New York City Council Votes to End Broker Fees Squeezing Renters

https://www.bloomberg.com/news/articles/2024-11-13/nyc-on-brink-of-ending-killer-broker-fees-that-squeeze-renters

by JumpCrisscross • 2 years ago

258 156 2 years ago

bloomberg.com

tdeck3• 2 years ago

https://archive.is/jyNpm

dxxvi• 2 years ago

How did you find that link?

aspenmayer2• 2 years ago

Go to archive.is and search for existing archives and/or make one if it doesn’t exist or you just want to make another one.

Or just put any full url path including http(s) after archive.is/ to skip to the search for that url.

nobody99997• 2 years ago

How did you find that link?

If you install the Archive Page addon Firefox[0]/Chrome[1] (I don't use Chrome, but the FF version works nicely) you can right-click on any link and select 'search link', or you can click 'archive link' which will queue the link for archival if it has not already been archived.

[0] https://addons.mozilla.org/en-US/firefox/addon/archive-page/

[1] https://chromewebstore.google.com/detail/archive-page/gcaimh...

tdeck3• 2 years ago

real estate agents who exclusively represent the landlord’s interests wouldn’t be able to seek a fee from the person signing the lease.

I'm curious if this will be creatively interpreted so that the broker is mandatory but supposedly represents the interests of both LL and tenant, so the tenant has to pay anyway.

JumpCrisscross4• 2 years ago

curious if this will be creatively interpreted so that the broker is mandatory but supposedly represents the interests of both LL and tenant, so the tenant has to pay anyway

The problem with the old system was I was paying a guy who didn’t have any obligation to me. Dual obligations means the broker can at least be sued for a conflict of interest if they hide something or don’t do their job. It’s a step in the right direction.

soperj• 2 years ago

In America, paying lawyers always seems like it's a step in the "right" direction

tdeck3• 2 years ago

I disagree. The problem is that this whole job doesn't need to exist and is parisitic. I've lived in multiple cities and never once dealt with a "broker" when renting an apartment or paid a broker fee, directly or indirectly. This system isn't normal, even in the US.

GenerWork• 2 years ago

While I do agree with the spirit of this, doesn't this mean that any fees that brokers require will be included in the rent?

ForHackernews• 2 years ago

Landlords can shop around and brokers will have to compete on price. A potential renter has no ability to pick a different broker.

voberoi4• 2 years ago

The fee will end up somewhere.

If it's in the rent, it's better to amortize the cost of the broker fee over a year vs. pay upfront.

Between the fee + first month's rent + security deposit (+ sometimes an additional month's rent) it is common to have to front 10K - 20K just to get into an apartment here.

jftuga• 2 years ago

What are typical rents for 2 or 3 bedroom apartments that are located in safe neighborhoods?

standardUser4• 2 years ago

A landlord can't just raise the rent to make up for the loss of this one time payment unless the market will accommodate the higher rent. The idea that it must "end up somewhere" doesn't hold water since the fee offered no value to begin with.

xxpor• 2 years ago

Or the brokers simply go away, like every other city in the country.

hooverd2• 2 years ago

Maybe, but landlords like saving money and might opt to do away with the broker middleman rather than eat the cost.

mikeocool2• 2 years ago

Landlords who have many apartments to rent every year have a lot more leverage over brokers than renters who are generally renting at the very most once a year. So when landlords are forced to pay the fee that have more optionality to negotiate the fee down.

Even now, when a landlord has a lot of available apartments they need to move or when the market is soft (for example during peak COVID), they’ll typically offer a “1 month OP.” Meaning the landlord pays the broker a 1 month’s rent fee, and the broker markets the apartment to renters as no fee. Even if the landlord just roles that into the rent, it’s a savings over the 12-15% fee standard today.

Also, landlords with larger buildings or geographic density are already figuring out that they can rent apartments cheaper with a few salaried leasing agents, instead of paying brokers. If more of them are forced to internalize the broker fee, more of them will figure that out.

xp84• 2 years ago

Not a New Yorker here, can someone ELI5 (briefly, I don't want to waste your time) what function brokers serve other than extracting money from people? I know a real estate agent at least takes care of a great deal of paperwork that must be done correctly in the transfer of title, and shows properties to buyers. But in terms of rentals, I've never needed a third party to do any of that, and I lived in 5 rental apartments in about 8 years. Landlords 'just' list their properties on the Internet, people find said properties and submit applications or go see them at a predefined time. I'm aware of property managers and have dealt with them in cases where the landlord doesn't want to bother interviewing tenants and stuff -- is a broker a subset of these functions? I think of a property manager though as also serving the function of arranging repairs and handling the whole tenant relationship. In my experience, a property manager does charge a percentage of the rent to handle all this, which kind of means it's passed on, but in terms of how the broader market contains competitors who aren't paying a property manager constrains how much it can be fully passed onto the tenant.

zjp3• 2 years ago

No. Rent is a function of supply and demand in the market and not landlord input costs. There are houses in SF that would carry mortgages of like, 8-12k, but can only rent for 4-6k. This is why people say that land value taxes won't be passed on to the renter. It doesn't matter how much it costs you to hold property. Its market value is its market value.

QuadmasterXLII• 2 years ago

any fees that the brokers require will be zero because the owners will tell them to piss off

anotherhue• 2 years ago

Great, now bring back the congestion fee and we can say we live in a better city than we did last year.

el_benhameen• 2 years ago

https://www.nytimes.com/2024/11/13/nyregion/congestion-prici...

As you requested.

crazygringo5• 2 years ago

Seriously, two good pieces of news for New Yorkers today. I'm shocked.

cyberax• 2 years ago

LOL. The effect of this on prices: zero.

hooverd2• 2 years ago

Right, I doubt it lower prices but it will save people money on the buyer side. I don't know how you would lower prices in NYC other than building even more.

kelnos5• 2 years ago

That's the point. Rents should stay more or less the same, but now renters won't have to pay a bullshit fee up front.

Landlords can list their units on whatever listing sites/services for like $500 a pop, and renters won't have to pay $5k-$10k to a broker who did basically nothing for them.

Rents will not go up; rents are a function of what the market will bear, not of a landlord's costs.

535188B17C93743• 2 years ago

Didn't they do this before and brokers found a way around it?

standardUser4• 2 years ago

Good question. I rented my first and so far only NYC apartment in 2021 and I did not have to pay a broker fee. Apparently, I had very good timing...

"In 2020, interpreting a tenant protection law passed by the legislature, the New York Department of State issued guidance that prohibited brokers hired by landlords from charging tenants. The Real Estate Board of New York challenged the restriction in a lawsuit, resulting in a state court overturning the ban in 2021."

https://council.nyc.gov/shaun-abreu/2024/06/11/the-city-what....

rgrmrts2• 2 years ago

The law didn’t pass or was quietly killed, presumably due to pressure by lobbyists representing rental agencies.

beisner2• 2 years ago

This is a win for price competition - the "broker fee" paid by the renter is a classic example of principal agent problems / information asymmetry.

First, the service is being provided to the landlord (listing, tours, etc.), not the client, for all listings these days (I don't know any young person who has ever used a renter's agent, except maybe if it's provided in a relocation package). The renter has no choice in which broker to use to find/transact w/ the property, so there's very little price pressure for these broker fees.

Second the information asymmetry - the terms of the fee are completely opaque in the listings, and are not disclosed basically until signing unless you press brokers earlier. So there's basically no competitive pressure pushing these fees down, since it's basically a "junk fee" from a user experience perspective tacked on at the very end (and not listed on listings), and the landlord - who IS in a position to negotiate on price - doesn't care.

I don't buy the argument that there will be some long-term price hike in rents as a result of this decision - people who rent for 1-5 years already are paying a MASSIVE "net effective" premium for having an additional month's rent tacked on up front - but also it strongly incentivizes tenant retention (e.g. by being more responsive, keeping prices lower, etc.), because the landlord does not want to have to eat a broker's fee next listing.

aclimatt• 2 years ago

Perfectly said on both counts. Rents, unlike broker fees, are highly transparent prices that are far more influenced by market pressure and competition, a win for buyers in a market already very lopsided toward sellers. Because broker fees are disclosed selectively and later in the purchase funnel, buyers (renters) often make less optimal and more expensive choices due to that information asymmetry.

There definitely will be a small spike in the cost of rentals, but 1) it will definitely not be a perfect 12-15% transfer from what the fee costs, and 2) I predict that downward price pressure will bring rental costs around what they are now, especially given the prevalence of no fee units. The cost will likely just cut into landlords' revenue, and anyone claiming prices will rise substantially are probably lobbying on behalf of landlords.

mistrial92• 2 years ago

Whatever lecture this came from needs to get a reality check -- "downward price pressure" on rental units in most of the USA was slowly disappearing until the COVID-19 lockdown, at which time the prices increased dramatically, across the board, in all markets (except maybe the Ohio valley? Mississippi ?). Secondly, AirBnB gave reliable revenue streams to property owners, across the western world, keeping units empty. Third, local government has converged on artificial constraint of construction in many markets.

bsimpson2• 2 years ago

I live in a building primarily owned by offshore investors.

NYC is a place where it's expected you'll always be on a lease - it's not common to go month-to-month after you fulfill your initial obligation (as it is in other cities).

I've heard a common grift here is to offer current tenants awful terms to renew the lease. The broker is banking on you balking, so she gets to tell the owner (who's never met you or even been to the US) "sorry - the existing tenant doesn't want to renew, so you're going to have to pay me to market the apartment again."

nradov• 2 years ago

Absentee landlords always get screwed by their local vendors. Nothing new there. It's routine for property managers to solicit kickbacks from other services that they hire like maintenance and landscaping.

mattzito2• 2 years ago

As someone who rented for 20 years in NYC, this is a bizarre scenario you describe. You deal with a broker during the leasing process, and then after you lease it, you pay the landlord, they have to sign the lease and approve repairs, and are the person with whom you review lease increases. The most arms length relationship I have ever heard or seen is having an admin assistant for the landlord handle all the operational things.

I have never seen a situation where the broker is responsible for the lease terms, because in the end the landlord has to sign their end.

CraigRo3• 2 years ago

Tenants will have more cash each month. Tenants bid up rents to the point of affordability, and they'll become more affordable. Furthermore, there will be more would-be tenants b/c you don't need to save up a for a broker fee -- as long as your income is high enough, you can get a unit, at least in theory. So more competition....

bko• 2 years ago

Of course there's competitive pressure to reduce or get rid of these fees. Plenty of people avoid buildings with brokers fee. Its even a filter in most real estate sites. I personally only looked at no fee brokers in the apartments or amortized the broker into the monthly payments. And for me, only no-fee apartments got my rent.

People aren't dumb and look at an apartment and get quoted $4k a month and when they go sign they realize its an extra $6k broker fee and just open up their wallets like "whoops". It's definitely factored into the price and affects who gets in to the door

BolexNOLA• 2 years ago

We should avoid “caveat emptor” as the status quo when possible, shouldn’t we?

beisner2• 2 years ago

Wonks and experienced New Yorkers aren’t dumb. I too refused any apartment that wasn’t “No Fee”. But only a tiny fraction of the housing stock - especially very few “cheaper” places - are No Fee. And it is genuinely hard to not price anchor on the listed price - especially if you don’t know how long you’re going to live there (aka how much to amortize vs a No Fee)

crazygringo5• 2 years ago

Plenty of people avoid buildings with brokers fee.

Very few units/buildings are no fee. And because so few are, there isn't much competitive pressure to reduce or remove the fees, because it's really hard to find a no-fee apartment that meets your other criteria. Hence, the new law.

rKarpinski• 2 years ago

Plenty of people are surprised by the junk fee and end up eating it.

remram• 2 years ago

It looks like this measure only applies to "real estate agents who exclusively represent the landlord’s interests". "The bill requires landlords who hire real estate agents to pay the agents’ fees themselves".

My read is that as long as a broker works with multiple landlords, you the tenant will still pay them a fee. And it might remain difficult to find available lodging without going through brokers.

SoftTalker2• 2 years ago

No it doesn't mean they can't work with multiple landlords, it means the represent the landlord(s) interests, not the tenants.

If a tenant hires his own agent to find an apartment, that agent would (a) represent the tenant and (b) the tenant would pay for that service.

But I'm not sure what stops the landlords from just raising the rent to cover the broker fees. Unless there's enough competition from landlords who don't use brokers.

paulgb• 2 years ago

Hopefully the actual bill wording doesn’t leave this ambiguous, but I think the intent of “exclusively” here is meaning that they don’t also represent the buyer’s interest (dual agency), not that they have an exclusive deal with the landlord.

kazinator4• 2 years ago

The renter has no choice in which broker to use to find/transact w/ the property, so there's very little price pressure for these broker fees.

How does that change if the landlord pays it? The renter still hasn't chosen the broker.

And either way, it comes from rent money.

This feels no different from pricing that hides sales tax, versus reveals it.

How about getting rid of these fucking agents.

MobiusHorizons2• 2 years ago

I believe the argument is it should put downward pressure on the fees brokers request since the payer (landlord) would be able to shop unlike the current system, where the renter can’t see the price until they have already chosen.

mcherm• 2 years ago

If the party who chooses the service provider is not the same as the party who pays the fee then it is difficult for market forces to operate. Making the same party choose and pay can fix that.

This is a different problem than "the service provided isn't valuable".

dghlsakjg2• 2 years ago

How about getting rid of these fucking agents.

This is what will likely happen with this law.

The prior system was that the person who hired the broker (the property owner) didn't care how high their fee was unless it caused them to lose a lease, since they weren't paying. So the incentive was for brokers to figure out how much money they could charge before they started blowing up deals for the person that hired them. If tenants would begrudgingly pay several thousand dollars to get the apartment, that is what they would charge. It was a race to the price ceiling since the payer wasn't the consumer. e.g. Owners don't care if one broker charges $2k, and one charges $3k, since as long as either can get a good tenant, they don't care.

Now, their pricing structure has to be directly in line with the property owners incentives. Property owners aren't going to swallow paying thousands of dollars to an agent for unlocking a door and processing an application (there are apps for both of those things that get it done for 10s of dollars). Now, it will be a race to the best price for the service. If one agent is asking $3k and the other is asking $2k, the owner will choose the one who is asking $2k, or more likely, save themselves $2k and do the work themselves.

barryrandall• 2 years ago

Making it a landlord cost changes the incentive structure. Landlords now have an incentive to pay agents as little as possible to maximize their profits.

kazinator4• 2 years ago

the landlord does not want to have to eat a broker's fee next listing.

Wouldn't a landlord who doesn't want to pay a broker just not use one? Advertise the place and handle the applicants on their own?

freefaler• 2 years ago

It's good that the prices are more visible. But the price of the rent will mostly be affected by the supply/demand curve.

Year Units Built Population Change (Number)

2019 26,900 -80,967

2020 23,000 +641,579

2021 24,000 -250,184

2022 24,000 -181,326

2023 27,980 -101,984

Last 5 years not much change in supply, but demand varies.

(based on https://en.wikipedia.org/wiki/Demographics_of_New_York_(stat...)

voberoi4• 2 years ago

Links to parts of today's NYC Council meeting where this passed today --

- The Speaker, Adrienne Adams, talks about the bill here: https://citymeetings.nyc/city-council/2024-11-13-0130-pm-sta...

- The prime sponsor, Chi Ossé's, comments on the bill: https://citymeetings.nyc/city-council/2024-11-13-0130-pm-sta...

- A vocal opposing voice, Vickie Paladino's, comments on the bill: https://citymeetings.nyc/city-council/2024-11-13-0130-pm-sta...

addicted• 2 years ago

I don’t know much about the bill at all but knowing that Vickie Paladino opposes it is the best endorsement it could have received in my eyes.

readthenotes1• 2 years ago

I don't live in New York and don't know who Paladino is, but based on this quote (from a link in the comment currently right above yours), she is an idiot

"She believes the bill will force housing units to go unadvertised, limiting transparency and opportunities for tenants"

jmyeet• 2 years ago

This passing is good. This being so controversial and difficult to pass is sad.

This is a fairly simple concept: you should not be forced to pay a fee for someone who does not have a fiduciary duty to you. The broker works for the landlord. The landlord should pay them. Simple.

johnnyanmac• 2 years ago

lots of failed "this shouldn't be controversial" props passed in California. Just shows how unreliable it is to rely on uninformed people to make policy changes.

At least the arguments up top have obvious perverse incentives.

kelnos5• 2 years ago

This being so controversial and difficult to pass is sad.

The controversy is created by the people who have something to lose by it passing, and they somehow manage to fool voters into believing their bullshit "but regular people will be hurt because X!" justifications. And voters for some reason don't look at the background of the people who support or oppose these sorts of things to see where their interests are aligned.

I don't really know how we get to the point where we have an educated, informed electorate, where people are resistant to misinformation, and think critically about what a yes or no vote actually means, filtering out arguments made by people with sneaky ulterior motives.

Personally I think people should be strongly discouraged from voting on issues that they don't understand. When I fill out my ballot (California & SF, so there are always quite a few ballot propositions), I try to do my best to read about each proposition, arguments for and against, and take at least a cursory look at the people doing that arguing, but honestly there are still probably some I should leave blank, as I don't fully understand the consequences of a yes/no.

you should not be forced to pay a fee for someone who does not have a fiduciary duty to you

This is one reason why I'm glad real estate purchase commissions are getting shaken up (the other is breaking up monopoly abuse). The current/previous commissions structure is bonkers.

whamlastxmas• 2 years ago

We need better people to represent us, which means not being captured by a two party system where we effectively don’t get to choose primary candidates, which means something like ranked choice voting.

tamade• 2 years ago

Glad they are ending this notorious NYC grift. Renting in the city is a horrible experience in no small part due to this broker racket

zjp3• 2 years ago

Based. Why the fuck do you deserve $10,000 for unlocking the door to an apartment I found myself?

nxm• 2 years ago

Same thing could said of real estate agents

lolinder3• 2 years ago

Our real estate agent more than earned her commission when we bought in 2021. There was zero chance we'd have landed a house that year without her help, and landing when we did got us a record-low mortgage rate that has more than covered the commission already.

zjp3• 2 years ago

While we’re on the subject of rent seeking industries we should crush: car dealerships.

paxys3• 2 years ago

Once sellers stop paying their commission buyer's agents are pretty much going to disappear. As I buyer I have no need to pay tens of thousands of dollars to someone for the work I'm anyways doing myself on Redfin and Zillow.

JumpCrisscross4• 2 years ago

Why the fuck do you deserve $10,000 for unlocking the door to an apartment I found myself?

Oh, mine didn't even bother with that. He cashed the commission cheque and flew to Paris the night before. True story.

I was so furious about having to pay someone I didn't hire that we almost lost the apartment; I covered the security deposit while my partner paid the broker.

billybones• 2 years ago

Sadly, this looks pretty toothless. The fine for noncompliance is $2k.

Given the average price for an NYC apartment at north of $3k, the cost to a landlord of complying with the law even once looks significantly higher than the cost of the paying the fine.

heroprotagonist• 2 years ago

Except, the first prospective renter can report you, and the second, and the third, and the fourth... all before you get an actual renter.

And more likely, the vehicles these brokers depend on like Zillow, etc, will end up bearing the burden of enforcement more than individual renters reporting to agencies.

crazygringo5• 2 years ago

Not toothless at all. Even if the fine is $2k per tenant, that's way more than the landlord is going to pay to a service to list and show the apartment, which is maybe $500?

Remember, broker's fees don't go to the landlord. They go to the brokers! The only reason landlords use them is because they're free for the landlord.

It's absolutely cheaper for the landlord to hire a service than to pay a fine.

nobody99997• 2 years ago

Remember, broker's fees don't go to the landlord. They go to the brokers! The only reason landlords use them is because they're free for the landlord.

What's more, the way it's worked up until now the landlord has many brokers to choose from. And brokers (especially in NYC) will have at least a dozen different folks who will want pretty much any decent apartment. Which allows the broker to charge outrageous fees because most landlords don't want to deal with the hoi polloi, just the folks vetted by the broker.

As such, the power asymmetry between renter and broker was astounding. Changing this will be good for the renter, that's for sure.

Brokers won't be able to get as much commission per apartment because the landlords will put the brokers on a flat fee annual retainer or something similar, because they have power (because they control the available inventory) to choose which broker(s) to work with.

All in all, it won't be so good for the brokers. Too bad. So sad. /s

adgjlsfhk1• 2 years ago

Remember, broker's fees don't go to the landlord. They go to the brokers!

I'm pretty sure there are landlords that charge the brokers for the chance to show their units. The landlords can advertise rents that are $300 lower (but get a $500 cut of the broker fee), and then can raise the rent by $300 the next year, increasing the chance that the tenant will go to another one of their (or their buddy's) properties and pay another brokers fee.

CraigRo3• 2 years ago

Most people here don't realize that there are two different markets:

1) Free market apartments: with tenants not having to pay broker fees up front, LLs can and will come up with workarounds. E.g. 'move-in-fee' of 5k or a 'move-out' fee. They will be able to charge more, especially on renewal leases.

2) Rent regulated apartments: LLs can't play those games, but they can say 'only available if you hire such and such a broker', or they might only list the apartments on a website that operates on a subscription basis where they get a cut somehow. Or, at the margins, this is a significant cost for money-losing units, so they might just add those units to the list of units permanently off the market.

I do expect brokerage fees to decline somewhat, and this may affect pricing for streeteasy and zillow and the other advertising portals, but this is not going to be a huge change, and is going to hurt a bunch of low-income tenants.

jareklupinski• 2 years ago

only list the apartments on a website that operates on a subscription basis

oh no, that's horrible! what are these websites? just so i dont accidentally click on any, can you give me their names / links

Eridrus• 2 years ago

I think you are misinformed about market rate apartments, very many of them still required you to pay a broker fee of 1-2 months rent on signing.

crazygringo5• 2 years ago

No, because the broker fees never went to landlords in the first place. They don't need to make up for lost revenue or something like that, with the kinds of schemes you're proposing.

What happens now is that instead of a tenant paying $5K to the broker when they rent the place, the landlord pays $500 to a service which lists the apartment in a few places (like StreetEasy) and handles showing the apartment (which can often be offloaded to the super or similar). It's not even a "broker" at this point, it's just a service. Like how with existing no-fee buildings, it's just one more thing the management office does.

I do expect brokerage fees to decline somewhat... but this is not going to be a huge change

Decline? Broker's fees, along with brokerages, are practically going to disappear (for the rental market). I don't know a single person who's actually gotten value out of using a broker, because everyone just finds the apartment they want on StreetEasy or whatever first.

This is going to be a gigantic change. And I have no idea why you think it would hurt low-income tenants? You're removing a huge fee they had to pay.

cute_boi• 2 years ago

They should also make a rule where tenants will get full security deposit if they haven't done anything extreme to the apartment.

paxys3• 2 years ago

Pretty sure that rule already exists.

JSDevOps• 2 years ago

Madness to think your paying someone to you might not have even met $10k for the keys to an apartment you found yourself.

kelnos5• 2 years ago

I never understood why landlord brokers are even a thing in a market like NYC. I live in SF and I've never heard of such a thing here, and we probably have a similar market when it comes to landlords getting to take advantage of high demand when it comes to listing visibility and negotiation.

Why do landlords think they need a broker in order to rent out their units in NYC? I would think demand is so high there that listings on all the regular-suspect listing sites would be more than sufficient to get their units rented quickly and at a price they're happy with.

No-fee listings seem to be a thing in NYC, but appear to be for a small minority of units.

lotsofpulp2• 2 years ago

Good brokers serve as a liability shield from being hit with discrimination claims.

SoftTalker2• 2 years ago

Why do landlords think they need a broker in order to rent out their units in NYC?

In NYC, it probably ties back to organized crime somewhow.

paxys3• 2 years ago

Why do landlords think they need a broker in order to rent out their units in NYC?

Because they know that the fee will be paid by the tenant, so why not?

I live in SF and I've never heard of such a thing here

BTW brokers are very common in SF as well, usually called "leasing agent" or something similar. Every non-corporate rental I ever looked at had a broker involved at some level, e.g. organizing open houses, doing private tours, sending out application forms, vetting applicants, sending out lease agreements. It's just that you as the tenant don't have to know or care because you aren't the one footing the bill.

fsckboy• 2 years ago

my assumption has been that the landlords noticed how much money the brokers were making and they figured why not bring it in-house and get a cut; i.e. the brokers are sharing the commissions with the landlords, and helping ensure there is no competition. My theory is if the landlords cannot make money doing this, they revert back to independent brokers. I don't have proof, but I'm pretty sure something like this is going on, and this law will do nothing. I think broker fees should be banned, and the rents should reflect the costs; if landlords want to hire broker/agents they can.

jakevoytko2• 2 years ago

I never understood why landlord brokers are even a thing in a market like NYC.

NYC is all about optimizing the grift.

Imagine a small-time landlord that owns six 20-unit 6-story buildings across Queens. When 1/3 of their inventory turns over in September (the busy time for apartments in NYC), do you think they want to run all over the borough to 500 showings until they finally get all of the units rented? Do you think they want to hire a staff that will show all the units? Hell no! They can, FOR FREE, just tell one (or several!) brokers, "if you manage to rent this unit out, you get to charge whatever fee you can get them to collect." And then they just need to do some paperwork when the broker finally lands someone.

burnt-resistor• 2 years ago

Now if they just did something about the lies in commercial real estate.

UltraSane• 2 years ago

Any middle man that extracts a percentage of a transaction is parasitic by definition.

harmmonica3• 2 years ago

As someone directly impacted by this (not a broker) just wanted to chime in based on my experience. Typically no fee apartments can get a 10 to even 20% premium on the monthly rent because it’s no fee. Makes sense because as others have said a lot of the inventory is broker-controlled so tenants will pay more in rent to avoid the upfront fee.

My prediction is this will increase rents in high-demand neighborhoods because the prices today in those neighborhoods have been discounted to account for the broker fees. I’m talking the rental rate. Will it go up enough to where it’s more expensive than if there’d been a broker fee? Depends on how long the tenant stays.

rgrmrts2• 2 years ago

I’ve refused to rent in a place that required a brokers fee, and that meant most decent apartments were not available to me. I for one am glad this is finally coming to an end (after the first failed attempt).

Rental brokers are useless, and their fees often exceed 1 month rent (15% of annual rent, so $5k/mo apartment you’re paying first month $5k, deposit $5k, and $9k brokers fee).

throwaway241113• 2 years ago

I own two apartments in Manhattan that I've rented out for over 20 years. I've occasionally assisted close relatives renting out a few other Manhattan apartments for longer. Sometimes I rely on a real estate broker as a middleperson, and sometimes I do the work myself, marketing the apartment as a "no fee" "for rent by owner" rental.

I also own the apartment I live in. But before I owned my residence, I was a renter, and thus for a period I've also experienced the mad crazy dash that is NYC apartment hunting while in the shoes of a prospective renter.

My impressions from my "lived experience" in case anyone finds it an interesting data point:

There isn't much information asymmetry, if any. Most apartments are marketed through brokers, and everyone understands, apartment seekers especially, that the broker will charge a fee that the renter must pay to the broker, and how much that fee is. In contrast, when landlords advertise their apartments without a broker, they specify in the ad that it is on a "no fee" basis. Anyone hunting for an apartment to rent who doesn't understand this at the outset of their search learns it soon enough, and certainly before they sign a lease.

My intuition is the bill requiring owners to pay the broker's fee, if it becomes law, will have little or no effect on the underlying economics. I expect the law will prove to have been mere theater, albeit perhaps theater that was "well intentioned," to borrow from a Mayor Adams' quotation in the Bloomberg article.

When I've decided what rent prices to advertise my apartments for, I've always assumed renters will pay the most they can afford to "satisfice" the apartment characteristics they seek. I've also assumed they will factor any broker's fee into deciding whether they can afford any specific apartment.

Whenever I've marketed an apartment myself, I've advertised a higher price than I would were I to advertise it through a broker, and vice versa. The rule of thumb I've used for how much to add to the monthly rent I advertise when I'm doing it without a broker, is what a broker's fee would be if I were using a broker (which is typically 15% of the first year's rent) divided by 12.

As far as I can tell, the negotiations and transactions that actually have transpired after I've marketed my apartments with and without brokers in the foregoing manner have matched the mental model of the market that I've relied on to estimate what prices to advertise.

If the new bill becomes law and thereby requires me to pay any broker fee myself, I plan to do the reverse. I'll ask for a higher price when I market one of my apartments through a broker than when I market it myself. I also expect the monthly differential I'll choose when doing it myself will continue be roughly the hypothetical broker's fee divided by 12.

mrfumier• 2 years ago

Can't wait they also get rid of these "destination fees" billed by nearly all hotels in NYC.

nobody99997• 2 years ago

Can't wait they also get rid of these "destination fees" billed by nearly all hotels in NYC.

That's not going to happen. Such fees (at least in the US, AFAICT) are in most cities.

Besides, hotels are for tourists. And a tourist's job is to spend as much money as the city can get them to cough up. And that's true of every city/destination.

rangestransform3• 2 years ago

I think hotel prices will go down once they stop housing migrants in them

nicbou2• 2 years ago

Germany effectively banned broker fees in 2015 with the "Bestellerprinzip": the person who hired the agent pays for the agent. In most cases, this means the landlord. The fee is also capped to 2x the cold rent (before utilities).

You also can't charge an agent fee for merely giving someone access to a database, and you can't be both the agent and the landlord, nor the agent and the previous tenant.

Unfortunately, the difficult housing market ended up creating all sorts of other bribes. The most common is the previous tenant selling their furniture for an exhorbitant fee, or straight up requesting a bribe. These are obviously illegal, and you would be entitled to keep the apartment even after getting your money back in court. However rights are of little importance if you don't have the time/energy/means to enforce them. It's also a bad way to start a relationship with a landlord.

German law is firmly on the side of tenants, but sometimes the greed is just too strong, and there is an endless supply of applicants who are willing to compromise.

More info here: https://allaboutberlin.com/guides/housing-scams#scams-by-lan...

switch007• 2 years ago

but sometimes the greed is just too strong, and there is an endless supply of applicants who are willing to compromise.

This is why increasing the supply is so important too. Lawmakers like to overestimate the impact of their laws.

But banning fees is so much easier than building house/going against your paymasters.

We had a similar fee ban in England too. Has it moved the needle on the overall rental situation? I don't believe so

nicbou2• 2 years ago

These are two separate problems. The agents are still useless, and I am glad that tenants don’t need to pay them.

However you are right. We need more apartments. The population is growing and they need a place to live. If you want to solve the aging population problem through immigration, you need to house those immigrants somewhere.

New York City Council Votes to End Broker Fees Squeezing Renters

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