The City Council is considering a major change to the fees tenants pay in order to land apartments.
The Council held a hearing Wednesday on a bill that would make landlords who hires brokers pay their fee, instead of charging it to prospective tenants.
What You Need To Know
- The Council is considering a bill to prevent landlords from charging tenants a brokers fee
- Brokers with the industry group, the Real Estate Board of New York, said landlords would raise rents to pass on the cost of brokers
- Broker fees are typically a month rent or can be as much as 15% of the annual rent
Prospective tenants would still be able to hire a broker on their own, as they can do now.
Broker fees can typically costing a month's rent or 15% of the annual rent.
Councilman Chi Ossé of Brooklyn said these fees are a barrier to finding a place to live.
He dismissed the complaint from brokers that landlords will cut back on using their services.
"If it is a valuable service, like we all agree, then people will still be hiring a broker," he said. "That's how it works in every other industry and how it should work in this industry, as well."
Other councilmembers backed the bill as a matter of fairness.
"If they had made the decision to bring somebody into a transaction, why is the other party in this case required to pay for that service, that they have not brought into this equation?" Councilman Keith Powers said.
But brokers belonging to the industry group, the Real Estate Board of New York, argued landlords would just cover the fee by raising rents
"They're going to charge the tenant, they're going to amortize it over 12 months and the tenant is going to pay that increase," Brian Phillips, a broker with Douglas Elliman said. "On the lease renewal, the tenant is going to pay more because the lease renewal is based on the last rented price."
Tenants would lose negotiating power over the broker fees, Bess Freedman, CEO of Brown Harris Steves, testified.
"Almost 50% of units are no-fee apartments," Freedman said. "This is all negotiable."
One broker argued that upfront costs for tenants are high because housing demand is outstripping supply.
"We don't build apartments anymore because politicians don't understand developers take risks to build apartments and you don't want to incentivize them to do so," Gary Malin, chief operating officer of The Corcoran Group, said.
Mayor Eric Adams on Tuesday discussed the bill, saying that he moonlighted as a real estate agent while working in the NYPD.
"We're going to look at the legislation. no one wants to have tenants pay what they shouldnt have to pay, but real estate agents do a lot of work," Adams said.