NY City Council Tries Again to Cut Tenants' Rental Broker Fees

Here we go again.

New York City Council member Chi Ossé will on Thursday introduce legislation to cut rental brokers’ income and shift costs to landlords, The Real Deal has learned.

According to a REBNY email sent to roughly 12,000 residential brokers, the bill seeks to cap agent commission at one month’s rent and ban landlords from forcing tenants to pay it. Its language is expected to be similar to a 2019 bill that brokers beat back, though REBNY officials have yet to see the new version.

Ossé’s bill attempts to do what a state agency also failed to do that same year. The Department of State, based on the Housing Stability and Tenant Protection Act, shifted rental broker fees to landlords.

The city and state actions galvanized the real estate industry, housing advocates and the general public, re-igniting long standing debates about housing affordability. The Council bill never came to a vote and the state regulation was defeated in court.

Ossé’s office did not immediately respond to a request for comment, although he tweeted after publication that his bill will not cap fees. He noted that brokers could still be paid by prospective tenants who hire them.

“The bill is fair and simple: whichever party hires the broker will have to pay the broker fee,” the Council member wrote.

Agent commissions — and who pays them — have been on the minds of lawmakers for years. Historically, renters in New York City have paid broker commissions even when the broker represents the landlord.

Four years ago, the Department of State’s action and Council bill sparked an intense response from the industry. Advocacy groups including REBNY, the New York Association of Realtors and 12 brokerages won a temporary injunction against state regulators while the decision was litigated.

In 2020, Albany Supreme Court Judge Susan Kushner ruled against the DOS interpretation and sided with the industry, permanently restoring the status quo to the dismay of many renters and housing advocates, who say that exorbitant broker fees make New York City housing even more unaffordable.

In the state legislature, critics of broker fees have unsuccessfully attempted to reopen the issue.

“Tenants should not pay brokers fees,” tweeted New York Sen. Jabari Brisport last year. “The landlord hires the broker. The landlord should pay the broker.” But a state bill this year did not pass the Senate, which has adjourned until January.

The proposed city legislation is an opportunity for REBNY, long accused of favoring commercial brokers over their residential counterparts, to demonstrate its support for rental brokers. In 2020, REBNY led an effort that drew more than 1,000 brokers to protest the cap on commissions in front of City Hall.

On Tuesday afternoon, REBNY, anticipating another high-profile struggle, once again sought to rally its members against the proposed reform. It emailed all of its residential brokers with a call to action.

“Instead of dealing with the housing crisis, this bill is a wasteful distraction that does far more harm than good,” reads the email, which urged members to submit pre-written letters to officials and tweet their opposition. “The legislation wrongly punishes real estate agents for a housing shortage and rising rents they did not create, while falsely claiming it will also improve the home search process for renters.”

In response, the group said, members sent roughly 750 emails to lawmakers within an hour.

According to REBNY, evidence shows that forcing landlords to pay for brokers’ fees raises rents, because landlords simply pass along the costs.

Capping fees could also discourage brokers from steering clients to buildings where housing vouchers are commonly used, said a group representative. (By law, landlords and brokers may not discriminate against voucher holders.)

REBNY also claims the bill would cut incomes in a working-class industry. The annual entry level salary of a rental broker is $52,000 and the average salary is roughly $100,000, according to REBNY.

“Many agents are working-class renters who are just as impacted by the City’s current housing crisis as any other working-class resident,” states REBNY’s pre-drafted letter to officials.

But tenant advocates say between broker fees, security deposits and moving expenses, switching apartments can cost $10,000 or more, essentially trapping tenants in their homes.

This story has been updated with comments from Council member Chi Ossé.