(The Center Square) — New York City landlords will be required to pay costly broker fees for tenants under a plan approved by the City Council that real estate groups argue will drive up rents and make it harder to find housing in the city.
The Fairness in Apartment Rentals Act, or FARE Act, was approved by the Council with a veto-proof majority of 42 to 8 on Wednesday, sending the proposal to Mayor Eric Adams for consideration.
The new law will change how landlords and tenants pay real estate broker fees by requiring whoever hires the broker to be responsible for the costs. Currently, prospective tenants are on the hook, regardless of who hired the broker. The fees, which range from one month’s rent to 20% of the annual lease, have long been viewed as a barrier to New Yorkers finding a place to live in a city with a housing shortage and a 1.4% vacancy rate.
“Housing is the largest cost for New Yorkers and the number one political concern,” Councilor Chi Ossé, a Brooklyn Democrat and lead sponsor of the bill, said in a statement. “For too many decades, tenants have been forced to hand over thousands of dollars in fees to a broker they never hired or asked for straining their budgets and restricting their freedom of movement.”
“This bill is seismic,” said Councilmember Shaun Abreu of Manhattan. “It’s going to be the difference between being able to have an apartment or not being able to have an apartment.”
But critics, like the powerful Real Estate Board of New York, say the new requirements would push rents to higher levels as landlords will bake the cost of the broker’s fee into the rent. They say the legislation could also incentivize landlords to take apartment listings off the internet, making it harder for New Yorkers to find apartments.
“The FARE Act will make it harder for tenants to find housing, raise rents, and make the hard work of real estate agents even more difficult,” REBNY president James Whelan said in a statement. “REBNY will continue to pursue all options to fight against this harmful legislation on behalf of our members and the renters they serve.”
On its website, REBNY said the vote’s outcome was “disappointing” but urged members to continue to reach out to council members to make them “understand the far-reaching consequences of the FARE Act on both renters and real estate professionals.”
Tenant groups and New York City officials have been pushing to eliminate the fee for years. In 2020, New York issued a mandate requiring landlords to pay the fees, but the Real Estate Board sued to overturn the requirement, and a state court ruled in their favor. It wasn’t clear whether the board will sue to block the legislation approved by the council.
Mayor Adams hasn’t said whether he will sign the bill but has raised concerns about the potential impact of the changes on smaller property owners and tenants who may end up paying more in rent.
“The bill has the right intentions,” Adams said in remarks. “But sometimes good intentions do not get the results you’re looking for.”