New York City Council Votes to End Broker Fees Squeezing Renters

> 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.

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".

> 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.

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.

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.