Attempts to ban broker fees have sputtered in New York City in recent years. But a bill that would prevent tenants from having to pay the loathed fees stands a decent chance of passing this year thanks to strong support in the City Council, although the real estate industry is mobilizing against it.
When signing a lease, tenants in New York City routinely have to fork over about 15% of their annual rent to the broker that listed their apartment. The practice is not common in other cities, and it amounts to another cost for tenants in an era of eye-watering rents.
The bill, by Brooklyn lawmaker Chi Ossé, would not ban the fees outright, as state regulators tried to do in 2020 before being spurned by the courts. Instead, Ossé’s bill would require the fees to be paid by whoever hired an apartment’s broker — most often the building’s landlord.
When Ossé first introduced the bill last year, it accrued support from a majority of the 51-member council but was never allowed to receive a committee hearing — a prerequisite for a bill to ever go up for a vote. Ossé and his allies attribute this to fierce opposition from the powerful Real Estate Board of New York, which represents thousands of brokers and argues it would jeopardize their incomes.
“This bill would basically make our broker-fee system replicate how the broker industry works in every other city in this country,” Ossé said in an interview.
Ossé reintroduced the bill last week in hopes of passing it this year, and more than half of council members have again signed on as co-sponsors — ranging from progressives to more conservative lawmakers like Bob Holden of Queens. Notably, Julie Menin, the new chair of the council’s Committee on Consumer and Worker Protection, has already committed to holding a hearing, she confirmed to Crain’s.
Council Speaker Adrienne Adams’ office declined to say if the speaker, who largely controls the legislative process, has a stance on the bill. Mayor Eric Adams said he would “look into the bill” after being asked by Crain’s at a Tuesday press conference.
“I was a former real estate agent, and so I know how important it is to get paid,” he said, referring to a part-time job he apparently held years ago. “A lot of time is spent showing people apartments or houses, so we need to make sure we get it right.”
REBNY’s tactics last year included sending Ossé a letter against the bill signed by 1,000 agents and brokers, enlisting its members to write op-eds against it, and circulating memos to lawmakers arguing the legislation would force landlords to pass on the new costs to tenants. In a statement, Reggie Thomas, REBNY’s senior vice president for government affairs, said the group believes the bill would “threaten the livelihood” of brokers.
“Our members add significant value to the home search process for renters and will fight for fair compensation for their hard work,” Thomas said.
Claims of a ‘deal’ denied
The circumstances of the bill’s demise last year remain in dispute. The committee overseeing the bill was chaired by Bronx lawmaker Marjorie Velázquez, who has acknowledged that she opposed holding a hearing on it. The Daily News reported last year that Velázquez stalled the bill at REBNY’s behest, a perception that two current lawmakers echoed to Crain’s this month. But Velázquez, who lost her re-election bid last year and now works for the nonprofit Tech:NYC, denied that claim.
“There was no deal with anyone,” Velázquez told Crain’s. “It was my job to speak to lots of organizations that had an interest in legislation before my committee, both for and against. It was an interesting bill, but it was my view that the council needed more time to evaluate a major change that would have impacted tens of thousands of brokers and millions of renters.”
In any case, two council members told Crain’s that REBNY’s opposition to the bill has been more muted in the early weeks of 2024 than it was last year — although that could change once a hearing date is set. Manhattan council member Keith Powers said the pushback to Ossé’s bill has also been milder compared to 2019, when Powers aroused strong opposition from REBNY by introducing his own bill that would have capped broker fees at one month’s rent.
“People have gotten more acquainted and educated with this issue since I first raised it,” Powers said. “The current version of the bill in the council is pretty simple for the public to understand that the person who’s bringing the broker into the transaction should be the person to pay for it.”
Powers’ 2019 bill stalled in committee amid opposition from REBNY. Then, in early 2020, the New York Department of State made waves by announcing that brokers’ fees would be eliminated based on a novel interpretation of the state’s 2019 rent-reform laws — but the ban was struck down by a judge after REBNY filed suit. Ossé, who represents Bedford-Stuyvesant and Crown Heights, argues his bill would hold up against potential legal challenges since it does not restrict the fees themselves.
Ossé’s office has also sent a memo to council members “correcting” what it called inaccuracies in REBNY’s arguments against the bill. Rejecting REBNY’s claim that tenants would end up paying for the shifted fees, Ossé points out that nearly half of the city’s housing stock is rent-stabilized, meaning it would be illegal for landlords to raise rents based on the bill. (Stabilized apartments often come with staggering broker fees, including an Upper West Side unit whose $20,000 fee made headlines in 2022.)
Any rent hikes to market-rate apartments would be spread out over an entire 12- or 24-month lease, Ossé’s office argues, which is less burdensome than paying the entire fee up-front. Plus, more broadly, Ossé contends that rents in New York are governed by market forces, not relatively small-scale costs like broker fees.
“The market is dictated by what tenants can pay,” he said. “If landlords wanted to increase rent anyway, they probably would.”
Brokers themselves have voiced mixed opinions on the importance of fees. While some have predicted rent hikes if Ossé’s bill passes, another broker told Gothamist last year that she already urges landlords to pay her commission, since prospective tenants are deterred by the costs. Broker Michael Corley told Curbed last year that he supported Ossé’s bill as a way of cleaning up an unruly system, although he added that rents would likely go up modestly in the short term.
New this year, Ossé’s bill enjoys support from several labor unions: the powerful union DC37, which represents 150,000 city employees, as well as the Retail, Wholesale and Department Store Union and the Committee of Interns and Residents.
Ossé, the council’s youngest member at age 25, has promoted the bill in a slickly produced video posted to social media, in which he alludes to “big money” having defeated the legislation last year.
If the bill passes, it would mark a turnaround from the 2019 City Council push and would be one of REBNY’s biggest defeats since the state’s landmark 2019 tenant protections were enacted over the industry’s staunch opposition. This year, REBNY is gearing up to push hard in Albany for new development incentives to spur more construction; Ossé, unlike some fellow progressive lawmakers, has echoed those calls to build more overall housing to reduce rents, in addition to enacting tenant protections.
“My response to our housing crisis is yes-and,” he said. “We need all hands on deck.”
Nick Garber , 2024-03-05 21:19:48
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