Despite protests from its real estate lobby, New York City will ban mandatory broker fees through the FARE Act, which was passed on Wednesday, November 13. The bill passed by a vote of 42 to 8, ensuring it could not be vetoed. After this legislation takes effect in six months, New York City tenants will no longer have to pay the commission of a real estate agent before moving into an apartment.
A Prohibitive Added Fee for Renters
Currently, New York City tenants pay fees up to 15% of an apartment’s annual rent, even if the real estate agent was hired by the landlord. The City Council’s decision is intended to stop landlords from placing the burden of these fees on the tenant, though they may still have to hire their own representative in some cases. Effectively, tenants will not have to pay for brokers who represent the landlord.
An Immensely Popular Bill
Outside of the real estate lobby, the new legislation has extensive popularity among New York City residents. The legislation was promoted on social media and by various influencers, an uncommon occasion for legislative decisions. It makes sense, as almost two-thirds of households in the city are renters who stand to benefit from avoiding these added fees.
“They spent hundreds of thousands of dollars to lobby our politicians to try to kill this bill and try to force you to pay broker fees,” Democrat Councilmember Chi Ossé said at a rally on Wednesday. “But you know what we did: we beat them.”
The Opinion of Real Estate Agents
Real estate brokers and representatives hold a different perspective, suggesting it could destabilize the market that employs more than 25,000 agents.” The broker fee arrangement in New York originates from a time when agents actively published listings and worked with tenants directly, but in the current day, agents largely operate online.
Changes in the Real Estate Market
During a City Council hearing this summer, speakers expressed frustrations over paying for an agent to simply open a door or provide them with a code to a lockbox. Nowadays, agents rarely work directly with tenants, as many rely on virtual or self-guided tours introduced during the COVID-19 pandemic
“In most businesses, the person who hires the person pays the person,” Agustina Velez said. She apparently paid $6,000 to switch apartments. “Enough with these injustices. Landlords have to pay for the services they use.”
Arguments Against the Act
Brokers opposed to the FARE Act argued that their role includes conducting background checks, organizing in-person viewings, and facilitating communication between landlords and tenants.
“This is the start of a top-down, government-controlled housing system,” said Brown Harris Stevens broker Jordan Silver. “The language is so incredibly vague, we actually have no idea what this would look like in the world.”
In opposition to the bill, the Real Estate Board of New York further suggested that landlords would simply add the cost of these fees into monthly rent, resulting in increased costs for tenants over time.
A Better Way Forward?
Despite this argument, many New Yorkers felt that this would be more practical since the high up-front cost made it prohibitively difficult to move in the first place.
“From the perspective of a tech investor and business owner in New York City, the more we can do to make it cheaper and easier for talented young people to come here and stay here, the better off we’ll be,” Bradley Tusk said in a statement supporting the bill. “Anyone who has paid 15% of their annual rent in brokers fees for someone to let you in an apartment for 10 minutes knows the practice is nothing more than legalized theft.”
