NYC City Council Shifts Broker Fees From Renters to Landlords

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Bill Shifting Broker Fees From Renters to Landlords Is Expected to Pass

The bill’s sponsor Chi Ossé, a progressive City Council member from Brooklyn, said that President-elect Donald J. Trump’s victory showed the urgent need for Democrats to address concerns over the cost of living.

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The New York broker fee system is atypical. In most other cities, landlords pay broker fees for rentals. (Love to be special, don't we)

The real estate industry has strenuously opposed the bill. The powerful Real Estate Board of New York, the industry’s main lobbying arm, has argued that if landlords are forced to absorb broker fees, they would simply pass the cost on to renters by raising rents.
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Something worth following very closely over the next couple of years. Landlords have significantly more negotiating power with the industry than renters do. I'm very interested to see the rate at which the middleman gets cut out entirely given how its easier than ever for landlords and tenants to find each other.
 
Big shoutout to Chi for this! He's been pushing this for at least a year, and I think most renters in NYC are optimistic about this passing.
 
thepixelnation said:
Big shoutout to Chi for this! He's been pushing this for at least a year, and I think most renters in NYC are optimistic about this passing.
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And as stated above, the landlords will factor it into the rent and mark it up further to compensate for the added hassle and expense. Your naivety calls to mind the dipshits who don’t know how tariffs work.
 
As a former realtor myself, good. There are far too many terrible realtors screwing over renters. That will never go away entirely, but this should greatly reduce the practice. The only argument I do buy is that landlords will factor this into the rent. So I expect to see more 18 month leases with a "free month" as an incentive, even though you are going to pay more in the long run.
 
kmp1284 said:
And as stated above, the landlords will factor it into the rent and mark it up further to compensate for the added hassle and expense. Your naivety calls to mind the dipshits who don’t know how tariffs work.
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You're acting like Brokers are an integral part of the rental service, but they really aren't. Obviously there will still brokers in New York City if this bill passes.

New York is in an interesting place right now, where there is a clear leader in NYC apartment hunting (StreetEasy, who is backing this bill), and apartments can be listed and someone puts down their downpayment within a few hours. It's not super common, many can sign a lease without talking to a Broker, or looking at any piece of work they did. Rental companies are becoming more popular than individual landlords, and those companies probably already have someone who does the task of a broker.

I don't think you're wrong that the landlord will factor this bill into their finances. One way they could do that would be not hiring a broker at all.

Other landlords may need a broker to sell a place because they can't do it on their own. But if they can't do it on their own, a rent hike will probably be prohibitive since there's probably a reason that apartment hasn't gone.
 
kmp1284 said:
And as stated above, the landlords will factor it into the rent and mark it up further to compensate for the added hassle and expense. Your naivety calls to mind the dipshits who don’t know how tariffs work.
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I don't think it matters so much if it just becomes factored into the rent (it will). It still helps reduce the requirement that people come up with an extra couple grand at signing time just to move. Moving right now is basically first+last+security+broker fee which when rents are 3K/moand up is a huge outlay upfront. Reducing that by 25% would increase mobility even if they're paying the same as most folks can't easily come up with 12K overnight.
 
I think people are vastly underestimating the bargaining power of landlords in these low vacancy environments too. I don't see any reason to believe that the broker fee the landlord pays won't be much lower than the one months rent that tenants are used to.
 
Or maybe, just get rid of brokers for rentals. There are freaking websites like zillow that everyone uses and I can guarantee whatever the subscription cost is to host the listing, it is significantly cheaper than paying for a broker. It's crazy how entire major cities on the west coast can do without it but cities in the east coast is stuck in the 1900s.

kmp1284 said:
And as stated above, the landlords will factor it into the rent and mark it up further to compensate for the added hassle and expense. Your naivety calls to mind the dipshits who don’t know how tariffs work.
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Property managers and landlords aren't dumb. They aren't just going to pass the broker cost to the rent because then they won't get anyone looking at their apartment. They would look for alternative cheaper way of finding their tenants like hosting it on a website. Any business anywhere would look at ways to cut cost elsewhere first before they pass the cost to customers because the goal of a business is to keep your product competitive. You're the one that's being naive here.
 
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KentXie said:
Property managers and landlords aren't dumb. They aren't just going to pass the broker cost to the rent because then they won't get anyone looking at their apartment. They would look for alternative cheaper way of finding their tenants like hosting it on a website. Any business anywhere would look at ways to cut cost elsewhere first before they pass the cost to customers because the goal of a business is to keep your product competitive. You're the one that's being naive here.
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I don't know that its necessarily naive, ultimate incidence can fall on either side of the transaction depending on the demand and supply characteristics right. In the medium term I imagine that housing supply is relatively inelastic because renters can relocate, so econ101 logic might predict that although future rent will be lower than the rent/annualized broker fee now, the leasers should be able to charge more in the broker-less world than the renters stands to gain.

That being said, I'm not sure that mom and pop landlords are pricing this efficiently lol. The fact that so many other cities can largely do without brokers suggests to me this is all due to some kind of weird friction that we haven't caught up with what zillow should be able to do. Maybe this is part of the reason that professionally managed buildings don't use brokers at all, alongside the fact that their scale enables them to do internally the kinds of vetting that brokers might provide for a small landlord.

Just spitballing, I'm sure some very serious people have thought this one through much more thoroughly 🙃
 
My wife and I are landlords here in Kuala Lumpur, and WE pay the broker fee. I'm not sure if that's the law here, but it's pretty standard.

Part of the reason we even need a broker is because the rental paperwork is FAR more substantial than what we would need if we were in the US.

Still, we paid our broker a month's rent for our new tenants, and we paid half a month's rent for their renewal.

Could we factor that cost into the rent? Not really. We basically had the broker research the market rate for the area and charged accordingly. I guess that means that technically the market rate reflects the broker's fees, but it's not something we gave much thought to.

I don't know how it will play out in NYC, or eventually Boston. I just remember not being very happy to pay a month's rent to a broker when my wife and I were looking for a place in Queens. For the amount of work our broker did, it didn't seem worth the cost.
 
MrDee12345 said:
My wife and I are landlords here in Kuala Lumpur, and WE pay the broker fee. I'm not sure if that's the law here, but it's pretty standard.

Part of the reason we even need a broker is because the rental paperwork is FAR more substantial than what we would need if we were in the US.

Still, we paid our broker a month's rent for our new tenants, and we paid half a month's rent for their renewal.

Could we factor that cost into the rent? Not really. We basically had the broker research the market rate for the area and charged accordingly. I guess that means that technically the market rate reflects the broker's fees, but it's not something we gave much thought to.

I don't know how it will play out in NYC, or eventually Boston. I just remember not being very happy to pay a month's rent to a broker when my wife and I were looking for a place in Queens. For the amount of work our broker did, it didn't seem worth the cost.
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I'm happy you get it and can speak from a landlord's perspective.

American brokers mostly just need to do tours sometimes, or at the very most field texts and deal with some sort of payments. Some renters might not even meet a broker. Often they're a useless middleman, and the landlord hires the broker because they don't have to pay for them.
 
Plus, it would create meaningful competition in the space and service (to the landlord) would become the standard. When the person hiring doesn't have to pay, 1 month rent, the legal maximum, is default. When the landlord does pay, it can create models where brokers compete on price or have different tiers of service - especially since a landlord is likely hiring a broker/agent for multiple units.

For example, I rent out my dad's old place in RI. I pay 75% of one months rent for a "full service" brokers fee in RI, or I could pay $500 as a flat fee for them to take photos and create the listing but DIY the showings. If I had 20 units at 2k each, I can see how I'd balk at paying 40k to a broker to turn over all units every year, as the benefit of being represented by a broker rarely equals 1 months rent. Therefore, I'd expect flat rate or "discount to rent" options to become more prevalent, but then they'd be "invisible" to the consumer. Even it's its passed on, you're not necessarily taking a months rent and dividing it by 12. You might be taking 75%, 1000, or 500, which overall if less than a months rent is still a reduction in housing costs. It doesn't exactly take more effort to market a 3k rental than a 2k rental after all, and I wouldn't be surprised to see more self-marketing, especially for larger owners.

It's been said before, but I still see the biggest benefit is in reducing the cost of moving. First Security and Brokers fee, 3 months rent is hard for many to have on hand, and reducing it by a ⅓ is huge to the consumer, especially since the brokers fee unlike the others isn't returned with the end of your tenancy.
 
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