Broker fee bill before New York City Council would shift the tab from tenants

Arielle Savoy, of Baldwin, and her would-be roommate had 15 minutes last month to view a two-bedroom, one-bathroom walk-up in Manhattan’s East Village. Then the broker, who works for the landlord, showed them out so other prospective tenants could take a tour.

Ultimately, the duo decided to take the apartment — and had to pay the broker $2,100 on top of $2,100 for a security deposit. All of that was before the monthly rent of $4,200 was due.

“It was kind of ridiculous. She rushed us in and out of there because she had other people to show the apartment to that day,” said Savoy, 22, a paralegal for a nonprofit, who moved in this month. “I don’t even remember her name, but I just remember that I had to pay her so much money for, like, 15 minutes of seeing the apartment and then getting rushed out.”

Savoy’s experience reflects a dilemma New York City tenants can face: Shoulder the broker’s fee or select from a vastly diminished housing market, in a city where the city housing vacancy rate is 1.4%, the lowest since 1968.

A bill being debated Wednesday before the New York City Council would shift a broker’s fees to be paid by whoever hired the broker — which is typically the landlord. The legislation is called the FARE — or Fairness in Apartment Rentals — Act, the latest effort to end broker fees for tenants in New York City, one of the few places in the nation where those who don’t hire brokers are responsible for paying.

“Finding an affordable apartment in New York City is a nightmare — and the towering cost of rent is just the beginning,” Councilman Shaun Abreu, one of the bill’s sponsors, said in a statement sent by his office. “On top of application fees, the security deposit, and first and last month’s rent, the real kicker for prospective renters is the broker fee, which can be thousands of dollars for a service the tenant never sought out. Whoever hires the broker should have to pay for the service.” 

The council has tried and failed to pass a bill capping broker fees. In 2020, the state issued a rule prohibiting tenants from being charged broker fees if the broker is hired by a landlord. The city’s Real Estate Board of New York successfully challenged the ban.

The board opposes the legislation. A fact sheet sent by its press office predicted that landlords would likely hike rents to market-rate tenants to offset costs, and there would be less availability to schedule viewings if landlords themselves had to show apartments and process prospective tenants. The sheet also says the legislation would hurt brokers’ livelihoods and put rent-regulated units at risk for greater disrepair, as landlords of those properties would not be able to legally increase rent to offset the costs.

Brian Hourigan of BOND New York, a residential brokerage firm based in Manhattan whose fees range from about a month’s rent to 15% of annual rent except in no-fee offerings, said landlords would need to raise rents if the legislation passes. REBNY put Newsday in touch with Hourigan.

“This could be the single most precipitous rent increase that New York rents have seen in quite some time,” said Hourigan, who grew up in Bethpage.

For rent-regulated units, he said, an unintended consequence might be that landlords who can’t legally raise the rent might decide to keep units off the market, because it’s cheaper than renovating or bringing them up to code, leading to less available housing. Or landlords might offer a unit only through word-of-mouth instead of advertising it. 

Savoy said she objects to paying a fee for someone she did not hire and received little help from, but she and her roommate had little choice for their apartment, her first in Manhattan. She hopes the legislation becomes law.

“I think that would be great, because I had no other way of seeing the apartment,” she said, adding: “I obviously wouldn’t have hired someone with such a high broker’s fee.”