Yahoo Finance New York Renters May Benefit From Huge Potential Change In Rental Laws
New York City real estate brokers are concerned about a proposed change to city laws that would make landlords responsible for paying brokers' commissions for renting apartments. The broker fees, which range from 10-15% of the first year's rent, have traditionally been paid by tenants. This is different from how brokers' commissions are paid in most cities throughout the country, where the property owner pays the broker's fee.
The current arrangement in New York has been a point of contention for tenants due to the cost. According to Zillow, the average apartment rent in New York City is $3,600. That amounts to $43,200 in rent annually, meaning a broker fee of 10% costs tenants over $4,320, in addition to the first month’s rent and security deposit.
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Paying the broker's commission, the first month's rent and the security deposit can easily cost a tenant upward of $10,000. Many tenants feel that paying a commission to a broker they didn't hire is unfair.
As New York City rents have risen, broker commissions have become progressively higher and more difficult to pay. Many New York renters believe paying a broker's fee, plus the first month's rent and the security deposit, raises the cost of securing an apartment beyond affordability.
Tenants have complained for years about the brokers' fees, but resistance from the city's real estate brokers and landlords has repelled previous efforts to change the current system. In 2020, The Real Estate Board of New York, a powerful lobbying group representing the city's landlords, won a court case that reversed a New York Department of State directive requiring landlords to pay brokers' commissions.
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That victory followed a failed bill to reverse the tenant-paid commission regulation in 2019. Although many members of New York's legislature may have been willing to vote in favor of that bill, it never made it out of committee to a floor vote. However, now, New York City rents are so expensive that even people who make over $100,000 a year struggle to afford them.
That explains why the calls for change have now reached an all-time high. In response, New York City Councilman Chi Ossé, who represents Bedford-Stuyvesant, has proposed a new bill called Intro 360, which would require landlords to pay the commission fees for the brokers they hire to rent their properties. The councilman's position is simple: he doesn't believe tenants should have to pay fees for services provided by someone they didn't hire.
Both the Real Estate Board of New York and the New York State Association of Realtors sprang into action immediately after Councilman Ossé announced his support for Intro 360. Many NYC-based real estate agents have gathered outside City Hall to make their voices heard. Brokers from New York's Corcoran firm have gone so far as to show up wearing matching shirts and hats to the protest.
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They perceive an immediate threat to their livelihood. Apartment commissions have always been a vital revenue source for brokers. Now that home prices and interest rates have surged high enough to slow down buying activity, those apartment rental commissions are even more valuable. Corcoran broker David Kafko acknowledged this when he told Slate Magazine, "If this passes, we won't be able to afford to live in our own communities."
Considering that renters outnumber landlords in New York by a large measure and Intro 360 is up for a vote by the City Council, it might seem like Kafko and his fellow agents have no chance. However, this is New York City, and politics is always complicated. Current Mayor Eric Adams is a former real estate agent with close ties to the industry.
Slate Magazine reports that Adams recently attended a Real Estate Board of New York event and said he would veto Intro 360 if it reached his desk. That leaves the bill's fate squarely in the hands of the City Council, where it currently sits just one vote short of a veto-proof majority. In the meantime, New York City's agents, landlords, and renters eagerly anticipate the result and plan their next moves.
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