Bill would make landlords pay broker fees
New York City is considering legislation that would require landlords, not tenants, to pay broker fees when hiring real estate agents, a move that has angered the city's real estate industry.
The proposal, backed by a majority of the City Council, aims to end the ubiquitous practice of tenants paying hefty upfront broker fees, which are nearly unheard of in most other cities. Renters often shoulder the burden of hefty broker fees, amounting to thousands of dollars, even when the broker works for the landlord.
"In most businesses, the person who hires the person pays the person," said Agustina Velez, a house cleaner from Queens who recently paid $6,000 in broker fees to move apartments. "Enough with these injustices. Landlords have to pay for the services they use."
However, the real estate industry has fiercely opposed the legislation, warning it could sow chaos in the rental market and devastate the livelihoods of the city's roughly 25,000 real estate agents.
"This is the start of a top-down government-controlled housing system," said Jordan Silver, a broker with Brown Harris Stevens, told The Associated Press. "The language is so incredibly vague we actually have no idea what this would look like in the world."
Supporters, including labor unions and housing advocacy groups, argue that broker fees prevent low-income New Yorkers from relocating and act as a barrier to housing affordability.
The bill's sponsor, city councilman Chi Ossé, said he was motivated by a recent "tiring, treacherous, and competitive" apartment search.
Broker fees were previously banned under a 2020 state law aimed at protecting renters but were quickly reinstated following a lawsuit led by the Real Estate Board of New York (REBNY). Currently, about half of the city's apartments come with a tenant-paid broker fee, often set at 15% of the annual rent. In Manhattan, where the median monthly rent recently hit $4,500, this could mean a fee as high as $8,100.
Read next: Realtors settle with DOJ over broker commissions
Under the new legislation, tenants would still be responsible for fees if they hire a broker themselves. However, the bill specifies that the party who hires the broker should be the one to pay their fee.
While some brokers acknowledged the current system favors landlords, they insisted their jobs are far more intensive than merely opening doors for tenants.
“I think it’s not logical. The landlord should pay the listing agent who is working on their behalf,” said Maria Octavio, a real estate broker at Douglas Elliman. “Because it’s worked this way for many years, the owners are used to it.”
REBNY organized a rally ahead of the council hearing, at which hundreds of brokers voiced their objections. They warned that the legislation could disrupt the rental market and threaten the livelihoods of the city's approximately 25,000 real estate agents.
Read next: How to become a mortgage broker in New York
REBNY criticized the bill's vague language, suggesting it would lead to confusion and unintended market consequences.
“How the market works is not as simple as a few sentences, which is what the bill is,” said REBNY vice president Ryan Monell. “It’s a misnomer to compare New York to other cities. This is really an exceptional market.”
The legislation also drew opposition from Mayor Eric Adams, who warned of unintended consequences and had strong backing from the real estate industry during his campaign.
Stay updated with the freshest mortgage news. Get exclusive interviews, breaking news, and industry events in your inbox, and always be the first to know by subscribing to our FREE daily newsletter.
