NYC broker fee law requires landlords to cover the cost, not tenants
NEW YORK -- Broker fees in New York City will be covered by landlords, instead of tenants, under a new law passed Wednesday by the City Council.
The Fairness in Apartment Rental Expenses, or F.A.R.E., Act received 42 of 51 votes, a veto-proof majority.
Under the bill, whoever hires the broker will have to pay them. In most cases, that is the landlord.
There is a 30-day window for the mayor to sign the F.A.R.E. Act into law. If he doesn't, it still becomes the law at that point. It will take effect 180 days after that.
Debate over NYC broker fee law
The bill lifts the financial burden from apartment hunters who often pay thousands of dollars in fees before signing a lease.
Councilmember Chi Ossé, who introduced the legislation, has promised it will result in more affordability for tenants, and that most cities around the country already follow this payment structure. New York's system is unique - it's one of the only cities where the landlord hires the brokers to list and show the apartment and then the tenant has to pay for it. Typically, it's 12-15% of the annual rent, but there's no cap.
When you add on first month's rent and a security deposit, that means renters frequently have to spend $10,000 to secure a typical one bedroom.
"What other industry does that exist where someone else orders something, and then someone else has to pay for it," said Ossé.
"It's really monumental, what Chi was able to do," Council Member Chris Marte said. "Since we're talking about real estate, he just broke a monopoly. These brokers control our lives and where we can live in the future."
Real estate groups say landlords will raise rents to cover costs
Ossé has faced fierce opposition from real estate groups who say his proposal will have unintended consequences, including increasing rent because landlords will just back the cost of the fees into the rent.
"Almost 50 percent of the units are no-fee apartments. Nobody's forced to. This is all negotiable," Brown Harris Stevens CEO Bess Freedman said.
"New York is its own animal, right? And I think it's a misconception to think, if this bill would pass, it would just automatically become what the rest of the country has," Ryan Monell, with the Real Estate Board of New York, said.
In May, the Real Estate Board of New York refused to support a fee cap. Council Member Vickie Paladino agrees with the real estate lobby, calling Ossé's bill "dumb."
"I sincerely hope that the real estate industry sues to have this law stopped," she said.
New York City Mayor Eric Adams weighed in on proposed legislation Tuesday, saying the bill has the right intention, but sometimes good intentions do not yield the intended results. Adams expressed concern the proposal would transform a one-time cost into a permanent rent increase for tenants.
Ossé says that would be illegal for nearly half of the city's rent-stabilized apartments, and he believes the market forces set the rent, not landlords.
"Forty-seven percent of homes for tenants in New York City are rent-stabilized, so it would be illegal for landlords to bake the fee into rent in that case. In addition to that, rents are set by market forces, not by what landlords could charge. If your landlord could increase your rent tomorrow, they would have done so yesterday. They're not holding back, who are we kidding," Ossé said.