As diverse in backgrounds and opinions New Yorkers tend to be, there's one thing they can all pretty much agree on: The rent is too damn high!
Well, it appears as if New York is actually trying to do something about it. On Wednesday, the New York Department of State banned broker's fees.
For anyone who has ever rented in the city, this may seem like an enormous sign of relief-- one-month's rent to as high as 15% of the annual rent, which in New York translates to thousands of dollars!
But hold on: Is this really a good thing for renters? There's actually a reason renters hire brokers and landlords opt to work with them.
According to some NYC real estate brokers, that broker-landlord relationship most likely will continue, which means that hefty broker's fee will likely be buried and then reincarnate its way back into the pockets of the renter.
"The complexity of the New York City market means that landlords will still prefer to have the services of brokers to rent their apartments to make sure tenants are properly vetted," said Reginald Richardson, a Brooklyn-based real estate broker with Engel & Völkers. "Because it is so extremely difficult to evict someone who is a problem tenant in New York City, landlords will pass this cost along to tenants in increased rent."
The other difference and caveat is that that rent increase will stay with them if they choose to renew the lease, in addition to the increase that typically comes with a new lease, Richardson added.
The exception to this, of course, are the rent-controlled apartments. State laws limit how much rents can be raised in New York City's roughly 1 million rent-regulated apartments. But still, this represents only a small percentage of the available rental stock.
The dramatic move came after a quiet, yet major, addendum to new rent laws passed in June 2019 aimed at giving renters a little financial reprieve from New York's bloated rental market. The new law stated that tenants couldn't be charged more than $20 in fees when applying for an apartment. That includes background and credit checks. Security deposits were also capped at one-month's rent.
Other DOS new rental guidelines state that:
- If the tenant can provide the landlord with a background check and credit check from within the past thirty days, the fees for those checks must be waived.
- Landlords cannot refuse to rent to a potential tenant because of previous landlord-tenant disputes.
- Landlords cannot charge a tenant a late fee unless the rent payment is five or more days late.
- The late fee cannot exceed $50 or 5 percent of monthly rent, whichever cost is less.
- Security deposits have to be returned 14 days after the tenant has vacated the apartment. If a landlord fails to return the deposit, they must return the entire deposit, regardless of whether or not there was damage to the apartment for which they intended to keep a portion of the deposit.
The DOS took it one step further and used this new law to eliminate brokers fees altogether-- a well meaning gesture that, perhaps, would have landed better with a little more expert consultation.
In a real estate market as cut-throat and competitive as New York City's, money is renewable energy-- the fuel that propels commerce forward.
And since energy is never lost and brokers will always be found, that fee will likely move elsewhere.