Real Estate

Wild Wednesday: 1,500 Rally at City Hall Over Broker Fee Reform

Thousands to Rally at City Hall Over FARE Act, with 1,500 Industry Professionals Expected to Attend

By Tal Alexander

6/10, 09:35 EDT

Key Takeaway

  • The Fairness in Apartment Rental Expenses Act (FARE) could shift broker fee responsibility from tenants to landlords, potentially impacting rental costs.
  • Real Estate Board of New York argues the bill will reduce brokers' incomes and lead landlords to embed fees into rents, making them a perpetual expense.
  • Council member Chi Ossé believes the bill will enhance tenant mobility and bargaining power, countering that rent-stabilized units won't see fee-related rent hikes.

Rallying for Broker Commission Reform

Thousands are expected to gather at City Hall this week to voice their opinions on the Fairness in Apartment Rental Expenses Act (FARE), a bill that could significantly alter the landscape of broker commissions in the city. Introduced by Council member Chi Ossé, the bill proposes that the party hiring a rental broker should be responsible for paying the fee, a shift from the current practice where tenants typically bear this cost. The Real Estate Board of New York (REBNY) anticipates a turnout of over 1,500 industry professionals, arguing that the bill could reduce brokers' incomes and ultimately harm tenants by embedding commission costs into rent, making them a perpetual expense.

The Debate Over Broker Fees

The FARE Act has sparked a heated debate. Proponents, including Ossé, argue that the bill would empower tenants with more bargaining power and mobility, allowing them to move more freely without the burden of hefty broker fees. Critics, however, contend that landlords will simply pass these costs onto tenants through higher rents. Ossé dismisses this concern, noting that rent-stabilized apartments would be unaffected and that market dynamics would continue to dictate rental rates. Historical attempts to reform broker fees, such as Council member Keith Powers' 2019 proposal to cap them, have faced significant pushback from brokers and have not been enacted.

Historical Context and Industry Resistance

The real estate industry's resistance to broker fee reforms is not new. In 2020, the Department of State issued guidance interpreting the 2019 rent law to ban tenants from being forced to pay broker fees, a move that was later overturned by a state court. This historical context underscores the ongoing tension between regulatory efforts and industry practices. Douglas Wagner of Bond New York suggests that if the FARE Act passes, landlords might avoid working with brokers altogether, keeping rental listings private to sidestep the appearance of broker involvement.

Broader Implications for the Real Estate Market

The potential passage of the FARE Act could have far-reaching implications for the real estate market. Supporters argue that eliminating upfront broker fees could attract a more diverse set of entrepreneurs and artists to the city, boosting the local economy. Political strategist Bradley Tusk, who has launched a $25,000 campaign in support of the bill, describes broker fees as an "artificial barrier" to talent. However, the real estate industry warns that the bill could lead to unintended consequences, such as reduced transparency in rental listings and a potential decline in broker services.

Street Views

  • Chi Ossé, Council member (Bullish on tenant rights):

    "More bargaining power and more mobility... If your landlord could increase your rent tomorrow, they would have done so yesterday. I think the public is very well aware of that."

  • Douglas Wagner, Bond New York (Bearish on FARE Act):

    "We know that these landlords don’t have it in their margins to hire their own brokers."

  • Bradley Tusk, Political strategist (Bullish on FARE Act):

    "Rental broker fees serve as an artificial barrier to a diverse set of entrepreneurs and artists from moving to the city. We are really depriving our economy of the talent we need."