“state regulators said renters can no longer be charged broker fees, potentially upending the market and delivering the latest blow to an industry already reeling from new regulations and sweeping tenant protections.” - WSJ
Instead, Landlords will be responsible for paying fee should they use an agent. Clearly a huge gut punch to rental agents and landlords alike- but what will be the overall effects on the entire multi family market?
It’s clear that this law adds another (unpredictable) expense to underwriting and a major hassle at the least. In short, I would love to hear how others are digesting this information and it’s implications.
What am I missing? How will this effect valuations and investor appetite? Is this actually beneficial for tenants or affordability?
No, guarantee you nobody who makes under 100k uses a broker, and owners know this.
Is 15% a rip off yup.
Will this effect 90% of the rental agents who make $60k-$120k, and have to provide for their families, yes.
I've never used a broker, but I see benefit, especially in new buildings where you should hire marketing agents. But some instances are crazy, i had a buddy who wanted to switch apartments in his building and if he did he HAD to pay a broker fee for literally moving units in his building where he lived for 5-years.
As a previous renter in NYC I think this is the best thing since sliced bread. The previous broker fee structure really disproportionately affected the lower price range of renters. Newer larger buildings often had LL's paying broker fee anyways.
For those outside of NYC who may not know, the previous "arrangement" was that the renters paid the landlord's broker's fee so you're paying for a guy who has no fiduciary duty to you for the privilege of paying your new LL rent.
There was nothing like touring apartments in an NYC summer, carrying around your tax return and check book because if there was an apartment you liked you needed to sign a lease that fucking day. Oh surprise, you thought the broker's fee was one month? Nope its 15% of the years rent. And for the most part every LL hired some shlocky broker to do tours because he wasn't paying for it anyways so you were expected to pay this pretty much everywhere.
So the next year when your LL raised your rent you had to decide is moving (1.5K), potential double rent for a week or so (1-2K) and broker fee (4.5K- 8K on a monthly rent of 4.5K) worth the move. Luckily my last couple moves before I bought my place were in large/luxury "no fee" buildings and recently the market had moved slightly towards no fee rentals.
Anyways, most would agree the practice seemed backwards and sucked. Glad to see this ruling even if I don't rent anymore.
As for the overall effect, I bet there are going to be a lot of brokers heavily cutting their fee to retain their book in the short term. Long term I expect their fees to return to close to normal but not more than a month's rent. Perhaps more inhouse leasing people on a 50-60K salary just running around doing tours.
@SHB you do realize though that the "no fee" apartments have the broker fee built into the monthly rent though right? You either pay it up front as a broker fee or as part of your monthly rent. There is no such thing as "no fee."
ehhh, perhaps to an extent in that it is an expense budgeted but comparing two similar sized doorman apartments there is not one or 1.5 months worth of difference in the rent between a fee and no fee apartment. The difference is usually that the no fee apartment has someone on site who nly leases that property, buildings with no fee generally skew towards larger, higher amenity buildings as a whole as well.
All I can tell you is my experience as a renter in the city since '09.
SHB - Is that just how NYC apartments work? Third party brokers instead of an on-site leasing team like the rest of the country?
Yea, I'd say the majority of units in the city have a third party broker from "platinum pimp realty" or whatever show the space, they will also run you around to other buildings they rep who may or may not be the same owner. There are just so many smaller buildings and landlords in the city its the structure thats been proped up. Onsite leasing is reserved for large towers but I've toured 200+ unit buildings that didnt have dedicated leasing person.
The one thing renters needed to look out for were rental listings put up by a broker who didn't have the assignment. So you show up, a guy meets you there but its not the LL rep, he's just trying to swoop in to split a fee. I suspect with the new ruling that will be a bit more difficult to pull off
Wont this just increase the average rent? Therefore, the avg consumer will pay the same amount?
No, because landlords will quickly realize that brokers don't provide much value and the system was always flawed anyway, and will begin cutting broker fees to have a more attractive rent.
Leasing brokers are fucked. Everyone else, it's business as usual. I'll be crying a lot of crocodile tears for the brokers, I'm sure
This will just be a transfer of $ from brokers to landlords. If the market always cleared at X rent for an apartment (inclusive of broker fee), its not going to be 85% *X just because some dumb local politicians want it to be.
Landlords will just capture most/all of that value for themselves.
Bringing down the cost of housing in NYC is a great idea. The best way to do this is to end rent stabilization and build a fuck ton of new housing across all incomes.
Won't the broker fee just be baked into rent anyways? It's semantics at this point since the monthly price of your rental will remain the same or increase if you're not in a rent stabilized building
Second order of events will show that this is a boon for landlords. Bake a one-time fee into a lease in perpetuity. Will happen citywide, normalising the increase, and owners can legitimately show increased rent rolls.
Congrats, Albany...
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