A row is brewing in New York City between renters and real estate brokers, over who pays the thousands of dollars in fees when an apartment is rented.
On 12 June, lawmakers in New York met to discuss the Fairness in Apartment Rental Expenses act (Fare act), which would require the person who hires the broker to pay the broker fee.
It prompted an unlikely protest: hundreds of brokers from some of the biggest housing companies in the US taking to the streets to argue against a bill that would mean renters no longer pay thousands of dollars in fees.
New York City is one of the few cities in the US where tenants can be forced to pay broker fees – which are typically 15% of annual rent – despite a landlord having hired the broker.
Amid a housing crisis that has seen rent increase amid a lack of available affordable housing, it means people finding new rental accommodation can expect to spend thousands.
In other US cities, if landlords hire a broker to find a tenant for a home, the landlord pays the broker for that service. Not so in New York, where the median rent in Manhattan in May was $4,250, according to a report by real estate company Douglas Elliman. That means that for a typical New York apartment, a renter could expect to pay a $7,650 fee to a broker they never hired and, in many cases, had never met until the broker showed them their apartment.
“New York is facing a pretty historic homelessness crisis, housing costs are through the roof and homelessness is through the roof,” said Cea Weaver, coalition director at Housing Justice for All, a tenant advocacy organization.
“Because of brokers’ fees, you might be able to pay your rent, you might have rental assistance that’s going to help you pay your rent, but you can’t find any way to use it because there’s a prohibitive $10,000, $15,000, $20,000 fee on top of the already very high moving costs.”
Weaver added that the fees could contribute to the homelessness crisis.
“It’s a very huge barrier to actually exiting shelter for low-income and working-class New Yorkers who are already just struggling to make ends meet.”
The pro-broker protest earlier this month saw realtors from Corcoran, described by Fortune as a “$20 billion real estate empire”, and Douglas Elliman, a real estate company valued at $100m, gather outside City Hall.
“Everyone in attendance was gathered to object to a New York City Council bill that would save tenants from having to pay fees to real estate brokers who were hired by landlords – ie, brokers that tenants did not hire,” Salon reported.
“In other words, it was a rally for keeping the fees on the backs of tenants.”
Chi Ossé, a city council member who represents parts of the Bedford-Stuyvesant and Crown Heights neighborhood in Brooklyn, introduced the Fare act in June 2023, and was present at the 12 June hearing.
“People can’t afford their rent and people certainly can’t afford an additional $2,000, $3,000 to a broker they never hired,” Ossé told a crowd that supported the Fare act, the Brooklyn Paper reported.
More than two-thirds of New Yorkers rent their homes, and the real estate lobby has claimed that, if enacted, landlords would increase rent to cover the cost of having to pay their own broker fees. But in his opening statement at the hearing on 12 June, Ossé argued otherwise.
“Rent is determined by market forces, not landlords,” he said, according to the Brooklyn Paper.
“If a landlord could magically raise your rent by several thousands of dollars tomorrow, he would have done so yesterday.”
The broker fees targeted by the Fare act were previously banned in 2020, but after a lawsuit led by the Real Estate Board of New York (Rebny), they were reintroduced. Four years later, the organization, which is a regular donor to political campaigns, is similarly focused on keeping broker fees in place.
“The Fare act would result in higher rents and less housing access for New Yorkers, while jeopardizing the livelihood of hardworking agents,” a spokesperson for Rebny said.
“The legislation would also do nothing to address New York City’s housing supply crisis, which has put increasing pressure on rents.”
For now, it looks like renters and tenant advocates could be preparing for victory. The Fare act has 33 supporters on the city council, the City reported, one away from a veto-proof majority. Ossé and others are now waiting to see whether Julia Menin, the chair of the city council’s committee on consumer and worker protection, who has not said whether or not she supports the bill, will bring it to a vote.
Cea Weaver said the decision to take broker fees away from tenants should be straightforward.
“It’s unique to New York. There are many, many, many other cities that regulate brokers’ fees. And the Fare act is pretty simple. It’s just like: the landlord’s gonna hire someone who’s providing them a service to market the unit, and put the unit on the marketplace, and therefore the landlord should pay it,” she said.
“It would make a huge difference in giving renters some predictability and stability.”
