In a guidance effective January 31st, 2020, New York State has effectively eliminated the exuberant broker fees that have plagued any New Yorker apartment hunting in the city. One of my most frustrating memories about moving in NYC was having to shell out for 3 months’ rent (first, last and deposit) and on top of that 15% broker fee. When I was looking to find my first apartment in Manhattan at 24-years-old, the monthly rent of $2,000 meant I had to come up with $9,600 just to move in, and $3,600 of that was just money thrown away to the real estate agent who was kind enough to answer my Craigslist email and show up at the apartment with the keys.
When I was looking to find my first apartment in Manhattan at 24-years-old, the monthly rent of $2,000 meant I had to come up with $9,600 just to move in
As of January 31st, according to the NYT article, “Brokers can still collect a fee, the state said in the revised rules, but it must be paid by the landlord unless a prospective tenant hired them to help find an apartment.” There is an obvious pushback from the real estate agents, arguing that the fee will be paid by landlords who will just include the fee into the monthly rent. While to some degree it’s going to become a reality, landlords are in a way better position to negotiate the fee as they have the option to show the apartment on their own. Whether by negotiating the fee they pay to be lower than 15% annual rent or by showing the apartment themselves, it will promote more competition meaning lower costs of moving. Ideally, it will also increase transparency. Apartment hunters in NYC, knowing that it is illegal to charge a fee can compare monthly rent apples to apples. I cannot tell you how many times I have found a “no fee” apartment, but after doing the walkthrough being informed that actually there is a fee.
“The bill has had one intention: To make it more affordable to rent an apartment in New York City by asking one thing—for the landlords to pay for the people that they hire”
OK, but the ruling’s point is not to relieve my ire over shelling out thousands of dollars on broker fees over the years. The point is to drive down the total cost of moving into an apartment, particularly for lower-income families and individuals. Manhattan Councilmember Keith Powers, who introduced the bill said: “The bill has had one intention: To make it more affordable to rent an apartment in New York City by asking one thing—for the landlords to pay for the people that they hire”. This rings true. The broker fee is a huge obstacle for young individuals searching for their first apartment, and particularly those with a low-income, trying to improve their current situation.
The Real Estate Board of New York released the following statement:
“We are aggressively pushing back on the Department of State’s misguided interpretation that will have a devastating impact on hard-working real estate agents, owners, and renters throughout New York State. If enforced, this guidance would result in higher prices for New Yorkers as building owners include commissions into rents and dramatically cut the incomes of tens of thousands of agents who provide a valued service in helping people find their new homes.”
Hopefully, the state sticks with their gut on this one. I have only lived in a handful of cities, all in the Northeast, but it seems that the extremely high broker fees are uniquely a New York problem. Browsing listings in Philadelphia, DC, Atlanta, or Miami, there is no mention of a broker fee. If it works there, why can’t it work in NYC?
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