What would it take to finally ban broker fees in New York?

A new bill has put the spotlight back on a decades-old fight for the city's beleaguered renters.

What would it take to finally ban broker fees in New York?
In a city with a chronic housing crisis and unaffordability crisis, the added fees can be a major factor in keeping housing out of reach. (Photo by Florian Wehde on Unsplash)

By Virginia K. Smith

Remember that brief shining moment in 2020, when it looked like New York renters might never have to pay broker fees again?

You’d be forgiven if you don’t, because it didn’t actually happen.

In February of 2020, state regulators passed an addendum to 2019’s blockbuster Housing Stability and Tenant Protections Act, mandating that renters could not be charged a broker’s fee unless they’d hired the broker themselves. (A standard broker’s fee in the city is 15% of the apartment’s annual cost, meaning a $2,000/month apartment could come with an up front broker’s fee of $3,600.)

Like a lot of optimistic legislation from 2020, the broker fee ban was walked back in pretty short order, courtesy of a temporary injunction by an Albany Supreme Court Judge in response to a near-instantaneous lawsuit from lobbying group the Real Estate Board of New York. A month after that, New York State issued a new guidance clarifying that broker fees were back on the menu.

That hasn’t stopped New York’s left-leaning legislators from trying to get rid of the notoriously onerous fees, which are widely considered to be a major factor keeping apartments out of reach for New Yorkers (and can feel especially galling in cases where a tenant who sought out an apartment themselves and never once interacted with an actual broker).

In spring of 2021, state Senators Julia Salazar and Jabari Brisport introduced a bill clarifying the intent of the original ban and once again barring tenants from having to pay fees, though as of now, the bill still hasn’t made it past the Senate Judiciary Committee.

This summer though, the anti-broker fee fight has gotten some new juice.

Back in June, City Councilmember Chi Ossé introduced a bill that would require a broker’s fee to be paid by whoever actually hired the broker, whether that’s the tenant or the landlord.

Dubbed the FARE Act (short for Fairness in Apartment Rental Expenses), REBNY announced its opposition to the bill before it was even introduced, The Real Deal reported. Following a memo last month sent by REBNY to City Council members claiming that a broker fee ban would harm both brokers and tenants, Ossé’s team issued a “corrected” version of the memo calling REBNY’s language “intentionally misleading.”

Could a ban really make things cheaper?

One of the biggest concerns that comes up any time there’s talk of a broker fee ban is the obvious one: couldn’t landlords simply pass the expense of the fee right back onto tenants by raising the rent?

Ossé has previously said that the bill would discourage landlords from raising rents when negotiating renewals, because replacing a tenant would mean the added expense of hiring a broker, per The Real Deal. (Ossé's office was unavailable for comment.)

Of course, plenty of no-fee apartments already exist on the market, and tend to be heavily advertised as such. But in a lot of cases, they also come with the cost of the fee already baked into the rent.

“I work with a landlord who decided to list an apartment [without increasing the rent from] the previous tenant, but the new tenant would pay the broker fee,” said Mihal Gartenberg, a broker with Coldwell Banker Warburg. “No one was biting.”

Eventually the landlord decided to pay the fee themselves but raise the cost of monthly rent.

“We raised the rent and made it a no-fee apartment, and two people who had come to look at the apartment before and didn’t take it, then came back and rented it,” Gartenberg told The Groove.

“You can take lower [rent] and pay the fee, or you can pay higher rent and the landlord pays [the fee],” she added. “It’s this interesting conundrum where people think something is free or not free. They’re paying for it whether they know or not.”

In London, a blueprint for a ban

After a years-long campaign, a similar ban on “letting agent fees” went into effect in London in June 2019. The Tenant Fees Act also required that all costs of a property be advertised up front, and negotiated a slightly lower maximum for security deposits.

The move was heralded as a decisive win for tenants, who would no longer have to pay hundreds of pounds of extra fees along with the already-high costs of renting. But little analysis is available on the long-term impacts of the ban in the past four years, and fee or no fee, London renters are still battling spiraling rents and chronically low supply (sound familiar?).

Stateside, the Fare Act has majority support in the City Council, The Daily News reported, in spite of intensive backroom lobbying from REBNY. Ossé is currently working to get the bill heard in the Housing and Buildings Committee, and it would likely need a stamp of approval from Mayor Eric Adams to actually become law. Unless of course, the City Council wants to override another mayoral veto of one of its housing priorities.

We’re never going to turn up our noses at landlords paying for expenses they’ve been shadily foisting onto renters, obviously. Or at tenants saving money any way they can. But in a rabid market, what’s technically allowed and what’s actually happening on the ground can be two very different things.

Consider just last year, when the rental market was so wild that we were forcibly introduced to the concept of “cuck money” — tenants offering to pay more than the advertised rent just to lock down an apartment.

“2022, was insane,” Gartenberg said. “I always do no-fee and prefer for the landlord to pay. But every single apartment [I worked with] except for one ended up being a multiple bid situation where the consumer paid the broker fee as part of the negotiation.”