NEW YORK (AP) — It’s a familiar and painful experience for legions of New York City renters: Before moving into a new apartment, a tenant must first pay thousands of dollars in fees to a real estate broker. real estate, even if that person is employed. from the owner.
Large one-time payments, known as broker fees, are ubiquitous in New York but almost unheard of elsewhere. In most other cities, landlords cover the commission of agents who work on their behalf.
But lEGISLATION backed by a majority of the New York City Council would require landlords who hire agents to pay their fees, marking a potential sea change in one of the nation’s most expensive housing markets.
Renters, who make up more than two-thirds of the city’s households, are hailing the latest attempt at reform. At a hearing Wednesday, many New Yorkers recalled paying exorbitant fees to brokers who seemed to do little more than open an apartment door or direct them to a lock box.
“In most businesses, the person who hires the person pays the person,” said Agustina Velez, a house cleaner from Queens who said she recently paid $6,000 to switch apartments. “Enough with these injustices. Owners must pay for the services they use.”
But the proposal has drawn fierce opposition from New York’s real estate industry.
Before the hearing, hundreds of brokers gathered to voice their opposition at a rally organized by the Real Estate Board of New York, the industry’s powerful lobbying group.
Through hours of testimony, they warned that the legislation would bring chaos to the rental market and destroy the livelihoods of the city’s roughly 25,000 real estate agents. Many prospective landlords would pass on the costs of paying brokers to tenants through increased rents or keep the apartments off the market altogether.
“This is the beginning of a top-down government-controlled housing system,” said Jordan Silver, a broker with the firm Brown Harris Stevens. “The language is so vague that we actually have no idea what this would look like in the world.”
The bill’s sponsor, city councilor Chi Ossé, said he was moving to act after a recent home search that was “tiring, treacherous and competitive”. Another local official, Brooklyn Borough President Antonio Reynoso, testified that he once paid a $2,500 fee to a broker he had never met.
Their frustration was echoed at Wednesday’s hearing by dozens of ordinary tenants, along with a mix of labor unions, housing policy groups and several prominent business leaders. Critics said paying broker fees serves as a deterrent to those who would otherwise move to the city, while preventing low-income New Yorkers from moving into new homes.
Such broker fees were previously banned in 2020 under a package of tenant protection laws passed by the state. But they were quickly reinstated after a lawsuit led by the Real Estate Board of New York.
Brokerage firms estimate that roughly half of the city’s apartments require a tenant-paid brokerage fee. The price of these fees can vary widely, although the standard amount is 15% of the annual rent. For the average apartment in Manhattan, where the average monthly rent recently reached $4,500, that would amount to a fee of $8,100.
Under the legislation, tenants will still pay brokers they hired directly. The bill’s short language—less than 200 words—requires only that the party hiring the real estate agent pay their fee.
“How the market works is not as simple as a few sentences, like a bill,” said Ryan Monell, a vice president at the Real Estate Board of New York. “It’s a misnomer to compare New York to other cities. This is truly an incredible market.”
Agents are convinced that their jobs are much more intensive than simply opening the door for tenants. Many said they help create listings, review applications, answer questions from tenants and arrange tours at all hours of the day. But some also acknowledged that the current system favors landlords.
“I think it is not logical. The landlord has to pay the listing agent who is working on their behalf,” said Maria Octavio, a real estate broker with the firm of Douglas Elliman. “Because it’s worked this way for many years, landlords are used to it.”
Anna Klenkar, a broker at Sotheby’s, said the industry group — known as REBNY — had contacted her employer after learning she planned to testify Wednesday in support of the legislation. “It feels less like we’re protecting ourselves and more like we’re protecting the landlords, who REBNY also represents,” she testified.
A REBNY spokesman did not respond to an emailed inquiry about whether they had contacted the employer.
Mayor Eric Adams, a Democrat, warned that the law could have unintended consequences. He had strong support in the real estate industry during his campaign and appeared decades ago as a real estate agent while working in the city’s police department.