Proposal to cap rental brokers’ commission loses steam as 3 sponsors drop out

Council member Keith Powers, one of the bill’s key sponsors, is saying he’s not seeking to cap income

Council Members Robert Holden and Keith Powers with images of REBNY’s recently launched social media campaign (Credit: Facebook, New York City Council, REBNY)
Council Members Robert Holden and Keith Powers with images of REBNY’s recently launched social media campaign (Credit: Facebook, New York City Council, REBNY)

Three City Council members have withdrawn their support from the proposed bill to cap commissions for rental brokers amid backlash from the real estate industry.

Council members Adrienne Adams, Justin Brannan and Robert Holden were initially sponsors, but have since removed their names from the proposal, known as Intro 1423. If it became law, rental brokers’ commission would be capped at one month’s rent, which for some brokers would mean collecting about 8.3 percent of the annual rent versus 15 percent.

Adams and Brannan did not respond to requests for comment, but Holden explained his change in position.

“When renting an apartment, it is your choice to use a broker or not,” he said in a statement. “Those who choose to pursue a career in real estate rely on that income. I think this bill is trying to solve one problem by creating another, but I am open to revisiting it after it has been negotiated in hearings.”

The change of heart comes after a series of petitions and campaigns have been launched by organizations representing and servicing rentals agents, including On-Line Residential which has garnered more than 2,100 signatures, and brokerage Level Group, which has 300 signatures. The Real Estate Board of New York has also coordinated a series of meetings between brokers and their home and work districts’ council members.

Citi Habitats broker Cono Natale met with Council member Holden and said his impression of the discussion was that the lawmaker “realized that he didn’t get the full picture” and “was open” to changing the approach.

“I know a lot of people who won’t be able to stay in business” should Intro 1423 be enacted, said Natale.

But one of the bill’s prime sponsors, Council member Keith Powers, is saying something different about the intention of Intro 1423. The proposed legislation states tenants can’t be on the hook for fees exceeding one months’ rent. But he says that the idea behind Intro 1423 is to prevent a renter from paying for a broker hired by a landlord or owner.

“My intention is not to effect any relationship where a tenant goes out and hires a broker on their own,” Powers told The Real Deal. “Who gets represented has to pay the fee — that was our ultimate intention.”

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“At the core of it, it’s a consumer protection issue,” he explained. If a renter or landlord chooses to hire their own broker, they “can work out any agreement they want about how to get compensated.”

He declined to comment on what role the cap in fees, which is currently written in Intro 1423, would have in this scenario. He also said he’s made these intentions for Intro 1423 known in “every single conversation” with stakeholders he’s had to date.

While REBNY confirmed they’d heard this from Powers, Jamie McShane, the organization’s head of communications, said in the statement they still have concerns “over both how the bill is currently written and proposed alternatives that would have the unintended consequences of increasing rents and interfering with the meaningful services provided by hard working rental agents.”

Douglas Wagner, Bond New York’s executive vice president of brokerage services, said that even if Powers’ intended changes become part of the proposed bill, his landlords clients say they would increase rents to be made “whole by the end of the year” to account for being unable to pass the cost of the broker’s services onto the renter.

“The rub is that most people stay in their apartments for more than one year,” he explained, so “the landlord is going to charge the tenant the fee again in year two.”

Intro 1423 is currently being considered by the Committee on Housing and Buildings and now has 21 sponsors, including Public Advocate Jumaane Williams. At its peak, the proposed bill had up to 25 sponsors.

Powers said Intro 1423 continues to have “lots of support” among Council members and noted that “we still have more sponsors than most bills in City Council.”

Most in the real estate industry seem to be trusting the letter of the proposed law over Powers’ stated intentions and are continuing to mobilize.

Hal Gavzie, Douglas Elliman’s head of rentals, is encouraging agents to contact council members to voice concerns.

“You can’t think ‘Ah, that’s never going to happen,’” he said. “That’s when things tend to get passed.”