The New York City Council voted to end the city’s decades-old broker fee arrangement where tenants pay apartment broker fees even when they didn't hire that professional to help them find a place to live.
The council passed the bill Wednesday, in a veto-proof majority of 42 to 8, to shift the broker fee burden to the party, typically a landlord, who hires an agent.
High broker fees had become synonymous with apartment living in New York. Boston is another city said to be making moves to do away with the practice.
Between January and September, the average New York renter moving to a new apartment spent on average $13,000 in upfront costs, according to a statement Wednesday from the council. New York’s rental vacancy rate reached a record low of 1.4% in 2023, a city survey released earlier this year said.
More than two-thirds of New York residents rent apartments, with about half of listings involving broker fees ranging from one month’s rent to 15% of annual rent, the council's Committee on Consumer and Worker Protection said in a previous study. That means a broker fee could potentially reach tens of thousands of dollars. For instance, CoStar data shows the average market asking rent per unit in Manhattan's Financial District is near a record high of $5,525. That would mean a broker fee of close to $10,000 based on the calculation of 15% of annual rent.
The council’s vote comes after heated arguments from both sides rooting for and against the bill, introduced by Council Member Chi Ossé.
“The system of forced broker fees is an affront to all New Yorkers,” Ossé said Wednesday in a statement. “The victims of the old paradigm are too many to count. ... This is a win for our city.” Ossé has previously said the average moving cost of over $10,000 in the city is “a burden very few people and families can bear.”
Industry warning
On the other hand, landlords and other industry professionals have argued the bill will lead to higher rents, hurt agents and create a less transparent and less efficient rental search process.
“Wednesday's vote is yet another instance of prioritizing ideology over economic and practical reality when it comes to the city’s rental housing stock,” trade group the Real Estate Board of New York said in an emailed statement to CoStar News. The bill “will make it harder for tenants to find housing, raise rents, and make the hard work of real estate agents even more difficult. REBNY will continue to pursue all options to fight against this harmful legislation.”
New York Mayor Eric Adams still needs to sign the bill for the change to take effect. Ossé's office said if Adams doesn't sign or veto, the bill automatically becomes law in 30 days. If Adams vetoes, the council can still override that because of its supermajority, a spokesperson for Ossé's office told CoStar News, meaning the law will take effect regardless.
“We're going to look at it,” Adams said at a news conference Tuesday before the vote. “Affordability is a real issue in the city. People are leaving the city because it's just too expensive and we need to find ways of ensuring that we get that affordability, but we can't do it with just a knee-jerk reaction. … We just got to get it right, make sure we reach the goals that we're looking for and at the same time, don't hurt small property owners and try to give some relief to those who are trying to live in the city.”
New York’s broker fee arrangement has been going on for decades. Brokers used to have to hustle and list apartments in publications, answer calls, arrange tours and handle paperwork. Now, with the internet, renters tend to look online and may never meet a broker, but renters and politicians behind the bill complain the fees remain, supporters of the bill have argued.
The bill’s passing comes after similar attempts at ending broker fees have failed, and a brief ban in the wake of the 2019 passing of New York state's tenant protection laws, known as the Housing Stability and Tenant Protection Act, was reversed after a lawsuit filed by REBNY.
The trade group has argued the bill would make rents higher because landlords would simply increase rents to offset broker costs. That would hurt small-property owners and rent-stabilized landlords who, they said, are already struggling from a state law that limits their ability to raise rents. With landlords not being able to pay for and hire brokers, REBNY said that will lead to fewer online listings with accurate information and quality pictures, and fewer in-person showings.
REBNY also has argued agents would see their livelihoods “threatened” while broker services renters rely on would become harder to find.