New York City Council Votes to End Broker Fees Squeezing Renters

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.

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.

> 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.

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.

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.