This is a win for price competition - the "broker fee" paid by the renter is a classic example of principal agent problems / information asymmetry.
First, the service is being provided to the landlord (listing, tours, etc.), not the client, for all listings these days (I don't know any young person who has ever used a renter's agent, except maybe if it's provided in a relocation package). The renter has no choice in which broker to use to find/transact w/ the property, so there's very little price pressure for these broker fees.
Second the information asymmetry - the terms of the fee are completely opaque in the listings, and are not disclosed basically until signing unless you press brokers earlier. So there's basically no competitive pressure pushing these fees down, since it's basically a "junk fee" from a user experience perspective tacked on at the very end (and not listed on listings), and the landlord - who IS in a position to negotiate on price - doesn't care.
I don't buy the argument that there will be some long-term price hike in rents as a result of this decision - people who rent for 1-5 years already are paying a MASSIVE "net effective" premium for having an additional month's rent tacked on up front - but also it strongly incentivizes tenant retention (e.g. by being more responsive, keeping prices lower, etc.), because the landlord does not want to have to eat a broker's fee next listing.
Perfectly said on both counts. Rents, unlike broker fees, are highly transparent prices that are far more influenced by market pressure and competition, a win for buyers in a market already very lopsided toward sellers. Because broker fees are disclosed selectively and later in the purchase funnel, buyers (renters) often make less optimal and more expensive choices due to that information asymmetry.
There definitely will be a small spike in the cost of rentals, but 1) it will definitely not be a perfect 12-15% transfer from what the fee costs, and 2) I predict that downward price pressure will bring rental costs around what they are now, especially given the prevalence of no fee units. The cost will likely just cut into landlords' revenue, and anyone claiming prices will rise substantially are probably lobbying on behalf of landlords.
Whatever lecture this came from needs to get a reality check -- "downward price pressure" on rental units in most of the USA was slowly disappearing until the COVID-19 lockdown, at which time the prices increased dramatically, across the board, in all markets (except maybe the Ohio valley? Mississippi ?). Secondly, AirBnB gave reliable revenue streams to property owners, across the western world, keeping units empty. Third, local government has converged on artificial constraint of construction in many markets.
In NYC, rents went way down, to the point where there was a sticker shock from people who moved to NY during Covid and were shocked when prices went back up a year or two later.
ok, I checked .. this article [0] says that rents in 2020 went back to 2011 prices.. new to me, so yes, I could write more carefully.. my mistake. Overall, I don't retract it.. rental prices are steeply greater now than 2020 AFAIK
NYC during covid was crazy. Buildings were offering 12 month leases with 4 months free. So when things normalized in 2021/22 people were facing 33% rent increases and then the pace of the increases basically never slowed down until this year.
Which makes sense if you look at demand. We went from people will never live in cities again at the height of covid, to things like revenge travel and everyone wanting to give big cities a try now that prices were briefly down.
Yeah I got 3 months free to stay in my tiny Gowanus apartment. It ended up saving us enough to get us over the line on a down payment on a house later. It was a really fortunate turn in an otherwise miserable year.
I believe the argument is it should put downward pressure on the fees brokers request since the payer (landlord) would be able to shop unlike the current system, where the renter can’t see the price until they have already chosen.
The prior system was that the person who hired the broker (the property owner) didn't care how high their fee was unless it caused them to lose a lease, since they weren't paying. So the incentive was for brokers to figure out how much money they could charge before they started blowing up deals for the person that hired them. If tenants would begrudgingly pay several thousand dollars to get the apartment, that is what they would charge. It was a race to the price ceiling since the payer wasn't the consumer. e.g. Owners don't care if one broker charges $2k, and one charges $3k, since as long as either can get a good tenant, they don't care.
Now, their pricing structure has to be directly in line with the property owners incentives. Property owners aren't going to swallow paying thousands of dollars to an agent for unlocking a door and processing an application (there are apps for both of those things that get it done for 10s of dollars). Now, it will be a race to the best price for the service. If one agent is asking $3k and the other is asking $2k, the owner will choose the one who is asking $2k, or more likely, save themselves $2k and do the work themselves.
The fees are still that high, even though the broker is from the landlord's side?
I wouldn't pay more than around $200 to have someone find me a tenant. Certainly not in landlord's market. It shouldn't be more than an hour or two of clerical work to talk to some people and sift through some applications.
So yeah, if landlords have to cash out for this, the broker racket in NYC is likely going to be fucked. Landlords are going to be sticker shocked; I don't see why they would be willing to paying four-digit figures in a market where tenants are not rare unicorns that have to be searched for high and low, and wooed.
That's the rub, the landlord chooses the broker, but has nothing to do with paying the broker's fee.
The fees are about to not be that high, this rule change just passed this week.
The landlords are about to care about broker fees now that they are the ones getting ripped off. I suspect that the entire landlord broker industry is about to cease to exist overnight. It will look a lot like rentals in most other American cities where no such job exists, and finding a tenant is all handled by whoever manages the property.
It seems foolish of landlords not to care, though. Whenever there is some surcharge (commission, tax or whatever) you have to see it as the transaction paying it out. Not party A or party B. Both are robbed by the value extraction. A buyer who is made poorer cannot pay as much for what is being sold. A seller who is made poorer needs to ask more to make up for the loss.
If I'm renting out a place, and it turns out that the renter is being charged some exorbitant $2000 fee, that would severely bother me. I would advise the tenant not to pay, and give them the place anyway. The crooked broker could then try to get it from me; at most I'd give them $200, take it or leave it.
Actually, another thing, the current system described creates an opportunity for fraud. What if the landlord and broker are not at arm's length? A landlord could set up a fake brokerage operation and just pocket the fee.
If we frame the new law as not "landlord pays the fee", but "tenant does not see a fee (unless they retain a broker themselves)" then in that light it makes even more sense. If the tenant does not see a fee, then there is no space for such collusion.
If the party who chooses the service provider is not the same as the party who pays the fee then it is difficult for market forces to operate. Making the same party choose and pay can fix that.
This is a different problem than "the service provided isn't valuable".
Making it a landlord cost changes the incentive structure. Landlords now have an incentive to pay agents as little as possible to maximize their profits.
I live in a building primarily owned by offshore investors.
NYC is a place where it's expected you'll always be on a lease - it's not common to go month-to-month after you fulfill your initial obligation (as it is in other cities).
I've heard a common grift here is to offer current tenants awful terms to renew the lease. The broker is banking on you balking, so she gets to tell the owner (who's never met you or even been to the US) "sorry - the existing tenant doesn't want to renew, so you're going to have to pay me to market the apartment again."
As someone who rented for 20 years in NYC, this is a bizarre scenario you describe. You deal with a broker during the leasing process, and then after you lease it, you pay the landlord, they have to sign the lease and approve repairs, and are the person with whom you review lease increases. The most arms length relationship I have ever heard or seen is having an admin assistant for the landlord handle all the operational things.
I have never seen a situation where the broker is responsible for the lease terms, because in the end the landlord has to sign their end.
Brokers have gotten more “savvy” where they’ll actually act as a de facto property manager for a small fee or even for free and absentee landlords buy in because it’s less work for them (no communication at all with the tenant). And then the landlord wonders why tenants never stick around for more than a year!
I tried to confirm your assertion about this grift but someone downvoted my previous comment saying as much. Just to reiterate: you’re right. This a real, relatively normal situation in NYC.
Absentee landlords always get screwed by their local vendors. Nothing new there. It's routine for property managers to solicit kickbacks from other services that they hire like maintenance and landscaping.
It looks like this measure only applies to "real estate agents who exclusively represent the landlord’s interests". "The bill requires landlords who hire real estate agents to pay the agents’ fees themselves".
My read is that as long as a broker works with multiple landlords, you the tenant will still pay them a fee. And it might remain difficult to find available lodging without going through brokers.
Hopefully the actual bill wording doesn’t leave this ambiguous, but I think the intent of “exclusively” here is meaning that they don’t also represent the buyer’s interest (dual agency), not that they have an exclusive deal with the landlord.
No it doesn't mean they can't work with multiple landlords, it means the represent the landlord(s) interests, not the tenants.
If a tenant hires his own agent to find an apartment, that agent would (a) represent the tenant and (b) the tenant would pay for that service.
But I'm not sure what stops the landlords from just raising the rent to cover the broker fees. Unless there's enough competition from landlords who don't use brokers.
Landlords will raise the rent but can only raise the rent to what the market will bear (which presumably they’re doing anyway). They then have incentive to ensure the broker is worth the fee.
Previously landlords would require renters to work with (and pay) the broker, so there was no incentive to choose a cheaper broker.
Here’s the thing: let’s assume that that’s exactly what happens. It’s still a good thing. This is now reflected in the visible part of the cost enabling people to make better decisions.
Renters negotiate the rent with the landlord. They don't negotiate the agent fee. They have to pay it or waste more time searching for another apartment with the risk of another agent charging an unknown and unaffordable fee.
It doesnʻt matter if they raise the rent to cover the fees. As another comment noted, THAT is a major win for price transparency. That would be a big improvement by itself.
Tenants will have more cash each month. Tenants bid up rents to the point of affordability, and they'll become more affordable. Furthermore, there will be more would-be tenants b/c you don't need to save up a for a broker fee -- as long as your income is high enough, you can get a unit, at least in theory. So more competition....
Of course there's competitive pressure to reduce or get rid of these fees. Plenty of people avoid buildings with brokers fee. Its even a filter in most real estate sites. I personally only looked at no fee brokers in the apartments or amortized the broker into the monthly payments. And for me, only no-fee apartments got my rent.
People aren't dumb and look at an apartment and get quoted $4k a month and when they go sign they realize its an extra $6k broker fee and just open up their wallets like "whoops". It's definitely factored into the price and affects who gets in to the door
> Plenty of people avoid buildings with brokers fee.
Very few units/buildings are no fee. And because so few are, there isn't much competitive pressure to reduce or remove the fees, because it's really hard to find a no-fee apartment that meets your other criteria. Hence, the new law.
Wonks and experienced New Yorkers aren’t dumb. I too refused any apartment that wasn’t “No Fee”. But only a tiny fraction of the housing stock - especially very few “cheaper” places - are No Fee. And it is genuinely hard to not price anchor on the listed price - especially if you don’t know how long you’re going to live there (aka how much to amortize vs a No Fee)
That's a matter of opinion, of course. American society is largely based on figuring out how to screw over as many people as you can so you can maximize your personal profit, so as a result many, many Americans think "caveat emptor" is a great way to run a society.
I don't live in New York and don't know who Paladino is, but based on this quote (from a link in the comment currently right above yours), she is an idiot
"She believes the bill will force housing units to go unadvertised, limiting transparency and opportunities for tenants"
> Why the fuck do you deserve $10,000 for unlocking the door to an apartment I found myself?
Oh, mine didn't even bother with that. He cashed the commission cheque and flew to Paris the night before. True story.
I was so furious about having to pay someone I didn't hire that we almost lost the apartment; I covered the security deposit while my partner paid the broker.
Twitter is owned by the CEO of Tesla who has gone insane and has turned Twitter into his own little yellow-journalism platform that he has flooded with liars and used to amplify lies.
I understand that EM is the link between Twitter and Tesla. However, the topic of this thread is middlemen which are no longer necessary. No matter what EM does with Twitter, it has no bearing on the merits of direct-to-consumer car sales, of which Tesla is only one example.
Our real estate agent more than earned her commission when we bought in 2021. There was zero chance we'd have landed a house that year without her help, and landing when we did got us a record-low mortgage rate that has more than covered the commission already.
The problem is that there's no consistency, and you end up paying the same price regardless of how much value the realtor provides. When I bought my current house, it was the second one I looked at, out of several listings that my partner and I found on Redfin ourselves.
Our realtor's expertise was useful when we were making an offer, and when dealing with financing and paperwork, but I don't think she provided $50k of value. If I were paying a fairly generous hourly rate for her time, she would have made less than $5k.
Sure, sometimes a buyer's agent spends 100 hours helping their clients, finding and showing property after property after property, and has to deal with tricky negotiations, and is maybe worth the 2.5% commission.
But I don't want to pay $50k for 10-15 hours of work; that's ridiculous. (And of course I was paying for the seller's agent's commission as well.)
Another house I was involved in buying was similar: second house we looked at, only one counter-offer needed.
If/when I buy again I will likely not use an agent. The new rules around not foisting the commissions onto the buyer will help too.
>> There was zero chance we'd have landed a house that year without her help
Of course there was zero chance. Real estate agents regularly refuse to show homes to or entertain offers from buyers that are not represented by a real estate agent (unless they’re hoping to represent the buyer too - then they get both commissions!).
“I never would have been able to do business in a monopolized market without doing business with a monopolist.”
First, as noted by lotsofpulp, this isn't accurate: seller agents were always perfectly happy to deal with lone buyers because there's no other agent to share the commission with.
Second, to the extent there is monopolistic behavior that gets in the way (and there definitely is), that's not what I'm talking about. The market that year was completely insane because of the interest rates, and there is no way we could have navigated it ourselves, real estate agent monopoly or no monopoly.
I'm very glad that they've been forced to allow competition, and most real estate agents are horrible and should be avoided. All I'm saying is that in some markets a good real estate agent is absolutely worth their commission.
It was the opposite. Home sellers paid both the home buyer’s agent’s commission and the seller’s agent’s commission, so buyers’ agents would not show houses they wouldn’t earn commission on, and simultaneously, buyers would choose to use an agent because they would not save any money by not using an agent.
Now, I believe since the National Association of Realtors is not allowed to require their selling agents to share their commission with buyers’ agents, that everything is up for negotiation, and home buyers can save money by not using agents.
> There was zero chance we'd have landed a house that year without her help,
These situations are created and maintained by real estate agents because they want to keep themselves useful.
There's no reason we can't get a push notification to our phone when a house matching our criteria gets listed locally. Open app, check it out, decide to move on it or pass.
The only reason real estate agents are helpful is because they've created their own system that they control.
I'm not talking about her helping us to show up at a house—yes, we could have done that ourselves—I'm talking about how she helped us as first time home buyers to navigate the most intense housing market in decades and craft a persuasive offer that actually beat out multiple cash offers without losing us tons of money. We got the first house we made an offer on at a time when most young people in our shoes were despairing at ever getting a home.
That situation wasn't created by real estate agents, it was created by sub-inflation mortgage interest rates, and she solved it by deeply understanding what a home seller wants out of an offer. That's what a real estate agent is good for, and it's what I hope a larger percentage of agents are going to be good at now that the bad ones can't hide behind their monopoly.
> and she solved it by deeply understanding what a home seller wants out of an offer
When I sell things, even large value things like houses/boats/cars, it's the most money with the least amount of hassle in that order that wins out. I'd love to know more deeply what I really want when selling something.
>That situation wasn't created by real estate agents, it was created by sub-inflation mortgage interest rates, and she solved it by deeply understanding what a home seller wants out of an offer. That's what a real estate agent is good for, and it's what I hope a larger percentage of agents are going to be good at now that the bad ones can't hide behind their monopoly.
That's as may be, but the law in question is specifically about rentals not sales. WRT rentals, the price is generally not negotiable, the terms (at least in NYC) are prescribed by at least three city and state agencies, and until now, despite the fact that the broker acted as the landlord's agent exclusively, anyone who signed a lease (as the tenant) had to pay the broker.
That's a very different situation, and not analogous to buying a home, except that (usually) you will live there.
For a first time buying it can be daunting. I even used a 'good' agent in the past. But, what made her good was that her and her husband were also contractors and together they were effectively real-time home inspectors with any house we looked at.
Since then I've bought a house without an agent and am about to sell another. All you really need is a lawyer and the internet. Then there are services you can pay to get on MLS.
IMO, RE agents hosed themselves by not self scaling down their commission percentages as prices went up. Even people who do want their help will balk at paying someone 20k-30k+.
Same we saw something like 25 houses and 4 pretty serious offers before finally landing one. We absolutely would not have been able to navigate the market without that help. He came to every house, helped us know what to look for, how to make sense of seller provided inspection reports advised us on how much to offer, and how to write the most competitive offer. He earned every bit and more what he was paid.
Real estate agents have no business being in the mortgage industry.
Charitably rereading your comment - this agent sounds like they were a buying agent. Which should 100% be a real thing; but nothing like a real estate agent and more like a family lawyer / family financial adviser / family hostage negotiator all rolled into one.
Once sellers stop paying their commission buyer's agents are pretty much going to disappear. As I buyer I have no need to pay tens of thousands of dollars to someone for the work I'm anyways doing myself on Redfin and Zillow.
Agree for commodity listings. A good buyer’s agent will create the supply you want. Mine did it by getting the property before it hit the MLS. Others will convince someone who wasn’t going list just yet to sell.
I never understood why landlord brokers are even a thing in a market like NYC. I live in SF and I've never heard of such a thing here, and we probably have a similar market when it comes to landlords getting to take advantage of high demand when it comes to listing visibility and negotiation.
Why do landlords think they need a broker in order to rent out their units in NYC? I would think demand is so high there that listings on all the regular-suspect listing sites would be more than sufficient to get their units rented quickly and at a price they're happy with.
No-fee listings seem to be a thing in NYC, but appear to be for a small minority of units.
> I never understood why landlord brokers are even a thing in a market like NYC.
NYC is all about optimizing the grift.
Imagine a small-time landlord that owns six 20-unit 6-story buildings across Queens. When 1/3 of their inventory turns over in September (the busy time for apartments in NYC), do you think they want to run all over the borough to 500 showings until they finally get all of the units rented? Do you think they want to hire a staff that will show all the units? Hell no! They can, FOR FREE, just tell one (or several!) brokers, "if you manage to rent this unit out, you get to charge whatever fee you can get them to collect." And then they just need to do some paperwork when the broker finally lands someone.
> Why do landlords think they need a broker in order to rent out their units in NYC?
Because they know that the fee will be paid by the tenant, so why not?
> I live in SF and I've never heard of such a thing here
BTW brokers are very common in SF as well, usually called "leasing agent" or something similar. Every non-corporate rental I ever looked at had a broker involved at some level, e.g. organizing open houses, doing private tours, sending out application forms, vetting applicants, sending out lease agreements. It's just that you as the tenant don't have to know or care because you aren't the one footing the bill.
my assumption has been that the landlords noticed how much money the brokers were making and they figured why not bring it in-house and get a cut; i.e. the brokers are sharing the commissions with the landlords, and helping ensure there is no competition. My theory is if the landlords cannot make money doing this, they revert back to independent brokers. I don't have proof, but I'm pretty sure something like this is going on, and this law will do nothing. I think broker fees should be banned, and the rents should reflect the costs; if landlords want to hire broker/agents they can.
Germany effectively banned broker fees in 2015 with the "Bestellerprinzip": the person who hired the agent pays for the agent. In most cases, this means the landlord. The fee is also capped to 2x the cold rent (before utilities).
You also can't charge an agent fee for merely giving someone access to a database, and you can't be both the agent and the landlord, nor the agent and the previous tenant.
Unfortunately, the difficult housing market ended up creating all sorts of other bribes. The most common is the previous tenant selling their furniture for an exhorbitant fee, or straight up requesting a bribe. These are obviously illegal, and you would be entitled to keep the apartment even after getting your money back in court. However rights are of little importance if you don't have the time/energy/means to enforce them. It's also a bad way to start a relationship with a landlord.
German law is firmly on the side of tenants, but sometimes the greed is just too strong, and there is an endless supply of applicants who are willing to compromise.
These are two separate problems. The agents are still useless, and I am glad that tenants don’t need to pay them.
However you are right. We need more apartments. The population is growing and they need a place to live. If you want to solve the aging population problem through immigration, you need to house those immigrants somewhere.
This passing is good. This being so controversial and difficult to pass is sad.
This is a fairly simple concept: you should not be forced to pay a fee for someone who does not have a fiduciary duty to you. The broker works for the landlord. The landlord should pay them. Simple.
> This being so controversial and difficult to pass is sad.
The controversy is created by the people who have something to lose by it passing, and they somehow manage to fool voters into believing their bullshit "but regular people will be hurt because X!" justifications. And voters for some reason don't look at the background of the people who support or oppose these sorts of things to see where their interests are aligned.
I don't really know how we get to the point where we have an educated, informed electorate, where people are resistant to misinformation, and think critically about what a yes or no vote actually means, filtering out arguments made by people with sneaky ulterior motives.
Personally I think people should be strongly discouraged from voting on issues that they don't understand. When I fill out my ballot (California & SF, so there are always quite a few ballot propositions), I try to do my best to read about each proposition, arguments for and against, and take at least a cursory look at the people doing that arguing, but honestly there are still probably some I should leave blank, as I don't fully understand the consequences of a yes/no.
> you should not be forced to pay a fee for someone who does not have a fiduciary duty to you
This is one reason why I'm glad real estate purchase commissions are getting shaken up (the other is breaking up monopoly abuse). The current/previous commissions structure is bonkers.
We need better people to represent us, which means not being captured by a two party system where we effectively don’t get to choose primary candidates, which means something like ranked choice voting.
lots of failed "this shouldn't be controversial" props passed in California. Just shows how unreliable it is to rely on uninformed people to make policy changes.
At least the arguments up top have obvious perverse incentives.
Sadly, this looks pretty toothless. The fine for noncompliance is $2k.
Given the average price for an NYC apartment at north of $3k, the cost to a landlord of complying with the law even once looks significantly higher than the cost of the paying the fine.
Not toothless at all. Even if the fine is $2k per tenant, that's way more than the landlord is going to pay to a service to list and show the apartment, which is maybe $500?
Remember, broker's fees don't go to the landlord. They go to the brokers! The only reason landlords use them is because they're free for the landlord.
It's absolutely cheaper for the landlord to hire a service than to pay a fine.
> Remember, broker's fees don't go to the landlord. They go to the brokers!
I'm pretty sure there are landlords that charge the brokers for the chance to show their units. The landlords can advertise rents that are $300 lower (but get a $500 cut of the broker fee), and then can raise the rent by $300 the next year, increasing the chance that the tenant will go to another one of their (or their buddy's) properties and pay another brokers fee.
No, that's not a thing. I don't know where you got that idea.
And the last thing a landlord generally wants is for their tenant of just one year to leave. Remember, an apartment will often go vacant for a month or even two between tenants, which is lost rent.
And if your tenant leaves, chances are miniscule they happen to move to another property you happen to own. (And what does a "buddy's" property have to do with anything?)
Unless rents are going up - in which case, a renter moving out means you can charge the next person enough to cover the apartment sitting empty for a month.
(That's assuming apartments even stay empty that long; when we were searching, we almost always had to commit to an apartment the day of the showing, or it'd be off the market the next day. Apartments seem to stay empty long enough for the required cleaning and maintenance to take place - and sometimes barely even that long, we've viewed apartments that were being actively worked on.)
>Remember, broker's fees don't go to the landlord. They go to the brokers! The only reason landlords use them is because they're free for the landlord.
What's more, the way it's worked up until now the landlord has many brokers to choose from. And brokers (especially in NYC) will have at least a dozen different folks who will want pretty much any decent apartment. Which allows the broker to charge outrageous fees because most landlords don't want to deal with the hoi polloi, just the folks vetted by the broker.
As such, the power asymmetry between renter and broker was astounding. Changing this will be good for the renter, that's for sure.
Brokers won't be able to get as much commission per apartment because the landlords will put the brokers on a flat fee annual retainer or something similar, because they have power (because they control the available inventory) to choose which broker(s) to work with.
All in all, it won't be so good for the brokers. Too bad. So sad. /s
Except, the first prospective renter can report you, and the second, and the third, and the fourth... all before you get an actual renter.
And more likely, the vehicles these brokers depend on like Zillow, etc, will end up bearing the burden of enforcement more than individual renters reporting to agencies.
As someone directly impacted by this (not a broker) just wanted to chime in based on my experience. Typically no fee apartments can get a 10 to even 20% premium on the monthly rent because it’s no fee. Makes sense because as others have said a lot of the inventory is broker-controlled so tenants will pay more in rent to avoid the upfront fee.
My prediction is this will increase rents in high-demand neighborhoods because the prices today in those neighborhoods have been discounted to account for the broker fees. I’m talking the rental rate. Will it go up enough to where it’s more expensive than if there’d been a broker fee? Depends on how long the tenant stays.
If you install the Archive Page addon Firefox[0]/Chrome[1] (I don't use Chrome, but the FF version works nicely) you can right-click on any link and select 'search link', or you can click 'archive link' which will queue the link for archival if it has not already been archived.
>Can't wait they also get rid of these "destination fees" billed by nearly all hotels in NYC.
That's not going to happen. Such fees (at least in the US, AFAICT) are in most cities.
Besides, hotels are for tourists. And a tourist's job is to spend as much money as the city can get them to cough up. And that's true of every city/destination.
Landlords who have many apartments to rent every year have a lot more leverage over brokers than renters who are generally renting at the very most once a year. So when landlords are forced to pay the fee that have more optionality to negotiate the fee down.
Even now, when a landlord has a lot of available apartments they need to move or when the market is soft (for example during peak COVID), they’ll typically offer a “1 month OP.” Meaning the landlord pays the broker a 1 month’s rent fee, and the broker markets the apartment to renters as no fee. Even if the landlord just roles that into the rent, it’s a savings over the 12-15% fee standard today.
Also, landlords with larger buildings or geographic density are already figuring out that they can rent apartments cheaper with a few salaried leasing agents, instead of paying brokers. If more of them are forced to internalize the broker fee, more of them will figure that out.
Not a New Yorker here, can someone ELI5 (briefly, I don't want to waste your time) what function brokers serve other than extracting money from people? I know a real estate agent at least takes care of a great deal of paperwork that must be done correctly in the transfer of title, and shows properties to buyers. But in terms of rentals, I've never needed a third party to do any of that, and I lived in 5 rental apartments in about 8 years. Landlords 'just' list their properties on the Internet, people find said properties and submit applications or go see them at a predefined time. I'm aware of property managers and have dealt with them in cases where the landlord doesn't want to bother interviewing tenants and stuff -- is a broker a subset of these functions? I think of a property manager though as also serving the function of arranging repairs and handling the whole tenant relationship. In my experience, a property manager does charge a percentage of the rent to handle all this, which kind of means it's passed on, but in terms of how the broader market contains competitors who aren't paying a property manager constrains how much it can be fully passed onto the tenant.
They provide zero value to the renter — it’s essentially an issue of supply and demand. There is a lot of demand for NYC apartments and not a lot of supply, so landlords can hand off their listings to a broker to market and show, and say “I’m not going to pay you, collect a fee from the tenant you bring in” and because of the supply and demand people deal with it.
They ultimately provide a lot of value to landlord — paying for marketing, showing the apartment to a bunch of people, answering the NYU student’s parents questions about crime in the neighborhood, making sure that applicants have provided all the right paperwork, etc etc.
The best part is that as a renter, just before you hand over the many thousand dollar check, you sign a piece of paper that says “this person you are paying does not work for you or represent your interests in any way in this transaction.”
In the past, there was some informational benefit for average Joe/Jane. Without internet, finding apartments, knowing which neighborhoods, buildings, or landlords were good or not was quite difficult. Whether the average broker helped with that I don't know, but those I know from that generation (pre-90s apartment seekers) the ones who used a broker did so for those reasons and were mostly satisfied. These days, most people I know exclusively look at direct listings and don't pay broker fees. The exception is usually when you are either more picky or in more of a rush. At my last apartment I paid a broker and it was indeed a place where the landlord simply didn't want to deal with vetting tenants and left it up to the brokers to get the info to impress them.
>In the past, there was some informational benefit for average Joe/Jane. Without internet, finding apartments, knowing which neighborhoods, buildings, or landlords were good or not was quite difficult.
Actually, we had these arcane things called "newspapers" that were filled with hundreds and hundreds of ads for apartment/house rentals, sales and even shares.
You figured out what you could afford and went through these arcane things and marked the ones that interested you. Then you gasp made a phone call to find out:
1. If the place is still available;
2. When can you come to look at it;
3. If you like it, snap it up (by writing a check[0]) before someone else does.
As for brokers, the ads generally noted that it was 'no fee' if the rental was direct with the landlord. Apartment shares were generally 'no fee' as well, since you were just moving in with roommates you didn't know.
I had some really weird experiences looking for both shares and apartments back in the 1980s and 90s. But it wasn't all that difficult or that much more time consuming than using the real estate websites these days. They're essentially the same thing, except with more photos.
I don't think I need to refute the overall glibness here, but in case you're looking for a place in the coming months/years: brokers are often the only ones who take checks these days. The last landlord I had who took a check was 15 years ago, since then it's been cash, bank transfer, or Zelle only.
>I don't think I need to refute the overall glibness here, but in case you're looking for a place in the coming months/years: brokers are often the only ones who take checks these days. The last landlord I had who took a check was 15 years ago, since then it's been cash, bank transfer, or Zelle only.
Firstly, I was talking about goings on 30-40 years ago, and GP's (incorrect) assertion that "In the past, there was some informational benefit for average Joe/Jane. Without internet, finding apartments, knowing which neighborhoods, buildings, or landlords were good or not was quite difficult." It was not.
As far as checks are concerned, I've been paying by check. The last time was for this month's rent.
Regardless, and I'll say it a second time in this message as you, apparently, missed it in the first message, my previous message was replying to the assertion that back in the 1980s/90s, it was much harder to find/get an apartment than now. It ain't true. I was there. I did it repeatedly.
The only real difference is that I don't have to go out and get the Village Voice or Sunday papers for the expanded classified ad pages. Oh, and more photos on the websites.
Edit: I went and checked and you, ics, were the GP to whom I referred. Please re-read my initial reply to you -- you obviously misunderstood.
I did not say it was much harder. I called your response glib because you appear to be reading much more into my response than was actually written and speaking on many assumptions. If you want a summary of my first post which was to an outsider asking why brokers exist in the NY marketplace, it is that there was some marginal benefit which now is even less in my opinion.
"In the past, there was some informational benefit for average Joe/Jane. Without internet, finding apartments, knowing which neighborhoods, buildings, or landlords were good or not was quite difficult."
Which I helpfully quoted at the beginning of my reply. I then (at the end of my comment) clarified that I was talking about 30-40 years ago.
I suppose if GGP has just as poor reading comprehension as you appear to have, they might have gotten confused. Which would be a shame.
That said, I assume at least a modicum of English proficiency and reading comprehension skills when posting here. Perhaps I should reevaluate that assumption.
> I know a real estate agent at least takes care of a great deal of paperwork that must be done correctly in the transfer of title
Real estate agents don't even do that; a dedicated title company will take care of this aspect of it.
After doing a few real estate purchases with realtors, I've come to the conclusion that they're not really necessary as a buyer, unless you really need/want someone to hold your hand the whole way. The offer and purchase forms are standardized by the state realtor's association (technically they are not free to use, but you can find them online), and the seller will be responsible for filling out all the disclosure forms and whatnot, which you just have to sign that you acknowledge receipt.
As I said, the title company (often also the escrow company) will handle all the title-related stuff. Your mortgage lender will help you fill out the mortgage application, and either the title company or a notary hired by the mortgage lender will walk you through signing the final forms. In states (like NY) where you're required(?) to have an attorney when you're buying property, I feel like a realtor is even more superfluous.
On the seller side, I do believe realtors provide quite a bit more value. Whether or not it's enough to justify their commission is of course up for debate.
Regarding rentals, yeah... before buying I lived in 9 different rentals (upstate NY, SF bay area, SF), and at no point did I need any third party to help with it, even when several of these were before the prevalence of listings on the internet. Find listing, contact landlord and/or attend open house, submit application, sign lease, done. There were certainly some rentals I didn't end up getting due to high demand, but that's life.
No. Rent is a function of supply and demand in the market and not landlord input costs. There are houses in SF that would carry mortgages of like, 8-12k, but can only rent for 4-6k. This is why people say that land value taxes won't be passed on to the renter. It doesn't matter how much it costs you to hold property. Its market value is its market value.
If it's in the rent, it's better to amortize the cost of the broker fee over a year vs. pay upfront.
Between the fee + first month's rent + security deposit (+ sometimes an additional month's rent) it is common to have to front 10K - 20K just to get into an apartment here.
A landlord can't just raise the rent to make up for the loss of this one time payment unless the market will accommodate the higher rent. The idea that it must "end up somewhere" doesn't hold water since the fee offered no value to begin with.
You are right that the landlord can't just raise the rent to make up for the loss of this one time payment unless the market will accommodate it.
I am not arguing that it will end up in the rent. I was only arguing that, if it did, that would still be a better arrangement.
However, you are wrong that the service provided by the fee offers no value, and that the fee will not end up somewhere (even in a diminished way).
- To landlords it offers upfront vetting, no required face time with prospects, and less work to land a tenant. We have a 1.4% vacancy rate in NYC -- apartments on the market will have hundreds of interested people and multiple applications. Landlords basically manage none of this.
- To prospective renters who actively hire a broker -- and these do exist, I did this once -- it offers zero time on the prospect's part to look for, schedule, and research units. You tell the broker your parameters, they will do the research, and then set up a multi-hour tour of apartments.
(Unless you are only looking at no-fee apartments, you are better off just hiring a broker so you get at least some value from it if you rent a fee-ful apartment)
The value the fee provides to the people who care about it, will end up somewhere. This work doesn't go away. Many landlords and prospective renters will take on the work themselves, but many won't.
These people will pay for the broker fee. Those broker fees end up with the landlord or the prospective renter.
It is not my conclusion that eliminating the broker fee will result in higher rent. I think what will happen is:
- The broker market will shrink.
- Some landlords or renters will pay for it.
In a nutty housing market like NYC's, there is actual value provided by brokers, to some people.
Finally -- to be clear, I'm not arguing against the FARE Act. I am fully supportive of it and wish this happened years ago.
Tenants have more money, and there are more tenants who now qualify who might not have already saved up for a broker fee. I'm sure landlords have factored this in.
In very expensive cities like NYC, Boston, SF it'll be $4k+ for 1 to 2 bedrooms, $5k+ for 2 to 3 bedrooms.
If you have 2 buddies and going on a $5500 3 bedroom in Boston, you'll likely be requested first rent + last rent + deposit + broker fee (=1 rent) = 4 * rent = $22k just to get the keys. That's $7300 per person. This is only to get the key, the next month you pay rent #2.
If you're going on a $4k 1 bedroom by yourself (or with your partner) you'll be hit with 4 * 4=$16k upfront cost, or $8k if you're lucky and have a partner.
Renting is extraordinarily expensive in big cities in the US right now. I'm sometimes surprised people can survive this market. I make ~$150k a year in a lucrative software engineering role, and rent is still too expensive for me. It's very difficult for e.g. teachers, researchers etc making ~$70k a year etc.
Some cities will be cheaper, some will be more expensive. E.g. I know that Philadelphia is particularly cheap when it comes to cost of living. Chicago is expensive, but seems to be slightly cheaper than NYC/Boston etc...
That's a bit outdated. NYC and the entire state of California have banned landlords from requiring both last months rent in addition to a security deposit, and the security deposit can be no more than 1 months rent.
I imagine some other cities have done the same.
Where I live, in a desirable Manhattan neighborhood with an old building stock, you can find a decent 1-bedroom for around $3500/mo and move in for a total of $7k. If you hunt for a deal and can make a few sacrifices, you can bring that down to $6k.
Oh that's very good to know, I stand corrected. I last moved late 2023 (Boston) and I was interested in market in a few cities around that times. It's always great to hear local governments can make progress for the people.
Why is it so expensive to rent in Boston? I am surprised to see it in your list. The economy isn't nearly as large as NYC or SF(+nearby cities). The only explanation I can think of: NIMBY/BANANA: It is almost impossible to add new units (housing stock).
Renting is actually not that expensive in NYC relative to buying a condo of similar size and quality, I punched in numbers for a 2b2b in LIC and it’s just about a wash over 10 years
> real estate agents who exclusively represent the landlord’s interests wouldn’t be able to seek a fee from the person signing the lease.
I'm curious if this will be creatively interpreted so that the broker is mandatory but supposedly represents the interests of both LL and tenant, so the tenant has to pay anyway.
> curious if this will be creatively interpreted so that the broker is mandatory but supposedly represents the interests of both LL and tenant, so the tenant has to pay anyway
The problem with the old system was I was paying a guy who didn’t have any obligation to me. Dual obligations means the broker can at least be sued for a conflict of interest if they hide something or don’t do their job. It’s a step in the right direction.
I disagree. The problem is that this whole job doesn't need to exist and is parisitic. I've lived in multiple cities and never once dealt with a "broker" when renting an apartment or paid a broker fee, directly or indirectly. This system isn't normal, even in the US.
Right. At a global level, the major benefit to this bill will be to eliminate most brokers' jobs and require them to instead do something that actually provides value to society.
Most people here don't realize that there are two different markets:
1) Free market apartments: with tenants not having to pay broker fees up front, LLs can and will come up with workarounds. E.g. 'move-in-fee' of 5k or a 'move-out' fee. They will be able to charge more, especially on renewal leases.
2) Rent regulated apartments: LLs can't play those games, but they can say 'only available if you hire such and such a broker', or they might only list the apartments on a website that operates on a subscription basis where they get a cut somehow. Or, at the margins, this is a significant cost for money-losing units, so they might just add those units to the list of units permanently off the market.
I do expect brokerage fees to decline somewhat, and this may affect pricing for streeteasy and zillow and the other advertising portals, but this is not going to be a huge change, and is going to hurt a bunch of low-income tenants.
No, because the broker fees never went to landlords in the first place. They don't need to make up for lost revenue or something like that, with the kinds of schemes you're proposing.
What happens now is that instead of a tenant paying $5K to the broker when they rent the place, the landlord pays $500 to a service which lists the apartment in a few places (like StreetEasy) and handles showing the apartment (which can often be offloaded to the super or similar). It's not even a "broker" at this point, it's just a service. Like how with existing no-fee buildings, it's just one more thing the management office does.
> I do expect brokerage fees to decline somewhat... but this is not going to be a huge change
Decline? Broker's fees, along with brokerages, are practically going to disappear (for the rental market). I don't know a single person who's actually gotten value out of using a broker, because everyone just finds the apartment they want on StreetEasy or whatever first.
This is going to be a gigantic change. And I have no idea why you think it would hurt low-income tenants? You're removing a huge fee they had to pay.
I own two apartments in Manhattan that I've rented out for over 20 years. I've occasionally assisted close relatives renting out a few other Manhattan apartments for longer. Sometimes I rely on a real estate broker as a middleperson, and sometimes I do the work myself, marketing the apartment as a "no fee" "for rent by owner" rental.
I also own the apartment I live in. But before I owned my residence, I was a renter, and thus for a period I've also experienced the mad crazy dash that is NYC apartment hunting while in the shoes of a prospective renter.
My impressions from my "lived experience" in case anyone finds it an interesting data point:
There isn't much information asymmetry, if any. Most apartments are marketed through brokers, and everyone understands, apartment seekers especially, that the broker will charge a fee that the renter must pay to the broker, and how much that fee is. In contrast, when landlords advertise their apartments without a broker, they specify in the ad that it is on a "no fee" basis. Anyone hunting for an apartment to rent who doesn't understand this at the outset of their search learns it soon enough, and certainly before they sign a lease.
My intuition is the bill requiring owners to pay the broker's fee, if it becomes law, will have little or no effect on the underlying economics. I expect the law will prove to have been mere theater, albeit perhaps theater that was "well intentioned," to borrow from a Mayor Adams' quotation in the Bloomberg article.
When I've decided what rent prices to advertise my apartments for, I've always assumed renters will pay the most they can afford to "satisfice" the apartment characteristics they seek. I've also assumed they will factor any broker's fee into deciding whether they can afford any specific apartment.
Whenever I've marketed an apartment myself, I've advertised a higher price than I would were I to advertise it through a broker, and vice versa. The rule of thumb I've used for how much to add to the monthly rent I advertise when I'm doing it without a broker, is what a broker's fee would be if I were using a broker (which is typically 15% of the first year's rent) divided by 12.
As far as I can tell, the negotiations and transactions that actually have transpired after I've marketed my apartments with and without brokers in the foregoing manner have matched the mental model of the market that I've relied on to estimate what prices to advertise.
If the new bill becomes law and thereby requires me to pay any broker fee myself, I plan to do the reverse. I'll ask for a higher price when I market one of my apartments through a broker than when I market it myself. I also expect the monthly differential I'll choose when doing it myself will continue be roughly the hypothetical broker's fee divided by 12.
Good question. I rented my first and so far only NYC apartment in 2021 and I did not have to pay a broker fee. Apparently, I had very good timing...
"In 2020, interpreting a tenant protection law passed by the legislature, the New York Department of State issued guidance that prohibited brokers hired by landlords from charging tenants. The Real Estate Board of New York challenged the restriction in a lawsuit, resulting in a state court overturning the ban in 2021."
I’ve refused to rent in a place that required a brokers fee, and that meant most decent apartments were not available to me. I for one am glad this is finally coming to an end (after the first failed attempt).
Rental brokers are useless, and their fees often exceed 1 month rent (15% of annual rent, so $5k/mo apartment you’re paying first month $5k, deposit $5k, and $9k brokers fee).
That's the point. Rents should stay more or less the same, but now renters won't have to pay a bullshit fee up front.
Landlords can list their units on whatever listing sites/services for like $500 a pop, and renters won't have to pay $5k-$10k to a broker who did basically nothing for them.
Rents will not go up; rents are a function of what the market will bear, not of a landlord's costs.
Right, I doubt it lower prices but it will save people money on the buyer side. I don't know how you would lower prices in NYC other than building even more.
This is a win for price competition - the "broker fee" paid by the renter is a classic example of principal agent problems / information asymmetry.
First, the service is being provided to the landlord (listing, tours, etc.), not the client, for all listings these days (I don't know any young person who has ever used a renter's agent, except maybe if it's provided in a relocation package). The renter has no choice in which broker to use to find/transact w/ the property, so there's very little price pressure for these broker fees.
Second the information asymmetry - the terms of the fee are completely opaque in the listings, and are not disclosed basically until signing unless you press brokers earlier. So there's basically no competitive pressure pushing these fees down, since it's basically a "junk fee" from a user experience perspective tacked on at the very end (and not listed on listings), and the landlord - who IS in a position to negotiate on price - doesn't care.
I don't buy the argument that there will be some long-term price hike in rents as a result of this decision - people who rent for 1-5 years already are paying a MASSIVE "net effective" premium for having an additional month's rent tacked on up front - but also it strongly incentivizes tenant retention (e.g. by being more responsive, keeping prices lower, etc.), because the landlord does not want to have to eat a broker's fee next listing.
Perfectly said on both counts. Rents, unlike broker fees, are highly transparent prices that are far more influenced by market pressure and competition, a win for buyers in a market already very lopsided toward sellers. Because broker fees are disclosed selectively and later in the purchase funnel, buyers (renters) often make less optimal and more expensive choices due to that information asymmetry.
There definitely will be a small spike in the cost of rentals, but 1) it will definitely not be a perfect 12-15% transfer from what the fee costs, and 2) I predict that downward price pressure will bring rental costs around what they are now, especially given the prevalence of no fee units. The cost will likely just cut into landlords' revenue, and anyone claiming prices will rise substantially are probably lobbying on behalf of landlords.
Whatever lecture this came from needs to get a reality check -- "downward price pressure" on rental units in most of the USA was slowly disappearing until the COVID-19 lockdown, at which time the prices increased dramatically, across the board, in all markets (except maybe the Ohio valley? Mississippi ?). Secondly, AirBnB gave reliable revenue streams to property owners, across the western world, keeping units empty. Third, local government has converged on artificial constraint of construction in many markets.
In NYC, rents went way down, to the point where there was a sticker shock from people who moved to NY during Covid and were shocked when prices went back up a year or two later.
ok, I checked .. this article [0] says that rents in 2020 went back to 2011 prices.. new to me, so yes, I could write more carefully.. my mistake. Overall, I don't retract it.. rental prices are steeply greater now than 2020 AFAIK
[0] https://www.curbed.com/2023/01/nyc-real-estate-covid-more-ap...
NYC during covid was crazy. Buildings were offering 12 month leases with 4 months free. So when things normalized in 2021/22 people were facing 33% rent increases and then the pace of the increases basically never slowed down until this year.
Which makes sense if you look at demand. We went from people will never live in cities again at the height of covid, to things like revenge travel and everyone wanting to give big cities a try now that prices were briefly down.
Yeah I got 3 months free to stay in my tiny Gowanus apartment. It ended up saving us enough to get us over the line on a down payment on a house later. It was a really fortunate turn in an otherwise miserable year.
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It's good that the prices are more visible. But the price of the rent will mostly be affected by the supply/demand curve.
Year Units Built Population Change (Number)
2019 26,900 -80,967
2020 23,000 +641,579
2021 24,000 -250,184
2022 24,000 -181,326
2023 27,980 -101,984
Last 5 years not much change in supply, but demand varies.
(based on https://en.wikipedia.org/wiki/Demographics_of_New_York_(stat...)
> The renter has no choice in which broker to use to find/transact w/ the property, so there's very little price pressure for these broker fees.
How does that change if the landlord pays it? The renter still hasn't chosen the broker.
And either way, it comes from rent money.
This feels no different from pricing that hides sales tax, versus reveals it.
How about getting rid of these fucking agents.
I believe the argument is it should put downward pressure on the fees brokers request since the payer (landlord) would be able to shop unlike the current system, where the renter can’t see the price until they have already chosen.
> How about getting rid of these fucking agents.
This is what will likely happen with this law.
The prior system was that the person who hired the broker (the property owner) didn't care how high their fee was unless it caused them to lose a lease, since they weren't paying. So the incentive was for brokers to figure out how much money they could charge before they started blowing up deals for the person that hired them. If tenants would begrudgingly pay several thousand dollars to get the apartment, that is what they would charge. It was a race to the price ceiling since the payer wasn't the consumer. e.g. Owners don't care if one broker charges $2k, and one charges $3k, since as long as either can get a good tenant, they don't care.
Now, their pricing structure has to be directly in line with the property owners incentives. Property owners aren't going to swallow paying thousands of dollars to an agent for unlocking a door and processing an application (there are apps for both of those things that get it done for 10s of dollars). Now, it will be a race to the best price for the service. If one agent is asking $3k and the other is asking $2k, the owner will choose the one who is asking $2k, or more likely, save themselves $2k and do the work themselves.
The fees are still that high, even though the broker is from the landlord's side?
I wouldn't pay more than around $200 to have someone find me a tenant. Certainly not in landlord's market. It shouldn't be more than an hour or two of clerical work to talk to some people and sift through some applications.
So yeah, if landlords have to cash out for this, the broker racket in NYC is likely going to be fucked. Landlords are going to be sticker shocked; I don't see why they would be willing to paying four-digit figures in a market where tenants are not rare unicorns that have to be searched for high and low, and wooed.
That's the rub, the landlord chooses the broker, but has nothing to do with paying the broker's fee.
The fees are about to not be that high, this rule change just passed this week.
The landlords are about to care about broker fees now that they are the ones getting ripped off. I suspect that the entire landlord broker industry is about to cease to exist overnight. It will look a lot like rentals in most other American cities where no such job exists, and finding a tenant is all handled by whoever manages the property.
It seems foolish of landlords not to care, though. Whenever there is some surcharge (commission, tax or whatever) you have to see it as the transaction paying it out. Not party A or party B. Both are robbed by the value extraction. A buyer who is made poorer cannot pay as much for what is being sold. A seller who is made poorer needs to ask more to make up for the loss.
If I'm renting out a place, and it turns out that the renter is being charged some exorbitant $2000 fee, that would severely bother me. I would advise the tenant not to pay, and give them the place anyway. The crooked broker could then try to get it from me; at most I'd give them $200, take it or leave it.
Actually, another thing, the current system described creates an opportunity for fraud. What if the landlord and broker are not at arm's length? A landlord could set up a fake brokerage operation and just pocket the fee.
If we frame the new law as not "landlord pays the fee", but "tenant does not see a fee (unless they retain a broker themselves)" then in that light it makes even more sense. If the tenant does not see a fee, then there is no space for such collusion.
If the party who chooses the service provider is not the same as the party who pays the fee then it is difficult for market forces to operate. Making the same party choose and pay can fix that.
This is a different problem than "the service provided isn't valuable".
Making it a landlord cost changes the incentive structure. Landlords now have an incentive to pay agents as little as possible to maximize their profits.
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> the landlord does not want to have to eat a broker's fee next listing.
Wouldn't a landlord who doesn't want to pay a broker just not use one? Advertise the place and handle the applicants on their own?
I live in a building primarily owned by offshore investors.
NYC is a place where it's expected you'll always be on a lease - it's not common to go month-to-month after you fulfill your initial obligation (as it is in other cities).
I've heard a common grift here is to offer current tenants awful terms to renew the lease. The broker is banking on you balking, so she gets to tell the owner (who's never met you or even been to the US) "sorry - the existing tenant doesn't want to renew, so you're going to have to pay me to market the apartment again."
As someone who rented for 20 years in NYC, this is a bizarre scenario you describe. You deal with a broker during the leasing process, and then after you lease it, you pay the landlord, they have to sign the lease and approve repairs, and are the person with whom you review lease increases. The most arms length relationship I have ever heard or seen is having an admin assistant for the landlord handle all the operational things.
I have never seen a situation where the broker is responsible for the lease terms, because in the end the landlord has to sign their end.
Brokers have gotten more “savvy” where they’ll actually act as a de facto property manager for a small fee or even for free and absentee landlords buy in because it’s less work for them (no communication at all with the tenant). And then the landlord wonders why tenants never stick around for more than a year!
My lease is with "Foreign Investor c/o Local Broker."
I think the reason it was listed as a "no fee" apartment is because the brokerage is the de facto landlady.
As the person who told me about this grift explained, this is not an uncommon relationship.
I tried to confirm your assertion about this grift but someone downvoted my previous comment saying as much. Just to reiterate: you’re right. This a real, relatively normal situation in NYC.
Absentee landlords always get screwed by their local vendors. Nothing new there. It's routine for property managers to solicit kickbacks from other services that they hire like maintenance and landscaping.
No honour among thieves, I guess!
It looks like this measure only applies to "real estate agents who exclusively represent the landlord’s interests". "The bill requires landlords who hire real estate agents to pay the agents’ fees themselves".
My read is that as long as a broker works with multiple landlords, you the tenant will still pay them a fee. And it might remain difficult to find available lodging without going through brokers.
Hopefully the actual bill wording doesn’t leave this ambiguous, but I think the intent of “exclusively” here is meaning that they don’t also represent the buyer’s interest (dual agency), not that they have an exclusive deal with the landlord.
No it doesn't mean they can't work with multiple landlords, it means the represent the landlord(s) interests, not the tenants.
If a tenant hires his own agent to find an apartment, that agent would (a) represent the tenant and (b) the tenant would pay for that service.
But I'm not sure what stops the landlords from just raising the rent to cover the broker fees. Unless there's enough competition from landlords who don't use brokers.
Landlords will raise the rent but can only raise the rent to what the market will bear (which presumably they’re doing anyway). They then have incentive to ensure the broker is worth the fee.
Previously landlords would require renters to work with (and pay) the broker, so there was no incentive to choose a cheaper broker.
Here’s the thing: let’s assume that that’s exactly what happens. It’s still a good thing. This is now reflected in the visible part of the cost enabling people to make better decisions.
Renters negotiate the rent with the landlord. They don't negotiate the agent fee. They have to pay it or waste more time searching for another apartment with the risk of another agent charging an unknown and unaffordable fee.
It doesnʻt matter if they raise the rent to cover the fees. As another comment noted, THAT is a major win for price transparency. That would be a big improvement by itself.
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Tenants will have more cash each month. Tenants bid up rents to the point of affordability, and they'll become more affordable. Furthermore, there will be more would-be tenants b/c you don't need to save up a for a broker fee -- as long as your income is high enough, you can get a unit, at least in theory. So more competition....
Of course there's competitive pressure to reduce or get rid of these fees. Plenty of people avoid buildings with brokers fee. Its even a filter in most real estate sites. I personally only looked at no fee brokers in the apartments or amortized the broker into the monthly payments. And for me, only no-fee apartments got my rent.
People aren't dumb and look at an apartment and get quoted $4k a month and when they go sign they realize its an extra $6k broker fee and just open up their wallets like "whoops". It's definitely factored into the price and affects who gets in to the door
> Plenty of people avoid buildings with brokers fee.
Very few units/buildings are no fee. And because so few are, there isn't much competitive pressure to reduce or remove the fees, because it's really hard to find a no-fee apartment that meets your other criteria. Hence, the new law.
Wonks and experienced New Yorkers aren’t dumb. I too refused any apartment that wasn’t “No Fee”. But only a tiny fraction of the housing stock - especially very few “cheaper” places - are No Fee. And it is genuinely hard to not price anchor on the listed price - especially if you don’t know how long you’re going to live there (aka how much to amortize vs a No Fee)
We should avoid “caveat emptor” as the status quo when possible, shouldn’t we?
That's a matter of opinion, of course. American society is largely based on figuring out how to screw over as many people as you can so you can maximize your personal profit, so as a result many, many Americans think "caveat emptor" is a great way to run a society.
Plenty of people are surprised by the junk fee and end up eating it.
Links to parts of today's NYC Council meeting where this passed today --
- The Speaker, Adrienne Adams, talks about the bill here: https://citymeetings.nyc/city-council/2024-11-13-0130-pm-sta...
- The prime sponsor, Chi Ossé's, comments on the bill: https://citymeetings.nyc/city-council/2024-11-13-0130-pm-sta...
- A vocal opposing voice, Vickie Paladino's, comments on the bill: https://citymeetings.nyc/city-council/2024-11-13-0130-pm-sta...
I don’t know much about the bill at all but knowing that Vickie Paladino opposes it is the best endorsement it could have received in my eyes.
I don't live in New York and don't know who Paladino is, but based on this quote (from a link in the comment currently right above yours), she is an idiot
"She believes the bill will force housing units to go unadvertised, limiting transparency and opportunities for tenants"
This statement is pretty representative of how she presents her ideas.
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If that video's an example of the "sane voice", I fear for y'all.
Based. Why the fuck do you deserve $10,000 for unlocking the door to an apartment I found myself?
> Why the fuck do you deserve $10,000 for unlocking the door to an apartment I found myself?
Oh, mine didn't even bother with that. He cashed the commission cheque and flew to Paris the night before. True story.
I was so furious about having to pay someone I didn't hire that we almost lost the apartment; I covered the security deposit while my partner paid the broker.
Same thing could said of real estate agents
While we’re on the subject of rent seeking industries we should crush: car dealerships.
Car dealerships provide inventory control and local storage. For decades this was a very valuable service for both the automakers and car buyers.
They're less necessary now... as long as you're willing to wait a few weeks for your be car to arrive. Most people aren't, or can't.
You can have your cake and eat it: Tesla sells cars online, both new built/shipped to spec and unclaimed/used inventory available immediately.
https://www.tesla.com/inventory/used/my?arrangeby=plh
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> The Tesla CEO is busy undermining democracy in the US by lying thousands of times on Twitter.
That is a non sequitur. Streamlined car-buying has nothing to do with Twitter.
Twitter is owned by the CEO of Tesla who has gone insane and has turned Twitter into his own little yellow-journalism platform that he has flooded with liars and used to amplify lies.
I understand that EM is the link between Twitter and Tesla. However, the topic of this thread is middlemen which are no longer necessary. No matter what EM does with Twitter, it has no bearing on the merits of direct-to-consumer car sales, of which Tesla is only one example.
Car dealerships were never really necessary. States just made it illegal to sell cars directly to consumers. It was always corruption.
This is also why I think men shouldn't have hair on their head. You know who else did that? Hitler.
Would you have bought a car from Hitler while knowing about the holocaust? I sure hope not.
The VW Beetle was a very popular car...
Not relevant.
Plenty of people were buying VWs despite the company's history. There are actually several such companies in Germany.
How many people bought it while knowing about the holocaust?
How is it not relevant? The car was literally Hitler’s idea and lots of people still bought it post WW2.
How many people bought it while knowing about the holocaust?
Our real estate agent more than earned her commission when we bought in 2021. There was zero chance we'd have landed a house that year without her help, and landing when we did got us a record-low mortgage rate that has more than covered the commission already.
The problem is that there's no consistency, and you end up paying the same price regardless of how much value the realtor provides. When I bought my current house, it was the second one I looked at, out of several listings that my partner and I found on Redfin ourselves.
Our realtor's expertise was useful when we were making an offer, and when dealing with financing and paperwork, but I don't think she provided $50k of value. If I were paying a fairly generous hourly rate for her time, she would have made less than $5k.
Sure, sometimes a buyer's agent spends 100 hours helping their clients, finding and showing property after property after property, and has to deal with tricky negotiations, and is maybe worth the 2.5% commission.
But I don't want to pay $50k for 10-15 hours of work; that's ridiculous. (And of course I was paying for the seller's agent's commission as well.)
Another house I was involved in buying was similar: second house we looked at, only one counter-offer needed.
If/when I buy again I will likely not use an agent. The new rules around not foisting the commissions onto the buyer will help too.
>> There was zero chance we'd have landed a house that year without her help
Of course there was zero chance. Real estate agents regularly refuse to show homes to or entertain offers from buyers that are not represented by a real estate agent (unless they’re hoping to represent the buyer too - then they get both commissions!).
“I never would have been able to do business in a monopolized market without doing business with a monopolist.”
First, as noted by lotsofpulp, this isn't accurate: seller agents were always perfectly happy to deal with lone buyers because there's no other agent to share the commission with.
Second, to the extent there is monopolistic behavior that gets in the way (and there definitely is), that's not what I'm talking about. The market that year was completely insane because of the interest rates, and there is no way we could have navigated it ourselves, real estate agent monopoly or no monopoly.
I'm very glad that they've been forced to allow competition, and most real estate agents are horrible and should be avoided. All I'm saying is that in some markets a good real estate agent is absolutely worth their commission.
It was the opposite. Home sellers paid both the home buyer’s agent’s commission and the seller’s agent’s commission, so buyers’ agents would not show houses they wouldn’t earn commission on, and simultaneously, buyers would choose to use an agent because they would not save any money by not using an agent.
Now, I believe since the National Association of Realtors is not allowed to require their selling agents to share their commission with buyers’ agents, that everything is up for negotiation, and home buyers can save money by not using agents.
> There was zero chance we'd have landed a house that year without her help,
These situations are created and maintained by real estate agents because they want to keep themselves useful.
There's no reason we can't get a push notification to our phone when a house matching our criteria gets listed locally. Open app, check it out, decide to move on it or pass.
The only reason real estate agents are helpful is because they've created their own system that they control.
I'm not talking about her helping us to show up at a house—yes, we could have done that ourselves—I'm talking about how she helped us as first time home buyers to navigate the most intense housing market in decades and craft a persuasive offer that actually beat out multiple cash offers without losing us tons of money. We got the first house we made an offer on at a time when most young people in our shoes were despairing at ever getting a home.
That situation wasn't created by real estate agents, it was created by sub-inflation mortgage interest rates, and she solved it by deeply understanding what a home seller wants out of an offer. That's what a real estate agent is good for, and it's what I hope a larger percentage of agents are going to be good at now that the bad ones can't hide behind their monopoly.
> and she solved it by deeply understanding what a home seller wants out of an offer
When I sell things, even large value things like houses/boats/cars, it's the most money with the least amount of hassle in that order that wins out. I'd love to know more deeply what I really want when selling something.
she solved it by deeply understanding what a home seller wants out of an offer
Ok, I'm curious: what do sellers want other than lots of money as soon as possible?
Money in their pockets as quick as possible and no take backsies.
>That situation wasn't created by real estate agents, it was created by sub-inflation mortgage interest rates, and she solved it by deeply understanding what a home seller wants out of an offer. That's what a real estate agent is good for, and it's what I hope a larger percentage of agents are going to be good at now that the bad ones can't hide behind their monopoly.
That's as may be, but the law in question is specifically about rentals not sales. WRT rentals, the price is generally not negotiable, the terms (at least in NYC) are prescribed by at least three city and state agencies, and until now, despite the fact that the broker acted as the landlord's agent exclusively, anyone who signed a lease (as the tenant) had to pay the broker.
That's a very different situation, and not analogous to buying a home, except that (usually) you will live there.
Edit: Fixed typo. Clarified prose.
> she solved it by deeply understanding what a home seller wants out of an offer.
You need to be more specific than that.
This smells like bullshit. What exactly did she figure out that a seller couldn’t have just put in a listing?
For a first time buying it can be daunting. I even used a 'good' agent in the past. But, what made her good was that her and her husband were also contractors and together they were effectively real-time home inspectors with any house we looked at.
Since then I've bought a house without an agent and am about to sell another. All you really need is a lawyer and the internet. Then there are services you can pay to get on MLS.
IMO, RE agents hosed themselves by not self scaling down their commission percentages as prices went up. Even people who do want their help will balk at paying someone 20k-30k+.
Same we saw something like 25 houses and 4 pretty serious offers before finally landing one. We absolutely would not have been able to navigate the market without that help. He came to every house, helped us know what to look for, how to make sense of seller provided inspection reports advised us on how much to offer, and how to write the most competitive offer. He earned every bit and more what he was paid.
We looked at over 100 houses over the course of a year. Our agent earned his commission!
Real estate agents have no business being in the mortgage industry.
Charitably rereading your comment - this agent sounds like they were a buying agent. Which should 100% be a real thing; but nothing like a real estate agent and more like a family lawyer / family financial adviser / family hostage negotiator all rolled into one.
Once sellers stop paying their commission buyer's agents are pretty much going to disappear. As I buyer I have no need to pay tens of thousands of dollars to someone for the work I'm anyways doing myself on Redfin and Zillow.
Agree for commodity listings. A good buyer’s agent will create the supply you want. Mine did it by getting the property before it hit the MLS. Others will convince someone who wasn’t going list just yet to sell.
I never understood why landlord brokers are even a thing in a market like NYC. I live in SF and I've never heard of such a thing here, and we probably have a similar market when it comes to landlords getting to take advantage of high demand when it comes to listing visibility and negotiation.
Why do landlords think they need a broker in order to rent out their units in NYC? I would think demand is so high there that listings on all the regular-suspect listing sites would be more than sufficient to get their units rented quickly and at a price they're happy with.
No-fee listings seem to be a thing in NYC, but appear to be for a small minority of units.
> Why do landlords think they need a broker in order to rent out their units in NYC?
In NYC, it probably ties back to organized crime somewhow.
> I never understood why landlord brokers are even a thing in a market like NYC.
NYC is all about optimizing the grift.
Imagine a small-time landlord that owns six 20-unit 6-story buildings across Queens. When 1/3 of their inventory turns over in September (the busy time for apartments in NYC), do you think they want to run all over the borough to 500 showings until they finally get all of the units rented? Do you think they want to hire a staff that will show all the units? Hell no! They can, FOR FREE, just tell one (or several!) brokers, "if you manage to rent this unit out, you get to charge whatever fee you can get them to collect." And then they just need to do some paperwork when the broker finally lands someone.
> Why do landlords think they need a broker in order to rent out their units in NYC?
Because they know that the fee will be paid by the tenant, so why not?
> I live in SF and I've never heard of such a thing here
BTW brokers are very common in SF as well, usually called "leasing agent" or something similar. Every non-corporate rental I ever looked at had a broker involved at some level, e.g. organizing open houses, doing private tours, sending out application forms, vetting applicants, sending out lease agreements. It's just that you as the tenant don't have to know or care because you aren't the one footing the bill.
my assumption has been that the landlords noticed how much money the brokers were making and they figured why not bring it in-house and get a cut; i.e. the brokers are sharing the commissions with the landlords, and helping ensure there is no competition. My theory is if the landlords cannot make money doing this, they revert back to independent brokers. I don't have proof, but I'm pretty sure something like this is going on, and this law will do nothing. I think broker fees should be banned, and the rents should reflect the costs; if landlords want to hire broker/agents they can.
Good brokers serve as a liability shield from being hit with discrimination claims.
Germany effectively banned broker fees in 2015 with the "Bestellerprinzip": the person who hired the agent pays for the agent. In most cases, this means the landlord. The fee is also capped to 2x the cold rent (before utilities).
You also can't charge an agent fee for merely giving someone access to a database, and you can't be both the agent and the landlord, nor the agent and the previous tenant.
Unfortunately, the difficult housing market ended up creating all sorts of other bribes. The most common is the previous tenant selling their furniture for an exhorbitant fee, or straight up requesting a bribe. These are obviously illegal, and you would be entitled to keep the apartment even after getting your money back in court. However rights are of little importance if you don't have the time/energy/means to enforce them. It's also a bad way to start a relationship with a landlord.
German law is firmly on the side of tenants, but sometimes the greed is just too strong, and there is an endless supply of applicants who are willing to compromise.
More info here: https://allaboutberlin.com/guides/housing-scams#scams-by-lan...
> but sometimes the greed is just too strong, and there is an endless supply of applicants who are willing to compromise.
This is why increasing the supply is so important too. Lawmakers like to overestimate the impact of their laws.
But banning fees is so much easier than building house/going against your paymasters.
We had a similar fee ban in England too. Has it moved the needle on the overall rental situation? I don't believe so
These are two separate problems. The agents are still useless, and I am glad that tenants don’t need to pay them.
However you are right. We need more apartments. The population is growing and they need a place to live. If you want to solve the aging population problem through immigration, you need to house those immigrants somewhere.
This passing is good. This being so controversial and difficult to pass is sad.
This is a fairly simple concept: you should not be forced to pay a fee for someone who does not have a fiduciary duty to you. The broker works for the landlord. The landlord should pay them. Simple.
> This being so controversial and difficult to pass is sad.
The controversy is created by the people who have something to lose by it passing, and they somehow manage to fool voters into believing their bullshit "but regular people will be hurt because X!" justifications. And voters for some reason don't look at the background of the people who support or oppose these sorts of things to see where their interests are aligned.
I don't really know how we get to the point where we have an educated, informed electorate, where people are resistant to misinformation, and think critically about what a yes or no vote actually means, filtering out arguments made by people with sneaky ulterior motives.
Personally I think people should be strongly discouraged from voting on issues that they don't understand. When I fill out my ballot (California & SF, so there are always quite a few ballot propositions), I try to do my best to read about each proposition, arguments for and against, and take at least a cursory look at the people doing that arguing, but honestly there are still probably some I should leave blank, as I don't fully understand the consequences of a yes/no.
> you should not be forced to pay a fee for someone who does not have a fiduciary duty to you
This is one reason why I'm glad real estate purchase commissions are getting shaken up (the other is breaking up monopoly abuse). The current/previous commissions structure is bonkers.
We need better people to represent us, which means not being captured by a two party system where we effectively don’t get to choose primary candidates, which means something like ranked choice voting.
lots of failed "this shouldn't be controversial" props passed in California. Just shows how unreliable it is to rely on uninformed people to make policy changes.
At least the arguments up top have obvious perverse incentives.
Sadly, this looks pretty toothless. The fine for noncompliance is $2k.
Given the average price for an NYC apartment at north of $3k, the cost to a landlord of complying with the law even once looks significantly higher than the cost of the paying the fine.
Not toothless at all. Even if the fine is $2k per tenant, that's way more than the landlord is going to pay to a service to list and show the apartment, which is maybe $500?
Remember, broker's fees don't go to the landlord. They go to the brokers! The only reason landlords use them is because they're free for the landlord.
It's absolutely cheaper for the landlord to hire a service than to pay a fine.
> Remember, broker's fees don't go to the landlord. They go to the brokers!
I'm pretty sure there are landlords that charge the brokers for the chance to show their units. The landlords can advertise rents that are $300 lower (but get a $500 cut of the broker fee), and then can raise the rent by $300 the next year, increasing the chance that the tenant will go to another one of their (or their buddy's) properties and pay another brokers fee.
No, that's not a thing. I don't know where you got that idea.
And the last thing a landlord generally wants is for their tenant of just one year to leave. Remember, an apartment will often go vacant for a month or even two between tenants, which is lost rent.
And if your tenant leaves, chances are miniscule they happen to move to another property you happen to own. (And what does a "buddy's" property have to do with anything?)
Unless rents are going up - in which case, a renter moving out means you can charge the next person enough to cover the apartment sitting empty for a month.
(That's assuming apartments even stay empty that long; when we were searching, we almost always had to commit to an apartment the day of the showing, or it'd be off the market the next day. Apartments seem to stay empty long enough for the required cleaning and maintenance to take place - and sometimes barely even that long, we've viewed apartments that were being actively worked on.)
>Remember, broker's fees don't go to the landlord. They go to the brokers! The only reason landlords use them is because they're free for the landlord.
What's more, the way it's worked up until now the landlord has many brokers to choose from. And brokers (especially in NYC) will have at least a dozen different folks who will want pretty much any decent apartment. Which allows the broker to charge outrageous fees because most landlords don't want to deal with the hoi polloi, just the folks vetted by the broker.
As such, the power asymmetry between renter and broker was astounding. Changing this will be good for the renter, that's for sure.
Brokers won't be able to get as much commission per apartment because the landlords will put the brokers on a flat fee annual retainer or something similar, because they have power (because they control the available inventory) to choose which broker(s) to work with.
All in all, it won't be so good for the brokers. Too bad. So sad. /s
Except, the first prospective renter can report you, and the second, and the third, and the fourth... all before you get an actual renter.
And more likely, the vehicles these brokers depend on like Zillow, etc, will end up bearing the burden of enforcement more than individual renters reporting to agencies.
As someone directly impacted by this (not a broker) just wanted to chime in based on my experience. Typically no fee apartments can get a 10 to even 20% premium on the monthly rent because it’s no fee. Makes sense because as others have said a lot of the inventory is broker-controlled so tenants will pay more in rent to avoid the upfront fee.
My prediction is this will increase rents in high-demand neighborhoods because the prices today in those neighborhoods have been discounted to account for the broker fees. I’m talking the rental rate. Will it go up enough to where it’s more expensive than if there’d been a broker fee? Depends on how long the tenant stays.
Madness to think your paying someone to you might not have even met $10k for the keys to an apartment you found yourself.
https://archive.is/jyNpm
How did you find that link?
>How did you find that link?
If you install the Archive Page addon Firefox[0]/Chrome[1] (I don't use Chrome, but the FF version works nicely) you can right-click on any link and select 'search link', or you can click 'archive link' which will queue the link for archival if it has not already been archived.
[0] https://addons.mozilla.org/en-US/firefox/addon/archive-page/
[1] https://chromewebstore.google.com/detail/archive-page/gcaimh...
Go to archive.is and search for existing archives and/or make one if it doesn’t exist or you just want to make another one.
Or just put any full url path including http(s) after archive.is/ to skip to the search for that url.
More info is available at their FAQ:
https://archive.is/faq
Can't wait they also get rid of these "destination fees" billed by nearly all hotels in NYC.
>Can't wait they also get rid of these "destination fees" billed by nearly all hotels in NYC.
That's not going to happen. Such fees (at least in the US, AFAICT) are in most cities.
Besides, hotels are for tourists. And a tourist's job is to spend as much money as the city can get them to cough up. And that's true of every city/destination.
I think hotel prices will go down once they stop housing migrants in them
Glad they are ending this notorious NYC grift. Renting in the city is a horrible experience in no small part due to this broker racket
While I do agree with the spirit of this, doesn't this mean that any fees that brokers require will be included in the rent?
Landlords who have many apartments to rent every year have a lot more leverage over brokers than renters who are generally renting at the very most once a year. So when landlords are forced to pay the fee that have more optionality to negotiate the fee down.
Even now, when a landlord has a lot of available apartments they need to move or when the market is soft (for example during peak COVID), they’ll typically offer a “1 month OP.” Meaning the landlord pays the broker a 1 month’s rent fee, and the broker markets the apartment to renters as no fee. Even if the landlord just roles that into the rent, it’s a savings over the 12-15% fee standard today.
Also, landlords with larger buildings or geographic density are already figuring out that they can rent apartments cheaper with a few salaried leasing agents, instead of paying brokers. If more of them are forced to internalize the broker fee, more of them will figure that out.
Not a New Yorker here, can someone ELI5 (briefly, I don't want to waste your time) what function brokers serve other than extracting money from people? I know a real estate agent at least takes care of a great deal of paperwork that must be done correctly in the transfer of title, and shows properties to buyers. But in terms of rentals, I've never needed a third party to do any of that, and I lived in 5 rental apartments in about 8 years. Landlords 'just' list their properties on the Internet, people find said properties and submit applications or go see them at a predefined time. I'm aware of property managers and have dealt with them in cases where the landlord doesn't want to bother interviewing tenants and stuff -- is a broker a subset of these functions? I think of a property manager though as also serving the function of arranging repairs and handling the whole tenant relationship. In my experience, a property manager does charge a percentage of the rent to handle all this, which kind of means it's passed on, but in terms of how the broader market contains competitors who aren't paying a property manager constrains how much it can be fully passed onto the tenant.
They provide zero value to the renter — it’s essentially an issue of supply and demand. There is a lot of demand for NYC apartments and not a lot of supply, so landlords can hand off their listings to a broker to market and show, and say “I’m not going to pay you, collect a fee from the tenant you bring in” and because of the supply and demand people deal with it.
They ultimately provide a lot of value to landlord — paying for marketing, showing the apartment to a bunch of people, answering the NYU student’s parents questions about crime in the neighborhood, making sure that applicants have provided all the right paperwork, etc etc.
The best part is that as a renter, just before you hand over the many thousand dollar check, you sign a piece of paper that says “this person you are paying does not work for you or represent your interests in any way in this transaction.”
In the past, there was some informational benefit for average Joe/Jane. Without internet, finding apartments, knowing which neighborhoods, buildings, or landlords were good or not was quite difficult. Whether the average broker helped with that I don't know, but those I know from that generation (pre-90s apartment seekers) the ones who used a broker did so for those reasons and were mostly satisfied. These days, most people I know exclusively look at direct listings and don't pay broker fees. The exception is usually when you are either more picky or in more of a rush. At my last apartment I paid a broker and it was indeed a place where the landlord simply didn't want to deal with vetting tenants and left it up to the brokers to get the info to impress them.
>In the past, there was some informational benefit for average Joe/Jane. Without internet, finding apartments, knowing which neighborhoods, buildings, or landlords were good or not was quite difficult.
Actually, we had these arcane things called "newspapers" that were filled with hundreds and hundreds of ads for apartment/house rentals, sales and even shares.
You figured out what you could afford and went through these arcane things and marked the ones that interested you. Then you gasp made a phone call to find out:
1. If the place is still available;
2. When can you come to look at it;
3. If you like it, snap it up (by writing a check[0]) before someone else does.
As for brokers, the ads generally noted that it was 'no fee' if the rental was direct with the landlord. Apartment shares were generally 'no fee' as well, since you were just moving in with roommates you didn't know.
I had some really weird experiences looking for both shares and apartments back in the 1980s and 90s. But it wasn't all that difficult or that much more time consuming than using the real estate websites these days. They're essentially the same thing, except with more photos.
[0] https://www.investopedia.com/terms/c/check.asp
I don't think I need to refute the overall glibness here, but in case you're looking for a place in the coming months/years: brokers are often the only ones who take checks these days. The last landlord I had who took a check was 15 years ago, since then it's been cash, bank transfer, or Zelle only.
>I don't think I need to refute the overall glibness here, but in case you're looking for a place in the coming months/years: brokers are often the only ones who take checks these days. The last landlord I had who took a check was 15 years ago, since then it's been cash, bank transfer, or Zelle only.
Firstly, I was talking about goings on 30-40 years ago, and GP's (incorrect) assertion that "In the past, there was some informational benefit for average Joe/Jane. Without internet, finding apartments, knowing which neighborhoods, buildings, or landlords were good or not was quite difficult." It was not.
As far as checks are concerned, I've been paying by check. The last time was for this month's rent.
Regardless, and I'll say it a second time in this message as you, apparently, missed it in the first message, my previous message was replying to the assertion that back in the 1980s/90s, it was much harder to find/get an apartment than now. It ain't true. I was there. I did it repeatedly.
The only real difference is that I don't have to go out and get the Village Voice or Sunday papers for the expanded classified ad pages. Oh, and more photos on the websites.
Edit: I went and checked and you, ics, were the GP to whom I referred. Please re-read my initial reply to you -- you obviously misunderstood.
I did not say it was much harder. I called your response glib because you appear to be reading much more into my response than was actually written and speaking on many assumptions. If you want a summary of my first post which was to an outsider asking why brokers exist in the NY marketplace, it is that there was some marginal benefit which now is even less in my opinion.
I was replying to this and only this:
"In the past, there was some informational benefit for average Joe/Jane. Without internet, finding apartments, knowing which neighborhoods, buildings, or landlords were good or not was quite difficult."
Which I helpfully quoted at the beginning of my reply. I then (at the end of my comment) clarified that I was talking about 30-40 years ago.
I suppose if GGP has just as poor reading comprehension as you appear to have, they might have gotten confused. Which would be a shame.
That said, I assume at least a modicum of English proficiency and reading comprehension skills when posting here. Perhaps I should reevaluate that assumption.
> I know a real estate agent at least takes care of a great deal of paperwork that must be done correctly in the transfer of title
Real estate agents don't even do that; a dedicated title company will take care of this aspect of it.
After doing a few real estate purchases with realtors, I've come to the conclusion that they're not really necessary as a buyer, unless you really need/want someone to hold your hand the whole way. The offer and purchase forms are standardized by the state realtor's association (technically they are not free to use, but you can find them online), and the seller will be responsible for filling out all the disclosure forms and whatnot, which you just have to sign that you acknowledge receipt.
As I said, the title company (often also the escrow company) will handle all the title-related stuff. Your mortgage lender will help you fill out the mortgage application, and either the title company or a notary hired by the mortgage lender will walk you through signing the final forms. In states (like NY) where you're required(?) to have an attorney when you're buying property, I feel like a realtor is even more superfluous.
On the seller side, I do believe realtors provide quite a bit more value. Whether or not it's enough to justify their commission is of course up for debate.
Regarding rentals, yeah... before buying I lived in 9 different rentals (upstate NY, SF bay area, SF), and at no point did I need any third party to help with it, even when several of these were before the prevalence of listings on the internet. Find listing, contact landlord and/or attend open house, submit application, sign lease, done. There were certainly some rentals I didn't end up getting due to high demand, but that's life.
No. Rent is a function of supply and demand in the market and not landlord input costs. There are houses in SF that would carry mortgages of like, 8-12k, but can only rent for 4-6k. This is why people say that land value taxes won't be passed on to the renter. It doesn't matter how much it costs you to hold property. Its market value is its market value.
Or the brokers simply go away, like every other city in the country.
Landlords can shop around and brokers will have to compete on price. A potential renter has no ability to pick a different broker.
Maybe, but landlords like saving money and might opt to do away with the broker middleman rather than eat the cost.
The fee will end up somewhere.
If it's in the rent, it's better to amortize the cost of the broker fee over a year vs. pay upfront.
Between the fee + first month's rent + security deposit (+ sometimes an additional month's rent) it is common to have to front 10K - 20K just to get into an apartment here.
A landlord can't just raise the rent to make up for the loss of this one time payment unless the market will accommodate the higher rent. The idea that it must "end up somewhere" doesn't hold water since the fee offered no value to begin with.
You are right that the landlord can't just raise the rent to make up for the loss of this one time payment unless the market will accommodate it.
I am not arguing that it will end up in the rent. I was only arguing that, if it did, that would still be a better arrangement.
However, you are wrong that the service provided by the fee offers no value, and that the fee will not end up somewhere (even in a diminished way).
- To landlords it offers upfront vetting, no required face time with prospects, and less work to land a tenant. We have a 1.4% vacancy rate in NYC -- apartments on the market will have hundreds of interested people and multiple applications. Landlords basically manage none of this.
- To prospective renters who actively hire a broker -- and these do exist, I did this once -- it offers zero time on the prospect's part to look for, schedule, and research units. You tell the broker your parameters, they will do the research, and then set up a multi-hour tour of apartments.
(Unless you are only looking at no-fee apartments, you are better off just hiring a broker so you get at least some value from it if you rent a fee-ful apartment)
The value the fee provides to the people who care about it, will end up somewhere. This work doesn't go away. Many landlords and prospective renters will take on the work themselves, but many won't.
These people will pay for the broker fee. Those broker fees end up with the landlord or the prospective renter.
It is not my conclusion that eliminating the broker fee will result in higher rent. I think what will happen is:
- The broker market will shrink.
- Some landlords or renters will pay for it.
In a nutty housing market like NYC's, there is actual value provided by brokers, to some people.
Finally -- to be clear, I'm not arguing against the FARE Act. I am fully supportive of it and wish this happened years ago.
Tenants have more money, and there are more tenants who now qualify who might not have already saved up for a broker fee. I'm sure landlords have factored this in.
What are typical rents for 2 or 3 bedroom apartments that are located in safe neighborhoods?
In very expensive cities like NYC, Boston, SF it'll be $4k+ for 1 to 2 bedrooms, $5k+ for 2 to 3 bedrooms.
If you have 2 buddies and going on a $5500 3 bedroom in Boston, you'll likely be requested first rent + last rent + deposit + broker fee (=1 rent) = 4 * rent = $22k just to get the keys. That's $7300 per person. This is only to get the key, the next month you pay rent #2.
If you're going on a $4k 1 bedroom by yourself (or with your partner) you'll be hit with 4 * 4=$16k upfront cost, or $8k if you're lucky and have a partner.
Renting is extraordinarily expensive in big cities in the US right now. I'm sometimes surprised people can survive this market. I make ~$150k a year in a lucrative software engineering role, and rent is still too expensive for me. It's very difficult for e.g. teachers, researchers etc making ~$70k a year etc.
Some cities will be cheaper, some will be more expensive. E.g. I know that Philadelphia is particularly cheap when it comes to cost of living. Chicago is expensive, but seems to be slightly cheaper than NYC/Boston etc...
That's a bit outdated. NYC and the entire state of California have banned landlords from requiring both last months rent in addition to a security deposit, and the security deposit can be no more than 1 months rent.
I imagine some other cities have done the same.
Where I live, in a desirable Manhattan neighborhood with an old building stock, you can find a decent 1-bedroom for around $3500/mo and move in for a total of $7k. If you hunt for a deal and can make a few sacrifices, you can bring that down to $6k.
Oh that's very good to know, I stand corrected. I last moved late 2023 (Boston) and I was interested in market in a few cities around that times. It's always great to hear local governments can make progress for the people.
> It's always great to hear local governments can make progress for the people.
Sometimes it seems like they are the only governments that can!
Why is it so expensive to rent in Boston? I am surprised to see it in your list. The economy isn't nearly as large as NYC or SF(+nearby cities). The only explanation I can think of: NIMBY/BANANA: It is almost impossible to add new units (housing stock).
Renting is actually not that expensive in NYC relative to buying a condo of similar size and quality, I punched in numbers for a 2b2b in LIC and it’s just about a wash over 10 years
Did you also model increase in net worth after 10 years given a semi-fixed income and excess money going to the SP500 vs the condo?
I think the NYT rent or buy calculator prices that in
What constitutes a safe neighborhood?
One's personal definition could mean $1000/m difference compared to someone else's.
https://streeteasy.com/for-rent/williamsburg/description:lor...
Easily $4K+
any fees that the brokers require will be zero because the owners will tell them to piss off
> real estate agents who exclusively represent the landlord’s interests wouldn’t be able to seek a fee from the person signing the lease.
I'm curious if this will be creatively interpreted so that the broker is mandatory but supposedly represents the interests of both LL and tenant, so the tenant has to pay anyway.
> curious if this will be creatively interpreted so that the broker is mandatory but supposedly represents the interests of both LL and tenant, so the tenant has to pay anyway
The problem with the old system was I was paying a guy who didn’t have any obligation to me. Dual obligations means the broker can at least be sued for a conflict of interest if they hide something or don’t do their job. It’s a step in the right direction.
I disagree. The problem is that this whole job doesn't need to exist and is parisitic. I've lived in multiple cities and never once dealt with a "broker" when renting an apartment or paid a broker fee, directly or indirectly. This system isn't normal, even in the US.
Right. At a global level, the major benefit to this bill will be to eliminate most brokers' jobs and require them to instead do something that actually provides value to society.
In America, paying lawyers always seems like it's a step in the "right" direction
Yes, having more rights is better than having fewer rights. Perfect versus good.
Most people here don't realize that there are two different markets:
1) Free market apartments: with tenants not having to pay broker fees up front, LLs can and will come up with workarounds. E.g. 'move-in-fee' of 5k or a 'move-out' fee. They will be able to charge more, especially on renewal leases.
2) Rent regulated apartments: LLs can't play those games, but they can say 'only available if you hire such and such a broker', or they might only list the apartments on a website that operates on a subscription basis where they get a cut somehow. Or, at the margins, this is a significant cost for money-losing units, so they might just add those units to the list of units permanently off the market.
I do expect brokerage fees to decline somewhat, and this may affect pricing for streeteasy and zillow and the other advertising portals, but this is not going to be a huge change, and is going to hurt a bunch of low-income tenants.
No, because the broker fees never went to landlords in the first place. They don't need to make up for lost revenue or something like that, with the kinds of schemes you're proposing.
What happens now is that instead of a tenant paying $5K to the broker when they rent the place, the landlord pays $500 to a service which lists the apartment in a few places (like StreetEasy) and handles showing the apartment (which can often be offloaded to the super or similar). It's not even a "broker" at this point, it's just a service. Like how with existing no-fee buildings, it's just one more thing the management office does.
> I do expect brokerage fees to decline somewhat... but this is not going to be a huge change
Decline? Broker's fees, along with brokerages, are practically going to disappear (for the rental market). I don't know a single person who's actually gotten value out of using a broker, because everyone just finds the apartment they want on StreetEasy or whatever first.
This is going to be a gigantic change. And I have no idea why you think it would hurt low-income tenants? You're removing a huge fee they had to pay.
> only list the apartments on a website that operates on a subscription basis
oh no, that's horrible! what are these websites? just so i dont accidentally click on any, can you give me their names / links
I think you are misinformed about market rate apartments, very many of them still required you to pay a broker fee of 1-2 months rent on signing.
Any middle man that extracts a percentage of a transaction is parasitic by definition.
They should also make a rule where tenants will get full security deposit if they haven't done anything extreme to the apartment.
Pretty sure that rule already exists.
I own two apartments in Manhattan that I've rented out for over 20 years. I've occasionally assisted close relatives renting out a few other Manhattan apartments for longer. Sometimes I rely on a real estate broker as a middleperson, and sometimes I do the work myself, marketing the apartment as a "no fee" "for rent by owner" rental.
I also own the apartment I live in. But before I owned my residence, I was a renter, and thus for a period I've also experienced the mad crazy dash that is NYC apartment hunting while in the shoes of a prospective renter.
My impressions from my "lived experience" in case anyone finds it an interesting data point:
There isn't much information asymmetry, if any. Most apartments are marketed through brokers, and everyone understands, apartment seekers especially, that the broker will charge a fee that the renter must pay to the broker, and how much that fee is. In contrast, when landlords advertise their apartments without a broker, they specify in the ad that it is on a "no fee" basis. Anyone hunting for an apartment to rent who doesn't understand this at the outset of their search learns it soon enough, and certainly before they sign a lease.
My intuition is the bill requiring owners to pay the broker's fee, if it becomes law, will have little or no effect on the underlying economics. I expect the law will prove to have been mere theater, albeit perhaps theater that was "well intentioned," to borrow from a Mayor Adams' quotation in the Bloomberg article.
When I've decided what rent prices to advertise my apartments for, I've always assumed renters will pay the most they can afford to "satisfice" the apartment characteristics they seek. I've also assumed they will factor any broker's fee into deciding whether they can afford any specific apartment.
Whenever I've marketed an apartment myself, I've advertised a higher price than I would were I to advertise it through a broker, and vice versa. The rule of thumb I've used for how much to add to the monthly rent I advertise when I'm doing it without a broker, is what a broker's fee would be if I were using a broker (which is typically 15% of the first year's rent) divided by 12.
As far as I can tell, the negotiations and transactions that actually have transpired after I've marketed my apartments with and without brokers in the foregoing manner have matched the mental model of the market that I've relied on to estimate what prices to advertise.
If the new bill becomes law and thereby requires me to pay any broker fee myself, I plan to do the reverse. I'll ask for a higher price when I market one of my apartments through a broker than when I market it myself. I also expect the monthly differential I'll choose when doing it myself will continue be roughly the hypothetical broker's fee divided by 12.
Didn't they do this before and brokers found a way around it?
Good question. I rented my first and so far only NYC apartment in 2021 and I did not have to pay a broker fee. Apparently, I had very good timing...
"In 2020, interpreting a tenant protection law passed by the legislature, the New York Department of State issued guidance that prohibited brokers hired by landlords from charging tenants. The Real Estate Board of New York challenged the restriction in a lawsuit, resulting in a state court overturning the ban in 2021."
https://council.nyc.gov/shaun-abreu/2024/06/11/the-city-what....
The law didn’t pass or was quietly killed, presumably due to pressure by lobbyists representing rental agencies.
I’ve refused to rent in a place that required a brokers fee, and that meant most decent apartments were not available to me. I for one am glad this is finally coming to an end (after the first failed attempt).
Rental brokers are useless, and their fees often exceed 1 month rent (15% of annual rent, so $5k/mo apartment you’re paying first month $5k, deposit $5k, and $9k brokers fee).
Great, now bring back the congestion fee and we can say we live in a better city than we did last year.
https://www.nytimes.com/2024/11/13/nyregion/congestion-prici...
As you requested.
Seriously, two good pieces of news for New Yorkers today. I'm shocked.
LOL. The effect of this on prices: zero.
That's the point. Rents should stay more or less the same, but now renters won't have to pay a bullshit fee up front.
Landlords can list their units on whatever listing sites/services for like $500 a pop, and renters won't have to pay $5k-$10k to a broker who did basically nothing for them.
Rents will not go up; rents are a function of what the market will bear, not of a landlord's costs.
Right, I doubt it lower prices but it will save people money on the buyer side. I don't know how you would lower prices in NYC other than building even more.
Now if they just did something about the lies in commercial real estate.