The Daily Dirt: Broker fee lessons from … England?
An analysis of New York's top real estate news
In the U.S., it’s somewhat rare for tenants to pay broker fees. England, however, just implemented rules similar to those hanging over New York.
With the exception of New York City and Boston, landlords in most markets pay a portion or all of a renter broker’s fees. Oddly enough, England’s experience in barring “letting fees” could offer some lessons as NYC braces for a possible ban, Kevin Sun reports.
The Tenant Fees Act, which went into effect in June, bars brokers in England from collecting fees from renters. A key difference between this policy and New York’s is that brokers in England had more than two years to brace for the change. Though a New York judge granted brokers a temporary reprieve on Monday — the new rules won’t kick in until at least March, when the next court date is scheduled — the industry was largely blindsided by the new rules.
Meanwhile, various studies have been conducted on the potential impact of England’s Tenant Fees Act since the measure was first announced in 2016.
A study conducted by U.K.’s Association of Residential Letting Agents found that as many as 4,000 of England’s 58,000 residential leasing jobs would be lost as a result of the ban. The Ministry of Housing seemed ok with this.
“Those agents losing business are likely to be those most reliant on supernormal profits, benefiting from market failures, and in turn who are not able to adapt their business models effectively,” the ministry stated in its own impact study. “If it is the most inefficient agents that leave the market, then in turn market efficiency would improve.”
The ministry also projected that landlords wouldn’t be able to pass on the full cost of broker fees to tenants. According to its assessment, brokers would likely be able to pass on about 75 percent of the cost of the ban to landlords, who would then be able to pass on 50 percent of that to tenants in the form of rent hikes.
Though, of course, New York’s market is vastly different, similar concerns have been raised in the past week. We just don’t yet have any studies to lay out the potential impact of New York’s ban.
Yikes. Airbnb lost $322 million in the first nine months of 2019.
During the same period of 2018, the company was profitable, having reported $200 million in gains, according to the Wall Street Journal.
In the third quarter of 2019, Airbnb’s revenue jumped by more than $400 million year-over-year to $1.65 billion. The increase, however, was outpaced by expenses.
The company has nearly $3 billion in cash on hand, and has been valued at $31 billion (though a much lower internal valuation has apparently been floated). Still, Airbnb plans to go public this year and doing so as an unprofitable startup ( à la Uber and Lyft) isn’t a great look.
What we’re thinking about: Renters whose leases are up March 1 technically are on the hook for broker fees, per the court’s temporary restraining order on the state’s guidance. Brokers, what kinds of conversations are you having with landlords and tenants in light of the court decision? Send a note to email@example.com.
Residential: The priciest residential closing recorded Tuesday was for a condo unit 211 Elizabeth Street in Nolita, at $8.2 million.
Commercial: The most expensive commercial closing of the day was for a development site at 305-311 First Avenue in Gramercy Park, at $28.5 million.
The largest new building filing of the day was for a 254,900-square-foot mixed-use building at 671 Brook Avenue in the South Bronx. BRP Companies filed the permit application.
NEW TO THE MARKET
The priciest residential listing to hit the market was for a condo unit at 1 Central Park South, at $45 million. Douglas Elliman’s Tal Alexander has the listing.
— Research by Mary Diduch
A thing we’ve learned…
The first song on GoldFish’s 2006 album “Caught in the Loop” is titled “The Real Deal.” It has nothing to do with TRD. Thank you to David Jeans for providing this tidbit.
Elsewhere in New York
— While the Trump administration approved funding for the Portal North Bridge project, which would replace a century-old, two-track bridge over the Hackensack River, it doesn’t think the Hudson River rail tunnel qualifies for grant money, Politico New York reports. The Federal Transit Administration on Tuesday deemed the tunnel project (part of Gateway) a “medium-low” priority.
— The creepy coronavirus robot is back! According to the New York Post, a robot created by Pennsylvania-based company Promobot was surveying tourists on Monday, inquiring if they were experiencing any symptoms of the disease. The same bot was kicked out of Bryant Park last week for not having the necessary permits.
— Barclays Center has the city’s worst privately owned elevator in the subway system, the City reports. According to MTA stats, the elevator functioned just 74.2 percent of the time in 2019.