheaply. Meanwhile new developers are incentivized to build increasingly fancy apartments due to increasing construction costs (thanks, Trump’s steel tariffs and union corruption), gentrification raising home prices, and general greed. While there were initially 105,000 Mitchell-Lama apartments in 268 buildings back in 1955 when the program started, only 55,000 currently exist. And while deBlasio has pledged millions to keep these units within the program, no new buildings are being constructed. HDFC co-ops also regularly vote to go condo when they can, as board members want to leave the building while selling at market rate and without paying flip taxes. I can’t fault the owners for doing this, but it is a little bit of a “climbing the ladder and then cutting that ladder off when you get to the top” vibe. For their own benefit they are removing the protections that allowed them to get where they are in the first place!
I met someone recently who was asking about whether real estate in New York had completely lost its soul, whether everyone was just buying as an investment based more on speculation and value than personal connection. While this is a large part of the market, I’m happy to say that it has not been my experience with most of my clients. And having options like these validates that point and feeling. While NYC real estate is a great place for foreign wealth to park itself, it’s also a great place for someone to find a home where they can aggressively nest (like I do) and not have to pay rent (also like I do, ugh).
Now get out there, join a Mitchell Lama lottery, and SAVE!