Is the United States becoming a nation of renters? While the number of people renting, not owning their homes, is on the rise—that doesn’t mean the prices of those rentals are going down. In fact, according to Zillow, the median rent price in New York City is $3,539, and the expenses don’t end there.
New York renters also face broker’s fees, where they must pay the transaction’s broker a percent of their annual rent cost (usually 10% – 15%). Under the median New York rental price, the fee could be as high as $6,370.20. The fee must also be paid by the renter even if the landlord is the one who hired the broker and regardless of whether the broker played a role in helping the renter secure their leasing.
Brokers’ fees are described as a holdover from the pre-digital era, where prospective tenants had to go to brokers, not Zillow, to find an apartment. They were also briefly banned in 2020 by New York State regulators in an interpretation of the Housing Stability and Tenant Protection Act.
However, brokers’ fees were affirmed as the law of the land in 2021 by an Albany Judge who, in a lawsuit brought by lobbying group the Real Estate Board of New York City, overruled regulators’ moratorium on tenants paying brokers’ fees.
Now, a New York City councilperson is making an effort to tackle brokers’ fees within the city. Councilperson Chi Ossé (representing the 36th district, or Brooklyn neighborhoods Bedford-Stuyvesant and North Crown Heights) introduced the Fairness in Apartment Rentals (FARE) Act on June 22, 2023—it was subsequently referred to committee.
The FARE Act would explicitly transfer responsibility for paying the brokers’ fees to whoever hired the broker to be part of the rental transaction. Ergo, a prospective tenant could forgo using a broker altogether—if their landlord brings in one, they’ll have to pay the brokers’ fee themselves. The bill has not passed yet, but it does currently enjoy the support of a majority of the City Council.
Advocates of the FARE Act argue it will help young renters in NYC by lowering their expenses and that will, in turn, be a boon to the New York City economy because renters will have more money to spend. The Real Estate Board of New York City has come out against the act and is actively lobbying against it.
Richard Haggerty, CEO of New York state’s largest multiple listing service OneKey® MLS, voiced his opposition while also stressing the need for consumer-friendly conditions:
“Legislatures (should not) be making that decision, whether it be the City Council, whether it be the Senate, whether it be the Assembly, it should be the market that determines that and (market decisions) should, at all times, make sense to consumers. So if the structure is pro-consumer, then that’s what’s going to dictate the best approach, not a City Council bill. At the same time, I think what we have to be cognizant of is the cases that are happening around the country that are very much focused on the consumer. We’ve got to be cognizant of the fact that anything that we do has got to take the consumer into consideration and make sure that everything that we do is at the end of the day, pro-consumer.”
Follow RISMedia for updates on this ongoing legislation.
