NYC Council Approves New Law: Shifting Broker Fees from Tenants to Landlords

The NYC Council has passed a new law that puts broker fees on landlords, which could change the rental landscape. For years renters in NYC have had to pay steep upfront costs including broker fees which can be one month’s rent or more.

This new NYC brokers fee law will help tenants and make housing more affordable but will also spark debates about landlords and the real estate industry..

Background of the Law

Renting an apartment in NYC has always been a financial barrier for many, with upfront costs exceeding $10,000. These costs include a security deposit, first month’s rent and a broker fee which can be more than one month’s rent. With the median rent being $3,874 the broker fee alone is a big burden for tenants.

The NYC Council recognized this and proposed the new law to put this financial burden on landlords. This law will ease the financial pain on renters and address the growing affordability crisis in the city.

Details of New NYC Brokers Fee Law

The new law, called the Fairness in Apartment Rental Expenses (F.A.R.E.) Act was sponsored by Councilmember Chi Ossé who represents the 36th District in NYC. The law addresses a long standing issue in the NYC rental market where landlords hire brokers to list and show apartments but tenants pay the bill. Those broker fees, 12-15% of the annual rent with no cap, have been a huge burden on renters.

The F.A.R.E. Act passed with a veto proof majority of 42-9 in the City Council. Now Mayor Eric Adams has 30 days to sign the bill. If he doesn’t, the law will take effect in 180 days after the signing deadline.

Debate Over The Law

The passage of this law has sparked significant debate among lawmakers, industry leaders, and advocates.

Chi Ossé, the bill’s sponsor, celebrated its approval, stating:

“A cruel and unfair system that has persisted for decades will end. Democrats will prove we can tackle affordability. And the voters will see that the government can work for them.”

However, NYC Mayor Eric Adams expressed reservations, acknowledging the bill’s good intentions but warning of potential unintended consequences:

“The bill has the right intention, but sometimes good intentions do not get the results you’re looking for.” Adams raised concerns that shifting broker fees to landlords might lead to permanent rent increases for tenants.

James Whelan, president of the Real Estate Board of New York (REBNY), criticized the new NYC brokers fee law, calling it:

“Yet another instance of prioritizing ideology over economic and practical reality when it comes to the city’s rental housing stock.”

On the other hand, Council Member Chris Marte praised the bill’s impact, remarking:

“It’s really monumental, what Chi was able to do. Since we’re talking about real estate, he just broke a monopoly. These brokers control our lives and where we can live in the future.”

This mixed response highlights the complexities of balancing tenant relief with the realities of NYC’s housing market.

Impact on Tenants

Supporters of the legislation, such as Councilmember Shaun Abreu, highlight its transformative potential for tenants, particularly those struggling with upfront costs. Abreu described the bill as “seismic” and a change that could determine whether someone can secure an apartment.

By alleviating the immediate financial burden of broker fees, the law aims to make renting more accessible for tenants. However, critics warn that landlords may offset these costs by embedding broker fees into higher monthly rents, potentially negating the financial relief for tenants over time.

Impact on Landlords

For landlords, the law introduces a new financial responsibility that could increase their operational costs. Councilmember Vickie Paladino expressed concern that the fees will not disappear but instead be passed along in the form of rent hikes, stating,

“These fees aren’t going anywhere. They’re just going to be built into rents.”

This could particularly affect properties not under rent stabilization, where landlords have more freedom to adjust rent prices.

While the law seeks to level the playing field for tenants, its ultimate impact on both renters and landlords will depend on how the market adapts.