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New York City Council Votes to End Broker Fees Squeezing Renters

(www.bloomberg.com)
258 points JumpCrisscross | 7 comments | 13 Nov 24 21:38 UTC | HN request time: 0.001s | source | bottom
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beisner ◴[13 Nov 24 22:42 UTC] No.42131018[source]▶
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.

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1. aclimatt ◴[13 Nov 24 23:57 UTC] No.42131597[source]▶
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.

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2. mistrial9 ◴[14 Nov 24 02:08 UTC] No.42132432[source]▶
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.
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3. mattzito ◴[14 Nov 24 02:28 UTC] No.42132540[source]▶
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.
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4. mistrial9 ◴[14 Nov 24 02:59 UTC] No.42132702{3}[source]▶
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...

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5. yawnr ◴[14 Nov 24 04:56 UTC] No.42133268{4}[source]▶
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.
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6. matwood ◴[14 Nov 24 08:20 UTC] No.42134137{5}[source]▶
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.
7. ch4s3 ◴[14 Nov 24 17:14 UTC] No.42138421{3}[source]▶
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.