Bill to End Forced Rental Broker Fees Goes to Council Vote With Veto-Proof Support

 

Mayor Eric Adams says he’ll weigh what to do about the measure, while real estate industry launches campaign warning of unintended consequences.

This article originally appeared in The City.

By Samantha Maldonado

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NEW YORK - Paying brokers’ fees to rent an apartment might just become a thing of the past for many tenants in New York City.

The City Council on Wednesday is poised to pass a revised bill known as the Fairness in Apartment Rentals Act, which requires whomever hired the broker to pay the fee.

The original bill simply put the hiring party on the hook for the fee. The new version directly states that a broker who publishes a listing for a property for rent is to be paid by the landlord. 

The amended version also requires the landlord or broker to disclose all fees tenants pay up front, and stipulates that before a tenant signs a lease, the landlord or broker must provide an itemized list of fees the tenant must pay to the landlord and others. Failure to comply comes with penalties of at least $1,000.

A veto-proof majority of 33 Council members support the bill, sponsored by Councilmember Chi Ossé (D-Brooklyn), who has promised it will result in more affordability for tenants contending with a red-hot rental market and a historically low vacancy rate. But real estate groups have opposed it, cautioning the measure will ultimately hurt tenants and throw the housing market into disarray.

Landlords often hire brokers to find tenants to rent open apartments, and tenants can also hire brokers to help find them suitable space. But as it stands, even if tenants find an apartment themselves, they may be on the hook to pay the broker fee.

Ossé said he came up with the bill after struggling to find an apartment in his district, which includes Bedford-Stuyvesant and part of north Crown Heights, as he kept encountering brokers representing landlords whose fees he’d nonetheless have to pay before signing a lease. 

“For many of the apartments that I was looking at, there would be a broker fee, and no broker would be present, or a broker would be, like, extremely rude, and that was happening more times than not,” Ossé said. “I'm not anti-broker. I'm anti people being forced to pay for something they didn't hire.”

He decided to hire a broker himself, who secured him an apartment for $2,250 per month with a broker fee of $2,500.

The High Cost of Moving

New York City and Boston are the only U.S. cities where tenants often pay for brokers they didn’t hire. 

There’s no cap on what brokers can charge, and fees in New York City typically hover around 10% or 15% of the annual rent (equal to about a month or two of monthly rent). Fees on rent-stabilized stock with monthly rents around $2,000 have been reported as high as $20,000.

In 2024 so far, the average upfront cost for a New York City rental charging a broker fee, and also including first month’s rent and a security deposit, was $12,951, according to Streeteasy data provided to THE CITY. The company also found that in the first 10 months of the year, a renter who paid a broker fee spent an average of 47.7% more in upfront expenses than someone who moved into a no-fee apartment.

Lois Paquette, a paralegal, nearly depleted her savings to cover a broker fee of $6,200 for the $3,100-per-month apartment she moved into with her girlfriend in July. They were the first applicants to the fifth-floor walk-up in Crown Heights, Brooklyn, after more than a month of searching. The high up-front costs made her wary of repeating the experience.

Lois Paquette moved to Crown Heights in July and had to dip into her savings to cover moving expenses and a $6,200 broker fee, Nov. 11, 2024.

“We’re never moving again,” Paquette, 27, said. “Something big would have to happen in five years for us to move.”

The broker handling the listing — whom Paquette did not hire — informed her she’d need to pay the fee. The broker showed the apartment, responded to emails and liaised with management. 

“Is that worthy of $6,000? I’m not sure, but at least they did their job,” she said. During a June City Council hearing where hundreds of people testified about the bill, some renters told stories of brokers who did minimal work, such as merely sending over a video tour.

All told, Paquette estimated she and her girlfriend spent about $15,000 on their move including the cost of movers. But the broker fee was the largest single expense.

Those costs can deter renters from leaving their apartment even when they want or need to move. Paquette and her girlfriend, for instance, were each paying higher rents for separate apartments before they moved in together, but the broker fees and moving costs would’ve been too much for her girlfriend to pay by herself if Paquette couldn’t help cover them — leaving the girlfriend stuck in a more expensive apartment.

While dozens of tenant advocacy and legal groups, including the Legal Aid Society and Make the Road New York, support the measure, the Real Estate Board of New York and many real estate brokers oppose it.

Those in opposition have warned landlords who hire brokers will simply increase rents on market-rate apartments to incorporate the one-time fee. (Already, most no-fee apartments in New York City have higher monthly rents than those with fees.)

Brokers and landlords attend a City Council hearing on a bill that would requite whomever hires a broker to pay their fee, June 12, 2024.

“If people are going to cut your salary or cut your livelihood, you're going to have to cut your services. I'm not going to work nearly as hard as I would for a less amount of money,” said Stephanie Tiboris, who has worked in New York City area real estate for almost 15 years, including as the exclusive agent for one landlord who owns five buildings. “If you're going to pay this fee, I want to show you how worth it it was. I want to help you. I want to continue to be a part of the process.”

She said her relationships with the tenants she works with continue until they move out, as she handles their complaints about issues such as leaky toilets and requests to negotiate when landlords propose rent increases. She emphasized the fee covers an ongoing service, and tenants can always negotiate fees or opt for no-fee listings.

In a tight housing market, however, both of those can be tough since tenants have less leverage or fewer options. Some tenants may not even realize they’re able to negotiate.

To that end, REBNY previously proposed its own version of the FARE Act, as The Real Deal reported, that would not have changed who pays the broker but instead mandates brokers give prospective renters a “tenant bill of rights.” The paperwork would list the fees the tenant is responsible for, state they do not have to work with a broker and specify that the broker fee is negotiable.

This week, the group began a last-minute advertising blitz on social media and on cabs against the bill, with some ads claiming the new version of the FARE Act would make apartment-hunting more difficult.

Sarah Saltzberg of Bohemia Real Estate said brokers who used to being paid by tenants would be disincentivized from listing apartments on places like StreetEasy or Zillow where prospective tenants who aren’t paying them could see those listings.

“If there's a fee and we have an agreement with a landlord, then we can put it up,” Saltzberg said. Otherwise, “The tenant will have to hire us … to have access to those listings, where they never had to do that before. They go online and they take their time, get a sense of the market. All of that will be gone.”

How Valuable? 

Michael Corley, a Brooklyn-based broker and president of Corley Realty Group, was one of the few real estate professionals to support the bill.

“Most brokers are concerned about not being able to extract a certain percentage of the lease,” he told THE CITY. “It’s understood that an agent is brokering lease value. If they believe that the amount of money they’re annualizing for the owner is that valuable, the owner should pay it… but the owner won't pay something like that.”

Mayor Eric Adams has expressed concerns about how the measure would affect small, struggling “mom-and-pop property owners” who may not be able to absorb the cost of a broker. 

“Anything that we can do to defer costs from everyday renters without hurting small property owners is important to me,” he said in October. “So we're going to read over it and make the determination of what the next steps are on it.”

The FARE Act is not the first attempt to legislate restrictions on broker fees.

In 2020, the New York Department of State issued guidance banning brokers hired by landlords from charging tenants as an interpretation of the 2019 rent law, which strengthened protections for tenants. But in 2021, a state court overturned the ban after the Real Estate Board of New York sued.

In 2019, Councilmember Keith Powers introduced a bill capping broker fees to one month’s rent, to which the industry responded with fierce opposition. The Council never voted on it.

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