After years of failed attempts to reform rental broker fees, the City Council on Wednesday approved a measure to free tenants from paying commissions for agents they do not hire.
The Council passed the Fairness in Apartment Rental Expenses Act, or FARE. It prevents rental brokers tapped by landlords from collecting fees from tenants.
Upon signing a lease in New York City, tenants typically pay the broker 15 percent of the annual rent to brokers, adding thousands of dollars to the costs associated with moving.
The bill’s sponsor, Council member Chi Ossé, says getting rid of this upfront cost will give tenants more leverage in lease renewal negotiations with landlords.
The Real Estate Board of New York has fought the measure and even proposed its own version, which would ramp up disclosures to tenants rather than upend how brokers are paid. The group argues that under Ossé’s bill, landlords would simply pass the cost of broker fees onto tenants by increasing rents, which eventually would cost long-time tenants more than paying upfront.
The trade group’s members also say the measure fails to reflect how rental listings are handled in the city. Often property owners will allow several agents to advertise their listings on a non-exclusive basis to widen the pool of potential tenants. Agents argue that these listings would disappear because, under the FARE Act, brokers who post a listing are deemed to have been hired by the landlord.
“Wednesday’s vote is yet another instance of prioritizing ideology over economic and practical reality when it comes to the city’s rental housing stock,” Jim Whelan, president of the Real Estate Board of New York, said in a statement. The group also seemed to hint at taking legal action.
“REBNY will continue to pursue all options to fight against this harmful legislation on behalf of our members and the renters they serve,” Whelan said.
Ossé dismissed claims that landlords will pass costs onto renters, arguing that the market dictates rents.
“Over the past couple months, years, the real estate lobby pushed back against this bill. They spent hundreds of thousands of dollars to lobby our politicians, to show up at our hearings, to make calls to our office, to try to kill this bill to force you to pay broker fees,” he said during a rally ahead of the vote.
He spoke in front of dozens of people on the City Hall steps, including from Make the Road New York, Housing Works, Churches United for Fair Housing, Open New York and the New York City District Council of Carpenters. One person held up a sign that read “REBNY is Trash” and depicted rats labeled as brokers and lobbyists.
“But you know what we did? We beat them,” Ossé said to cheers.
A previous reform bill was dropped after brokers showed up en masse at City Hall and argued that their modest incomes would be decimated by the legislation.
The new measure was approved with a veto-proof majority, but Mayor Eric Adams has not said if he will veto it. He has expressed concern for how it would affect small property owners. He told reporters Tuesday that he would look at the bill, but echoed REBNY’s argument that owners will simply increase rents.
“People are leaving the city because it’s just too expensive and we need to find ways of ensuring that we get that affordability but we can’t do it with just a knee-jerk reaction,” he said. “If you pass the cost onto the small property owners, nothing stops them from building it into their rent.”
One exception to that is rent-stabilized apartments, for which brokers sometimes charge far more than the traditional 15 percent if the unit’s rent is well below market value.
During a press conference ahead of the vote, City Council Speaker Adrienne Adams said the bill was “worked out with the administration” and said she was “surprised” by the mayor’s critical comments about the bill. She said she had not heard from the mayor, nor had he raised any “major issues” with the bill.
When asked if the Council would override a mayoral veto, she said the body was prepared to meet any “negative response.”
The mayor’s next move is complicated by the fact that his signature housing policy, the City of Yes for Housing Opportunity, needs City Council approval this fall. Also, he is under indictment and has low approval ratings, making it less likely that he would block a bill favored by tenants.
The bill threatens fines of up to $1,000 for the first violation of payment terms and up to $2,000 for each subsequent infraction within two years. The bill also requires landlords or agents to provide tenants with an itemized list of all fees that they are expected to pay. Failure to do so could result in a $500 fine, then $1,000 for repeat offenses.
The FARE Act also opens the door for tenants to sue agents who break its rules.
Officials have tried to reform rental broker fees since at least 2019, when Council member Keith Powers proposed capping them at about 8.3 percent. The measure, though amended to only limit commissions paid by renters when the broker is hired by a landlord, never came to a vote.
The following year, the Department of State issued guidance interpreting the state’s 2019 rent law to ban tenants from being forced to pay broker fees. REBNY filed a lawsuit alleging that the state had overstepped its authority, and in April 2021, the guidance was tossed as an “unlawful intrusion.”
State lawmakers have pitched their own legislation to shift responsibility for paying broker fees statewide, but it has not come to a vote.
During Wednesday’s rally, Ossé credited the Council’s progressive leadership with getting the FARE Act over the finish line. Council member Sandy Nurse, co-chair of the Council’s Progressive Caucus, told the crowd not to listen to “the bullshit that is being said about the progressive movement.”
“We have always been for the people. We are the people. We do have the power, and there is so much tenant power right now, present at City Hall,” she said. “We are going to win against the real estate lobby.”
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