Wild Wednesday coming as brokers, tenants fight over fees

Thousands are expected to descend on City Hall this week to rally against or for a bill that would overhaul broker commissions in the city.

The real estate industry plans a huge outpouring ahead of a hearing on the Fairness in Apartment Rental Expenses Act, or FARE. The measure, introduced by Council member Chi Ossé, would make whomever hires a rental broker responsible for paying the fee. Except at “no-fee” rentals, commissions today are typically paid by tenants.

The Real Estate Board of New York, which for years has fended off broker fee reforms, expects more than 1,500 industry professionals to show up. The trade group argues that the bill would reduce brokers’ incomes but also hurt tenants because landlords would bake the cost of commissions into rent, making them a perpetual expense.

REBNY officials say some tenants prefer to pay one upfront commission — which can be tens of thousands of dollars — if they plan to stay in the apartment for several years.

But Ossé said his bill would provide tenants with “more bargaining power and more mobility.” If a landlord increases the rent, a tenant can more easily find a new apartment without having to pay thousands of dollars in fees, he said.

He is unmoved by arguments that landlords will pass the broker fee costs onto tenants by increasing rents, saying they cannot do so at rent-stabilized apartments and that the market will continue to dictate rates at others.

“If your landlord could increase your rent tomorrow, they would have done so yesterday,” he said. “I think the public is very well aware of that.”

If the bill passes, however, any rent increases would likely be to empty units, not units with existing tenants where the broker fee has already been paid.

Elected officials have targeted rental broker fees, which are typically 15 percent of the annual rent, since at least 2019. At that time, Council member Keith Powers proposed capping them at about 8.3 percent.

Powers’ measure was later amended to specify that if the broker is hired by the landlord, renters would pay a commission of no more than one month’s rent. Brokers balked at the prospect of seeing their pay slashed and the bill never came to a vote.

The next year, in a surprise move, the Department of State issued guidance interpreting the 2019 rent law to ban tenants from being forced to pay broker fees. The Real Estate Board of New York, New York Association of Realtors and 12 brokerage firms filed a lawsuit alleging that the agency had overstepped its authority. A state court agreed in April 2021, calling the guidance an “unlawful intrusion.”

Douglas Wagner, who heads brokerage services at Bond New York, said the Department of State guidance provided a “dress rehearsal” for what would happen if Ossé’s FARE Act becomes law. Namely, landlords would stop working with brokers and keep rental listings under lock and key to avoid the appearance of working with a broker.

“We know that these landlords don’t have it in their margins to hire their own brokers,” he said.

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The measure now being considered has garnered support from various groups, including the Hotel and Gaming Trades Council and the New York City District Council of Carpenters, and even Ilana Glazer, star of the show “Broad City.”

Political strategist Bradley Tusk launched a $25,000 campaign to support the bill, an unlikely boost given his pro-business reputation, as noted first by Politico New York. Tusk told TRD that rental broker fees serve as an “artificial barrier” to a diverse set of entrepreneurs and artists from moving to the city.

“We are really depriving our economy of the talent we need,” he said