NYC bans unusual practice of forcing tenants to pay real estate brokers hired by landlords

NEW YORK– Mandatory real estate agent fees, an unusual feature of apartment hunting in New York City long maligned by tenantswill be banned under legislation passed Wednesday after overcoming strong backlash from the city’s real estate lobby.

In a system that exists in New York and almost nowhere else in the country, tenants are often forced to pay an agent’s commission before moving into an apartment, even if that agent is hired by the landlord.

The costs are high and are typically as much as 15% of annual rent, about $7,000 for the average-priced New York City apartment.

The legislation passed by the city council aims to prevent landlords from burdening tenants with these payments – at least as an upfront payment. While tenants will be allowed to hire their own representatives, they will no longer be forced to pay for agents who solely represent the interests of their landlords.

In a city where two-thirds of households are renters, the bill is very popular, a rare piece of municipal legislation championed by influencers on TikTok. It has also sparked opposition from brokers and their representatives, who warn it could send shockwaves through an industry that employs 25,000 agents.

“They spent hundreds of thousands of dollars lobbying our politicians to thwart this bill and force you to pay agency fees,” Assemblyman Chi Ossé, a Democrat who sponsored the FARE Act, said at a meeting Wednesday. “But you know what we did: we beat them.”

New York’s broker fee regulations date back nearly a century, to a time when real estate agents played an active role in publishing listings in newspapers and working directly with potential tenants. The committee structure is also found in Boston, but in few other parts of the country.

But with most listings published online and virtual or self-guided tours gaining popularity since the COVID-19 pandemic, many New Yorkers are becoming increasingly frustrated with the costs.

At a City Council hearing this summer, several speakers recalled paying out thousands of dollars to a real estate agent who seemed to do little more than open a door or text him the code to a lock box.

“In most companies, the person who hires the person pays the person,” Agustina Velez, a housekeeper from Queens, said at that hearing. She recalled paying $6,000 to change apartments. “Enough with these injustices. Landlords must pay for the services they use.”

Real estate agents counter that they do much more than just hold the door open: conducting background checks, combining showings and streamlining communications with landlords in a city where many tenants never meet the owners of their buildings.

“This is the beginning of a top-down, government-controlled housing system,” said Jordan Silver, a real estate agent with the firm Brown Harris Stevens. “The language is so incredibly vague, we actually have no idea what this would look like in the world.”

Others opposed to the bill, including the Real Estate Board of New York, say landlords will factor the additional costs into monthly rents.

But some New Yorkers say this is preferable to the current system of high upfront costs that make it difficult to move.

“From the perspective of a technology investor and business owner in New York City, the more we can do to make it cheaper and easier for talented young people to come here and stay, the better off we will be,” says entrepreneur and bill supporter Bradley Tusk said in a statement. “Anyone who has paid 15% of their annual rent in real estate agent fees for someone to let you live in an apartment for 10 minutes knows that this is nothing more than legalized theft.”

Mayor Eric Adams, himself a former real estate agent, has expressed concerns about the legislation and possible unintended consequences.

“Sometimes our ideas are not developed enough to know what the full long-term consequences are,” he said this week, adding that he would try to “find a middle ground.”

But he will have limited influence: the legislation passed by a vote of 42 to 8, a veto-free margin. It will come into effect in six months.