The bill favors tenants, who have long chafed at having to pay the broker fees, and shifts the burden to landlords in most cases. It has sparked controversy, with politicians expressing support and real estate professionals voicing mixed reactions.
Those in support of the Fairness in Apartment Rental Expenses (FARE) Act, also known as Intro 360, point to the historically low vacancy rates in New York City’s housing market and the difficulties that lower-income New Yorkers face when looking for affordable places to live.
These hardships are severe even without broker fees, which can run as high as 15 percent of the total amount that renters agree to pay in a typical one-year lease, advocates say.
Mr. Ossé presented the measure as a remedy to what he calls an “exploitative system,” in which tenants must pay broker fees when signing a residential lease, even if they never sought to work with a broker or interacted with the broker in any way.
The bill has drawn enthusiastic support from some of the city’s leading officials and unions, including New York City Comptroller Brad Lander; New York City Public Advocate Jumaane Williams; Brooklyn Borough President Antonio Reynoso; Michael Griffith, chief of staff of the New York City Central Labor Council, AFL-CIO; and other officials, community organizers, and activists.
Dissent against the proposal is equally as vocal. A broker with numerous clients in Brooklyn and Manhattan told The Epoch Times that poorer citizens already have access to the city’s Section 8 Housing Choice Voucher Program, and that powerful landlords managing multiple properties will barely notice the effects of Intro 360 if it becomes law.
Hence, small landlords, who tend to live in the same building in which they rent units, will bear the brunt of the bill’s realignment of market dynamics. They, in turn, will pass on a significant part of the burden to tenants in the form of higher rents, defeating the ostensible purpose of the new law.
Housing Market
The impetus behind Intro 360, Mr. Ossé, won the Brooklyn 36th District City Council race in 2021 at age 23, making him the youngest person ever elected to the New York City Council. He campaigned with an endorsement from U.S. Rep. Alexandria Ocasio-Cortez (D-N.Y.) of Queens.In a June 12 City Council hearing, supporters of Intro 360 testified about the New York City housing market and what they see as the necessity of curbing the severe burdens on lower-income residents.
Mr. Lander said the median asking rent for publicly listed apartments is currently $3,500. With rents in this range, a family has to earn $140,000 or more annually to escape the classification of “rent-burdened,” and that figure is twice the 2022 median household income, Mr. Lander said.
Those forces conspire to drive families out of the city, Mr. Lander said. Intro 360 won’t just ease the burden on poorer families but will promote transparency by keeping landlords and brokers from rolling fees for services that tenants never requested into rental costs without specifically identifying them, he said.
Mr. Williams, the public advocate, said lower-income New Yorkers are the victims of a dwindling supply market, even though the city has added 60,000 new homes in the past two years.
“By removing broker fees, this legislation will help the NYC housing market become more elastic, giving tenants more access to housing by allowing them to move easily and affordably,” he said.
Broadening Access
The issue might not have come to a head if tenants in New York City were not stuck paying fees so far out of line with the norm elsewhere, suggested Michael Shapot, a licensed broker and an attorney at the real estate brokerage Keller Williams NYC.“This is a New York City problem. In other parts of the country, rental brokerage fees are minimal. The complaints I hear are that the broker fees ‘are too damn high,’ just like the rents, the cost of groceries, and the price of Yankees tickets,” Mr. Shapot told The Epoch Times.
Mr. Shapot said the issue is complex, and that transferring costs to landlords may not be the panacea that supporters of Intro 360 hope it is.
“Occasionally, I work with a property owner to lease a home, and I always recommend that the landlord pay my fee. The typical result is that the landlord asks a higher rental price to cover the additional cost of the broker fee. And a higher initial rent translates into that much more of a rent increase in subsequent years,” he said.
Nonetheless, the absence of a fee is still likely to expand the pool of prospective renters, Mr. Shapot said. Even a higher rent won’t be a deterrent, simply because the potential tenants tend to look first and foremost at the upfront costs they will have to shoulder.
“No renter wants to go into his or her pocket to pay a landlord’s broker’s fee, and few want to pay a rental broker fee either. The exception is corporate relocation transferees, who are happy to pay for boots-on-the-ground, local expertise,” Mr. Shapot said.
When it comes to the long-term effects of Intro 360 on the market, only time will tell, he said. He alluded to the Tenant Protection Act of 2019, which, he said, in theory, was meant to alleviate tenants’ financial onus going into a deal but, in the end, made it harder to qualify to rent apartments.
“Intro 360 has similar lofty intentions. If it is enacted, we’ll see about the consequences,” he said.
Brokers’ Reservations
When looking at the potential effects of Intro 360, it helps to consider not just the price dynamics of finding and moving into a new apartment, but the long-term behavior patterns of renters, the realtor Ms. Twyford said.“When my rental clients calculate costs, they include the broker’s fee in the costs for their first year. But if they stay longer, then the broker fee will be amortized over time, and my clients feel it’s worth it to them if they get a good deal on rent,” she said.
Ms. Twyford said she sees other factors at work in the constricting market that advocates of Intro 360 say make brokers’ fees especially unpalatable for poorer renters.
“We should be looking at the bigger reason that rents have skyrocketed, and that’s because buying is not affordable. There are tons of empty new buildings that are sitting there and they’re simply tax write-offs,” she said.
Lower-income citizens have access to the Section 8 Housing Choice Voucher Program established under the Housing and Community Development Act of 1978 to help provide affordable living space. Ms. Twyford says that calls the purpose of Intro 360 into question.
“People who are struggling already have different ways to get access to affordable housing from the city,” she said.
“Small landlords who just live in the building that they own will have to deal with this, and that really is unfortunate, because they’re making it more and more difficult for people to own something,” she said.
A Complex Issue
Cara Ameer, a Realtor at Coldwell Banker Vanguard Realty in Ponte Vedra Beach, Florida, said efforts to contrast New York City’s high broker fees, and the practice of requiring tenants to pay them, with prevailing policies elsewhere in the country are misguided, because New York City’s dynamics are unique.“New York City is a unique animal in that the buyer has typically paid the rental commission. In many markets, the landlord/owner pays the commission to both the listing agent and to the agent that procures a renter,” Ms. Ameer told The Epoch Times.
“But is this unfair to buyers and renters in New York? It is important to consider the significant price variations in different jurisdictions. Outside New York, rental commissions may be a small percentage of the first month’s rent, totaling a couple hundred dollars at the most,” Ms. Ameer said.
“In some cases, they are a very modest percentage of the first year’s rent, and all commissions are negotiable, of course. Some owners opt to offer a flat dollar amount no matter how much the property is rented for.”
Hence, shifting the exorbitantly high broker fees from renters to landlords in New York City doesn’t mean it will bring practices in line with those elsewhere in the nation. Rather, it means imposing a drastic new burden on landlords and owners which they will have to absorb, along with property taxes, maintenance and repairs, and insurance, Ms. Ameer said.
She said renters will also suffer in the end.
“I do see that landlords having to pay broker fees will result in higher rents being charged, passing the expense onto renters, so that they will be feeling squeezed either way—whether they have to pay the broker fee when they secure the rental or in the form of higher rents,” said Ms. Ameer.
Mr. Ossé’s office didn’t immediately respond to a request for comment.
