by Shloma Hecht, Licensed Real Estate Salesperson
On June 11, New York City’s Fairness in Apartment Rental Expenses (FARE) Act went into effect. The new law prohibits landlords from passing on broker fees to renters. Instead, if a building owner hires a broker to manage their listings, that owner is responsible for paying the broker’s fees themselves. The intention here is admirable – to protect renters by lowering the high costs associated with moving.
Only problem: it’s misfiring terribly.
In the week since FARE was enacted, the average rental cost shot up 15%. Rather than absorbing broker fees themselves, landlords are simply padding rent prices to make up for the fees they’re now paying out of pocket.
As a broker, I’m watching this law backfire in real time. Prospective tenants are asking me if they can pay lower rent plus a separate broker’s fee, since it’ll be less expensive for them in the long run (which, of course, is now illegal). Landlords are hurting from it, too – for many, paying the upfront costs of broker fees on multiple units is a difficult blow to absorb.
Even more problematic, listings are being pulled in staggering numbers. The day FARE went into effect, 2,000 listings were removed from StreetEasy. Inventory nosedived 30%. Landlords want us agents to provide them with tenants, but don’t want to pay our fees (which is how we make our living). This transfers the burden onto tenants to find and hire brokers on their own, in order to learn about available apartments. Some are predicting the rise of a “shadow market” operating outside the listing platforms. It’s a lose-lose-lose situation.
We all know rent in our city is extremely expensive. It’s important to look at strategies for making rent more affordable, but you have to consider the actual context. Politicians pass bills from Albany, but they’re not on the ground, and they don’t understand the dynamics at play.
To a lot of people, this situation was completely predictable. Many building owners operate on surprisingly tight margins. As for brokers, people often assume they’re making a killing, but many are just getting by.
We need laws and politicians who really understand how the city operates, so we don’t have more bills like the FARE Act, that hurt the same people it was supposed to protect.
Why should tenants pay broker fees? Landlords just found another excuse to raise rents. Landlords would have raised rents anyway.
I as well as many others dont use brokers to find apts
As long as it sounds good, pass it. Second- and third-order effects? Fuggedaboudit.
Market prices – unencumbered by government regulations – offer the fairest prices.
There are landlords looking to get rid of either bad tenants or low paying tenants and the landlord is willing to pay brokers fee to brokers who find an apartment for tenants he doesn’t want.
and the brokers will represent the renters (and get paid by the renters), and then the renters will get a better deal on rent or a better place to live, bc now they have the brokers on their side and not on the landlord’s side, and the broker will show them listing that are better for them, rather then better for the landlords.
Which means the landlords will now have to rent better apartments or better prices to get tenants
Just a thought.
Dear Mr. Hecht, You see seem like a knowledgeable person who is looking out for the shechuna and its growth. Please address the fact that landlords are asking CASH on top of the asking price. THIS IS ILLEGAL and can be reported. They would never ask the goyishe tenant to do this. I understand some apartments are way below the going rate but this is not a hotel. You win on some units and “lose ” on others.At this point EVERYBODY’S rent was increased as of two weeks ago so why are they doing this shady practice. THIS MUST STOP… Read more »
imstead of telling us the issue most are aware of, why don’t you list some clear ways that this could be fixed?
Of course . Another liberal regulation that sounds good only hurt the people. The incredible thing is that people vote for this again and again .
As an agent myself, I can tell you that most landlords have no issue paying the broker fee—it makes the most sense, especially since the broker was hired by the landlord. Why should the tenant be the one to pay?
The only real exception is with rent-stabilized buildings, where rents are so low that the owner is often barely breaking even or even losing money. In those cases, there’s more of an argument to be made. But for free-market, marked-up units, it’s hard to justify making the tenant cover the cost.
Who said that it needs to be a full month price? Make it flat fee or low % from the rental agreement… today everything can be managed in one platform with a small fees…. Sorry but your profession is outdated
I’m also a real estate agent – and this horrible broker fee only made it worst for everyone!!!
You might be new to this, but the current law isn’t actually hurting that many people. Most landlords already cover the broker fees for free market units. What’s likely affecting you more is that you primarily work with rent-stabilized apartments, where agents often charge tenants large fees—something that many would argue isn’t exactly fair or ethical.
As an agent myself, I believe the law should have introduced a cap rather than applying a blanket rule across all unit types.
The bill was pass by NYC council and was sponsored by a Crown Heights council member who you have endorsed, enabled and have taken lots of pictures with!
Some lessons you are learn:
Stop supporting and enabling politicians who hate Jews
Remember your last essay calling landlords greedy, now the hand that feeds you is no more.
Who would that be?
New York seems to be one of the only cities that needs the FARE Act, the other being Boston. Admittedly, I’m no expert in the field, and I don’t have the proper tools to search this type of stuff, so I can’t confirm if Boston is or not. But it seems that the common practice everywhere else is that the burden of paying the broker’s fee is whoever hired them, it’s simple, if I don’t have the time to look for an apartment or to look for tenants myself, I should be the one to pay the costs. Tenants aren’t… Read more »
The reason NYC market is like that is because rent stabilization is keeping inventory down. Other cities don’t have this issue.
Seems that landlords always charge the highest amount the market can bear. If they feel that units will rent they’ll keep raising prices. If they are worried that they’ll be empty they can lower prices and/or pay brokers to market them. The fact is that brokers were not providing any services to tenants besides unlocking doors and saying “let me get back to you on that” to questions. You may have felt that you were hustling so hard because you were competing with other brokers to unlock doors and collect thousands of dollars, but that doesn’t change the fact that… Read more »
Brokers never provided anyone with thousands of dollars worth of value. Prospective tenants always need to fight to find an opening — whether it was ideal for them or not — and landlords never struggle to find tenants. Just get rid of the middleman altogether, and everyone will be happy. This is a step in that direction.
Of course the leaches, aka brokers, won’t be happy
Shame on brokers! They put in maybe fifteen minutes of work and collect a thousand dollars for allowing you to see the apartment. Never seen such a well accepted systematic ripoff
why is there a need for agents during this time most of the work can be done electronically. obviously the agents want a job but seems AI and the internet will come for their job soon.
Another “profession” can now go the way of Travelocity. The only thing more useless than broker fees, are realtor fees… another middleman making houses more expensive while providing little benefit for their service fee of a percentage of the house sale.
No offense to the writer but I think he is missing the point. The writer of the article is blaming tenants for a landlord issue. Never understood, why should the tenant need to pay a broker if the work the broker is doing is for the landlord? Meaning the broker was hired to take care of the landlord’s job in this tenant-landlord business deal seeing that the landlord did not have the time to actually find a tenant and file the paperwork. If a tenant did not have the time to look into apartments they should pay their own broker… Read more »
Sometimes a broker is not hired by landlord. The broker takes the listing placed in the newspaper by the landlord and act as if he is hired.